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Old 08-13-2022, 06:14 PM   #41
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Originally Posted by madatrub View Post
Where do you see inflation rolling over? Commodities got crushed in June, but plenty of other things going into the inflation calc are still going up. And we're headed into a fall/winter where energy is very uncertain, especially in the EU.
I buy a lot of bonds so I watch what happens to yields over the curve. Lot of good clues there. Short end up, intermediate and long end down.
It’s often said that the bond guy is a pessimist. I trust what I see in bonds far more than what I see in equities.
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Old 08-13-2022, 06:22 PM   #42
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I think it’s kind of funny that market timers in equities are frowned upon in this forum, yet bond market timing seems to be encouraged.
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Old 08-13-2022, 06:42 PM   #43
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I think it’s kind of funny that market timers in equities are frowned upon in this forum, yet bond market timing seems to be encouraged.


I am surprised too.
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Old 08-14-2022, 06:13 AM   #44
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I think it’s kind of funny that market timers in equities are frowned upon in this forum, yet bond market timing seems to be encouraged.
+100
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Old 08-14-2022, 07:08 AM   #45
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I think it’s kind of funny that market timers in equities are frowned upon in this forum, yet bond market timing seems to be encouraged.
I suspect there are more equity market timers (like me) on this forum than will admit it becasue of that perceived sentiment.
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Old 08-14-2022, 07:31 AM   #46
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Curious to get some opinions on the following strategy I adopted as of the beginning of 2022 (YR 1 RE) as it is somewhat relevant to the "should I buy 5+ years of CDs (or say bonds/treasuries)"...

I decided to carve out 10 years worth of planned spend (highly discretionary) in fixed holdings and let the rest of the $$ roll in equities (currently puts my AA around 67/33). Currently, I have 5 years effectively laddered somewhat short term maturing with the longest date of mid 2023, rates ranging from around 2% - 3+%. The 6-10 yr $$ are siting in short and intermediate bond funds. My thought is while bond funds take a hit in rising interest rate environments, they seem to perform equal to or often better than individual bonds over longer stretches. I may be splitting hairs here, but have settled on this strategy for now until someone can convince me I am really better off laddering a full 10 years of spend. Further part of the strategy is to spend equities when market is up, bonds when market is down. Thoughts?
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Old 08-14-2022, 08:09 AM   #47
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Dawg,

Funny that you should write that. I just suggested something somewhat similiar in the "Anyone buy an annuity simply to avoid market downturns?" thread.

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The biggest problem with the above strategy [buying a SPIA to avoid the stress of downturns] is that it doesn't provide for inflation.... your expenses increase with inflation and your annuity income does not.

I think if you want to avoid the stress of market downturns you would be better off to maintain a 10 year CD/UST/bond ladder with each rung being the annual gap between annual expenditures and annual income and then invest the rest consistent with your overall target AA. If you did this you could also build into the rungs a provision for inflation in expenditures and, if applicable, income.

So for example, let's say that your expenditures are currently $100k and you have $25k of fixed income from a SPIA and $30k of SS that will increase with inflation. If you assume 4% inflation, the first rung would be $48k ($104k - $25k - $31k) and the 10th rung would be $79k ($148k - $25k - $44k). The 10 year ladder would be total $624k.

If your plan had a 4% WR, then you would have $1.125m portfolio ($45k gap/4%) so that would result in a 45/55 AA.

As each rung of the ladder matures and you use the proceeds for spending you would add a 10th year rung from the stock part of the portfolio. If stocks are down, you could defer adding the replacement rung for a few years until stocks recover.
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Old 08-14-2022, 08:32 AM   #48
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Dawg,

Funny that you should write that. I just suggested something somewhat similiar in the "Anyone buy an annuity simply to avoid market downturns?" thread.
Yep. That's effectively the strategy.

Having always been total return, annual rebalance guy during the accumulation years holding only bond funds in my fixed allocation, the switch to a bond ladder strategy is a little new to me. Knowing I have 10 years of spend helps me feel comfortable letting the balance run in equities (I believe in "playing the game", despites having "won the game" ) for legacy/charity reasons. Plus, it's just my nature to try and reasonably grow my assets. I suppose my only real head scratcher is what may be best with my 6 - 10 yr $$?
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Old 08-14-2022, 08:34 AM   #49
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You'll never know. I did a 5 year 3.15% add on CD in 2019. Never would have guessed we'd be higher now.
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Old 08-14-2022, 09:13 AM   #50
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You'll never know. I did a 5 year 3.15% add on CD in 2019. Never would have guessed we'd be higher now.
Me too.... but while th 5 year CD is slightly higher, the 3.0-3.5% that I get from my 2019 credit union specials CDs are stlll competitive with CDs for the 2 year remaining term... so I'm satisfied.
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Old 08-14-2022, 10:01 AM   #51
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FWIW, not all of us have 'won the game'. Some of us are in the 4th quarter with a 12 point lead, all our time outs remaining, a great running game, and have control of the ball with 5 minutes left on the clock.

Our big fear is a foolish error such as double digit losses on multiple plays. (Inflation) And perhaps some daring bravado on the part of our opponents, who seem to have the sympathy of the game controlling officials. (Taxes)
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Old 08-14-2022, 10:47 AM   #52
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Space Coast Credit Union in Florida has a 21month CD for 3.25%. I did not see any limits. Why would one choose 5 years?
I would prefer a 5 or 7 year term for that 3.25% because my crystal ball says in 3 years rates will be way down, and then the CD holder has to do something with principal. Stocks? Spend it? I'd rather still have my cash chugging away at 3.25 % relatively worry free. My crystal ball says the trillions of U.S. debt will prevent rates from going up much over 4%, if that, for any 5 or 7 year term CD. OK, someone said there are already some 5 year CD's at 4%, so the crystal ball is wrong. Which is OK with me, lol. Maybe I'll wait another month or two.
Sort of like a game of chicken.
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Old 08-16-2022, 05:43 AM   #53
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I would prefer a 5 or 7 year term for that 3.25% because my crystal ball says in 3 years rates will be way down, and then the CD holder has to do something with principal. Stocks? Spend it? I'd rather still have my cash chugging away at 3.25 % relatively worry free. My crystal ball says the trillions of U.S. debt will prevent rates from going up much over 4%, if that, for any 5 or 7 year term CD. OK, someone said there are already some 5 year CD's at 4%, so the crystal ball is wrong. Which is OK with me, lol. Maybe I'll wait another month or two.
Sort of like a game of chicken.
Totally agree with you, my advisor says I’m the only client looking for 5 year and over CD’s right now. Finding some at 3.5 for 7 years
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Old 08-16-2022, 06:13 AM   #54
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Are we investing in CDs for the interest they throw off or safety of principal?

Would $5,000 invested in A Capital One Preferred K be similar? Currently at $21.64 goes ex dividend today, currently yielding 5.3429%.
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Old 08-16-2022, 05:59 PM   #55
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I recently bought 9.62% I-bonds.
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Old 08-16-2022, 06:16 PM   #56
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FWIW, not all of us have 'won the game'. Some of us are in the 4th quarter with a 12 point lead, all our time outs remaining, a great running game, and have control of the ball with 5 minutes left on the clock.
Excellent position to be in, unless you are playing for the Texans, in which case you probably only have a 50/50 chance of "winning the game" at that point.
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Old 08-16-2022, 06:28 PM   #57
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Excellent position to be in, unless you are playing for the Texans, in which case you probably only have a 50/50 chance of "winning the game" at that point.

Or the Eagles.
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Old 08-16-2022, 06:48 PM   #58
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I'd max out I Bonds first. The rate's not locked in, but it's near 10% for the first six months.
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Old 08-16-2022, 07:14 PM   #59
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My crystal ball says that the interest rates are no longer controlled by a free market. If the rates rise too high, the federal government cannot pay their note, and would have to declare default. The powers that be will not let that happen. The system is corrupted and politicized. This is not your daddy's 1982 13% CD world anymore. I seriously doubt we will ever see 6% cd's. let alone double digits rates.
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Old 08-16-2022, 08:57 PM   #60
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If you think it's safe to say "rates will continue to rise", then you're claiming you do have a crystal ball.

Nobody knows.
When the Feds have already signaled that more rate increases are coming, you don't need a crystal ball. The BIG factor on all this will be the 3rd quarter reports such as the GDP report that comes out in October followed by the future of 2022 holiday shopping and consumer confidence to spend money. That'll be the tipping block of whether we go into a full blown recession or not.
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