LONGER DURATION =
Doesn't that depend on if the yield curve is inverted or normal?
Doesn't that depend on if the yield curve is inverted or normal?
Reasons to move cash into bonds at this time
- Thread starter Bongleur
- Start date
Great to have gotten it right yesterday. But if you bought TODAY what would you end up with? Has it already achieved 50% of its total gains for the year?
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Just curious: Is this information that no one else has? If not, why don't you expect bidding for the bonds to reflect it? EMH, IOW.
Too late to invest in long bonds??
Moving into Long Term Treasuries... "is it too late to do that - or have most of the gains happened."
You can check T-bond yields here:
https://www.treasury.gov/resource-c.../Pages/TextView.aspx?data=yieldYear&year=2020
The 30 year bond yield fell from 2.33% on 1/1/2020 to 1.28% today (4/30) returning about 25%. IF rates fall 1%, from 1.28% to 0.28%, returns would be about +25%.
So, big returns and big losses are possible.
Moving into Long Term Treasuries... "is it too late to do that - or have most of the gains happened."
You can check T-bond yields here:
https://www.treasury.gov/resource-c.../Pages/TextView.aspx?data=yieldYear&year=2020
The 30 year bond yield fell from 2.33% on 1/1/2020 to 1.28% today (4/30) returning about 25%. IF rates fall 1%, from 1.28% to 0.28%, returns would be about +25%.
So, big returns and big losses are possible.
Freedom56
Thinks s/he gets paid by the post
All the information on this offer crossed the business wire services and has been reported by business news outlets. The firms that are involved in offering normally support the bids just before and after the bonds are issued. They try to keep at at par or higher depending on demand. This is artificial support. All recent Boeing bond offerings are underwater, this one won't be any different.
COcheesehead
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I own the bonds purchased years ago. You are misunderstanding. My post was in response to the question right above it.
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audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I don’t worry about my bond funds either because I hold them much longer than their average duration, and if they drop some due to rising interest rates I buy more, and if they gain due to falling interest rates, I trim them (i.e. rebalancing).
The CA Muni bonds that I'm holding in various funds are making me very nervous. Even though they're only 2% of my retirement fund I'm selling some off. Seems like Newsom is going to be very slow in opening CA up while at the same time spending money like crazy. At the same time, that huge unfunded pension debt is lurking.
ychuck46
Recycles dryer sheets
Working it as well.
Same here. At 66 I am probably more stock heavy than most this age, but it has done well during the panic of the last couple of months. I am less than 10% off my all time highs which I consider good, since I heard the average stock is still down something like a 1/3 in value. And have been picking up some cash here or there playing options, so for better or worse this downturn has not been as painful as it could have been.
Same here. At 66 I am probably more stock heavy than most this age, but it has done well during the panic of the last couple of months. I am less than 10% off my all time highs which I consider good, since I heard the average stock is still down something like a 1/3 in value. And have been picking up some cash here or there playing options, so for better or worse this downturn has not been as painful as it could have been.
tenant13
Full time employment: Posting here.
I would hate for this to happen and frankly I doubt it will but there is a chance interest rates will drop below zero. If this is combined with quantitative easing, there's a potential for bond holders to actually make a lot of money. This link explains it fairly well: The Lucrative Profitability Of A Move To Negative Interest Rates by Daniel Amerman
Normally, I would say there's no way in hell US would risk upending the world financial system like that: I mean who in their right mind would buy US treasuries knowing that they would receive less money for them than they paid? If it's The Fed though, then we are in this new reality where nothing else matters but the political expediency and the well being of the economy at this very moment. I'm not saying it's right or wrong. It might actually be necessary. But to circle back to OP's dilemma: this would be one reason to move to bonds.
Normally, I would say there's no way in hell US would risk upending the world financial system like that: I mean who in their right mind would buy US treasuries knowing that they would receive less money for them than they paid? If it's The Fed though, then we are in this new reality where nothing else matters but the political expediency and the well being of the economy at this very moment. I'm not saying it's right or wrong. It might actually be necessary. But to circle back to OP's dilemma: this would be one reason to move to bonds.
Beachcomber
Recycles dryer sheets
This is quite illuminating. So, using regressive analysis, we are heading to a major down cycle. Profiting would be investing in bonds with expected negative interest rates. I am interested in capital preservation as would be most here over 65. I took a beating in 2000 and 2008 with no interest in repeating that. I will be debt free in 3 weeks. Paying cash for a home may not seem prudent, but no mortgage has its' appeal.
Have you figured out an investment strategy based on Amerman's book?
Funny, my broker is poised to use my bond allocation as dry powder to purchase equities after the coming 2nd quarter drop.
As others have mentioned, there is no data on the future, but I think we can safely say that we are in for a downturn from Covid - 19.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Another sad guy hawking seminars and DvDs. If he really knew anything useful he would be rich and ER. I guess that overtones of conspiracy theories help him sell his stuff.
Yes. The fed's flexibility is highly overrated. All central banks must contend with the near-certainty of large capital flows if their rates get out of line. That's why poor countries sometimes enact capital controls.
Positive, negative, it's just a number called "the market rate." If you must play in the market, you get the market rate. The big players have no realistic options. Pipsqueeks like us can stuff currency under our beds, I guess.
Yes.
Also yes, and the stock market's current guess for the future seems to be that things will not be too terrible for too long.
For example, all the excitement about the unemplyment rate compared to historical rates misses the fact that all these people are not unemployed due to economic factors. Their unemployment is due to artificial and temporary causes. For example, there is a "Topgolf" facility near our home, featuring 100+ hitech ball-hitting bays. I drove by it yesterday and it is silent as a tomb. On the first day the governor permits it to be open, I have no doubt that it will be mobbed and all of the "unemployed" employees will no longer be unemployed. Instant economic recovery.
How widespread will the instant recovery be? How deeply hurt will the restaurant, hospitality, and airline segments be. I don't know. I don't know nuthin'. But neither does anyone else, including the seminar and DvD salesman.
Chuckanut
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Line up 256 people and give them a fair coin. Tell them the goal is to flip heads eight times in a row. Most likely one will do it.
What skill! What brains! What guts! What foresight! WHAT NONSENSE!
The law of averages tells us there will always be somebody whose timing is lucky and another person whose timing is unfortunate. Past good or bad luck is not a basis for making decision today.
COcheesehead
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
When everyone is so sure the next leg down is after the 2nd quarter, as stated in these forums and elsewhere where I post, that makes it pretty sure it’s not going to happen.
OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
And the law of human nature says that only the lucky one will post to brag about his timing. The unlucky person probably won't post. This predictable behavior unfortunately leads naifs to erroneous conclusions.
Often the lucky person seems to be lead to an erroneous conclusions, too: that his result was due to skill.
tenant13
Full time employment: Posting here.
The link I posted is obviously just someone's opinion. But mostly it's a mathematical analysis of one possible economic scenario. Whether you believe it's informed or not it's up to you. I myself don't quite see negative rates in US becoming a new norm but we don't have anywhere else to go except below zero in case a recession kicking in so IF that happens, Amerman's math becomes more relevant.
I've been thinking about the market and the broader economy yesterday - because of yet another surge - and I find the whole thing quite puzzling. On one hand, yes, the unemployment numbers are not "real", most of these people will go back to work as soon as they can but I wonder how the new reality will look like in a consumer based economy. Will we truly mobb those golf facilities as soon as some politician tells us to? Or we'll wait until there's a health data indicating it's "safe"? Are we going to travel as freely as we used to? Will we be even welcome to? There might be countries that are less reliant on tourism that will simply keep their borders closed. Perhaps we'll wait for an effective medication? Or a vaccine?
My personal "investment strategy" is changing every day, lol. I have enough taxable cash/bonds/equities to survive 3 years and I like playing so I got right into it...
First, I sold some stock to realize capital loss. That was intentional: I wanted to have the ability to manipulate my income for the next few years - either for health insurance or ROTH conversions purposes.
While the market was down I was playing with covered options - it's fun and if you're ready for them to exercise it's really safe. I ended up purchasing some dividend stocks in my taxable account and yesterday I "lost" some of my Apple stock due to the covered calls ending up in the money. It's what I kind of wanted to happen and the price was right. If it drops I may rebuy it.
I'm about 50% in cash right now. Most of it is in IRA however - not optimal. So I'll keep playing with put options within IRA targeting strong companies that I believe in but I also am looking at moving some cash into an Offshore Self-Directed IRA and buying property in my home country (Europe). Dollar is super strong right now so the prices are great plus I know the market much better than US. That would be a nice way to truly diversify my portfolio.
I may buy some treasuries but that's at the bottom of my list of things to do. And I don't see myself investing in broad market index funds. They are "too" diversified for my taste (and are doing much worse than my individual stocks); I don't want to have anything to do with travel or energy related stocks right now. It will take forever for them to rebound.
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OldShooter
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
When rates go down, bonds go up and the people that hold those bonds make money. Breaking news?
Obviously. As long as you're going into it with eyes open, there's nothing wrong with that. BTDT it's pretty easy to get lucky once in a while. That keeps the players in the casinos too.
This is something that no one else knows, so it is not reflected in the stock prices?
Good luck to you.
The link I posted is obviously just someone's opinion. But mostly it's a mathematical analysis of one possible economic scenario. Whether you believe it's informed or not it's up to you. I myself don't quite see negative rates in US becoming a new norm but we don't have anywhere else to go except below zero in case a recession kicking in so IF that happens, Amerman's math becomes more relevant.
I've been thinking about the market and the broader economy yesterday - because of yet another surge - and I find the whole thing quite puzzling. On one hand, yes, the unemployment numbers are not "real", most of these people will go back to work as soon as they can but I wonder how the new reality will look like in a consumer based economy. Will we truly mobb those golf facilities as soon as some politician tells us to? Or we'll wait until there's a health data indicating it's "safe"? Are we going to travel as freely as we used to? Will we be even welcome to? There might be countries that are less reliant on tourism that will simply keep their borders closed. Perhaps we'll wait for an effective medication? Or a vaccine?
My personal "investment strategy" is changing every day, lol. I have enough taxable cash/bonds/equities to survive 3 years and I like playing so I got right into it...
First, I sold some stock to realize capital loss. That was intentional: I wanted to have the ability to manipulate my income for the next few years - either for health insurance or ROTH conversions purposes.
While the market was down I was playing with covered options - it's fun and if you're ready for them to exercise it's really safe. I ended up purchasing some dividend stocks in my taxable account and yesterday I "lost" some of my Apple stock due to the covered calls ending up in the money. It's what I kind of wanted to happen and the price was right. If it drops I may rebuy it.
I'm about 50% in cash right now. Most of it is in IRA however - not optimal. So I'll keep playing with put options within IRA targeting strong companies that I believe in but I also am looking at moving some cash into an Offshore Self-Directed IRA and buying property in my home country (Europe). Dollar is super strong right now so the prices are great plus I know the market much better than US. That would be a nice way to truly diversify my portfolio.
I may buy some treasuries but that's at the bottom of my list of things to do. And I don't see myself investing in broad market index funds. They are "too" diversified for my taste (and are doing much worse than my individual stocks); I don't want to have anything to do with travel or energy related stocks right now. It will take forever for them to rebound.[/QUOT
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You mention Europe : Where is Europe would an American be smart to buy real Estate?
tenant13
Full time employment: Posting here.
I would never recommend buying real estate in an unfamiliar market. There are too many variables and way more things that can go wrong than if you just plunked your money into bonds/equities. I'm looking at properties and new developments in my childhood neighborhood that I know really well. This is not to discourage you from investing in real estate (including offshore) - I think there are plenty of opportunities all over the world and with the right property using your IRA might be beneficial. I live in NY but I bounce (well, used to...) around the world enough to be comfortable with the world outside US. It may not be for everyone.
https://fitsmallbusiness.com/self-directed-ira-for-real-estate-investing/
https://premieroffshore.com
https://www.escapeartist.com
This is a great reason to hold existing bonds paying a couple percent but...
How much of your capital are you willing to bet on buying now at 0%? Do you want to be holding 0% minus inflation for 30 years?
I guess you might consider it for a barbell strategy. 2.5% in gold, 2.5% in 30 year treasuries?
The big players are right now getting a free arbitrage. Treasury cannot (yet) sell below 0%, so they buy at auction and immediately sell at a negative rate.
tenant13
Full time employment: Posting here.
All true. I'm not buying bonds right now. I feel a bit stuck with cash in my IRA and so one of the ideas I had was investing in a rental property through SDIRA. I'm not sure if I actually go through with it though - it's a hassle. Other than that I play with covered options IF I'm ready for them to be exercised. They occasionally do but with the market being as volatile as it is, I quite often end up being paid for the exact opposite trade a week later. Low stakes gambling
