Anyone selling stocks to buy CDs, treasuries?

[OldShooter]

... The target-year funds have been extremely disappointing, I retired last year and was depending on their income (their description says that their highest goal is to provide income after reaching their target year), but they only paid out $251 (semi-annual income) this past June. I was so horrified, if their income is as unpredictable as stock prices I feel I can do better just using the money to buy bonds. ...

Two or three years ago I had been referring to target date funds generically, implicitly assuming that they were all the same. Then I started looking under the hood at some and discovered that their AAs and the AA trajectories can be wildly different. Extreme example here: https://www.reuters.com/article/us-...ers-on-risky-path-to-retirement-idUSKBN1GH1SI

So, rather than abandon target date funds completely, you might want to take a look under the hood of the ones you mention here plus some offered by other firms. Remember too, that your target date choice doesn't have to relate to anything else. Want more conservative AA? No problem, buy a fund with a date closer to today. More aggressive? Buy a fund with a target out a few extra years.

 

[pb4uski]

....Probably an annuity with a COLA would be more appropriate but annuities seem to have a bad rep and I think the cola ones are expensive. ...

It is very hard to find COLAed annuities these days, there are some out there that increase x% periodically, but none that I know of that follow CPI.

One notable exception is to delay social security. Let's say your PIA is $3,000/month and your FRA is 67. I you wait until 70, you forgo $108,000, but starting at 70 you receive an additional $720/month or $8,640/year. That's a 8% payout rate.

By comparison, according to immediateannuitis.com, the monthly benefit for a $108,000 fixed annuity for a 70 yo male is $768 and $725 for a 70yo female, so a similar benefit BUT the SS benefit increases annually for inflation.

 

[TickTock]

Just to be clear here - I never said that going long (e.g. 30 year T-Bond, or even more so going for long term Stripes) was a good idea. I'm not doing it, in fact my weighted days of to maturity is under one year.

All I stated is that if we were are at the peak for long term rates, that the longer the duration the better. They WILL rise the most (just as they have fallen the most).

As for me, I remain very skeptical that inflation is under control or will soon be under control, or the flip side being that to get it under control will mean pain in terms of defaults. So no way am I (again just speaking for myself) going to go very long at current real rates, nor will I adventure much out in terms of risk. I have enough risk in equities (about 40% of my net worth at this point), I don't need or want it in my fixed.

Having said the above, that doesn't mean I would never buy anything but a short term treasury, just that I won't put a lot of $ into "investment grade" or even worse bonds.

Would I do so? Yes, if the risk/reward was good enough. In 2009 I bought 7.5% Ford preferred which were selling at 20-25 cents on the dollar. Yes, a current yield of 35%. Ford didn't go bankrupt and they were eventually redeemed by Ford at par. I will take 5x on my investment PLUS the 35% annual interest (for a couple/few years) anytime. I'm not saying we will see deals like this again, but we are so far away from that I'm still not interested in tons of debt risk (particularly at my older age).

But if I see 10/20 year TIPS with a 3% real, then I will certainly be going HMM, maybe it is time to buy a bunch.

I don't disagree with any of what you posted above. My response came from you saying:

For those thinking we are near the top in terms of LT yields, you can pick up the US Treasury 30 year bond 1.25% coupon maturing 5/15/2050, issued 5/15/2020 for less than 50 cents on the dollar. (It reached a low today of 48 and 23/32nds and had a high over 101 in Aug 2020.) YTM is over 4.6%.

So much for a "risk free" investment (that is trading for less than half its original value, and for all those "well it will be redeemed at par" folks well I just lol.)

So yes, locking in a rate for 30 years can certainly negate the 'redeemed at par' advantage that individual bonds have. But for folks who opt for lower durations (such as you and I), 'redeemed at par' retains its value.

I think we're in closer agreement than the previous posts suggest.

 

[Rianne]

When Jamie Dimon talks, people listen

https://fortune.com/2023/09/26/jami...-rates-7-percent-soft-hard-landing-recession/

“First of all, interest rates went to zero. Going from zero to 2% was almost no increase,” he explained. “Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I’m not sure if the world is prepared for 7%. I ask people in business, ‘are you prepared for something like 7%?’”

 

[audreyh1]

Dimon has been warning and warning about an interest rate induced recession for the last year or so.

Probably a good discussion for JP Morgan Chase to have with their corporate customers.

We’ll see what happens. As far as I’m concerned our investment approach already handles recessions as I simply rebalance, not concerned with short-term volatility. Recessions happen. I don’t try to guess when. We’ve already been through several. We’re comfortable with a 50% equity allocation in spite of the short-term volatility.

 

[FREE866]

Jamie Dimon, like many people in the public eye, says a lot of things. Remember his summer of 2022 talk of the "impending hurricane"? If you bought stocks when he said that you've done well.



My take is select an AA you're comfortable and stick with it, not change it when the news headlines get inflamed with doom and gloom predictions.

 

[pb4uski]

Dimon has been warning and warning about an interest rate induced recession for the last year or so.

Probably a good discussion for BofA to have with their corporate customers. ...

But... Dimon is CEO of JPM Chase, not BofA.

 

[audreyh1]

But... Dimon is CEO of JPM Chase, not BofA.

Oops sorry, right. Brain fart.

 

[OldShooter]

Is there some comprehensive record listing Dimon's predictions vs what actually happened? I doubt it. The old quotation applies: "The purpose of economic forecasting is to make astrology look good."

In his book, "the signal and the noise" Nate Silver provides a very worthwhile chapter on economic forecasting. In it, he reports a conversation with Goldman's chief economist Jan Hatzius. His opinion? "Nobody has a clue."

 

[pb4uski]

... In his book, "the signal and the noise" Nate Silver provides a very worthwhile chapter on economic forecasting. In it, he reports a conversation with Goldman's chief economist Jan Hatzius. His opinion? "Nobody has a clue."

Or put differently, nobody knows nuthin'.

 

[Rianne]

Or put differently, nobody knows nuthin'.

True, but the discussion helps. Just as what AA works, when to take SS, what are safe investments, what stocks to buy...I don't know where I'll be in 5 years, could be in the ground, but discussing possibilities expands possibilities.

 

[twirler]

No.

I wouldn't do that. I would just allocate future investment purchases to CDs; should, that allocation meet your investment goals.

 

[MichaelB]

But... Dimon is CEO of JPM Chase, not BofA.

I do recall around 2 or so years ago Jamie Dimon and Brian Moynihan made remarkably contrasting statements on holding longer term treasuries. Dimon said JPMC was being cautious and had concerns about the effect of higher rates, while Moinahan said as long as the Fed was selling long bonds they would be buyers.

We saw in 1Q ‘23 substantially more impairment (unrealized losses) on BoA than Chase.

 

[OldShooter]

True, but the discussion helps. Just as what AA works, when to take SS, what are safe investments, what stocks to buy...I don't know where I'll be in 5 years, could be in the ground, but discussing possibilities expands possibilities.

Well, ... sort of. At one point both GE and Sears were considered "safe" investments. As far as what stocks to buy, the professionals demonstrate that this is unknowable every six months when the S&P SPIVA report is published. In forecasting, the ice is very thin and dangerous.

I do recall around 2 or so years ago Jamie Dimon and Brian Moynihan made remarkably contrasting statements on holding longer term treasuries. ...

Yes. They don't know nuttin' for sure. Below is a chart that I use in my Adult Ed investment class. Three major banks, three wildly different forecasts and spanning only three months into the future.

​

 

[twirler]

I do recall around 2 or so years ago Jamie Dimon and Brian Moynihan made remarkably contrasting statements on holding longer term treasuries. Dimon said JPMC was being cautious and had concerns about the effect of higher rates, while Moinahan said as long as the Fed was selling long bonds they would be buyers.

We saw in 1Q ‘23 substantially more impairment (unrealized losses) on BoA than Chase.

But, wasn't chase in the crapper right now, and BoA quarterlies going back quite a way are turning a profit and looking nice?

 

[jazz4cash]

As a customer I don’t care much about what the CEO has to say about the markets, economy etc. Jamie is a colorful guy so he gets a lot of attention but I would rather hear from their analysts. I’m only a customer for checking and brokered CDs.

 

[OldShooter]

As a customer I don’t care much about what the CEO has to say about the markets, economy etc. Jamie is a colorful guy so he gets a lot of attention but I would rather hear from their analysts. I’m only a customer for checking and brokered CDs.

I especially don't care about analysts. If they knew anything useful they would be lounging by the pool on their superyachts and trading a little whenever their cash balance got low. They would not be selling their expertise for a pittance or giving it away to retail investors for free.

 

[Koolau]

Dimon has been warning and warning about an interest rate induced recession for the last year or so.

Probably a good discussion for JP Morgan Chase to have with their corporate customers.

We’ll see what happens. As far as I’m concerned our investment approach already handles recessions as I simply rebalance, not concerned with short-term volatility. Recessions happen. I don’t try to guess when. We’ve already been through several. We’re comfortable with a 50% equity allocation in spite of the short-term volatility.

Right!


And JD has been spectacularly wrong on occasion - (I think he's probably right on this one but....) The older I get the less I listen to people on TV.

 

[MichaelB]

But, wasn't chase in the crapper right now, and BoA quarterlies going back quite a way are turning a profit and looking nice?

I don’t follow individual stocks and gave up trying to read a bank balance sheet years ago. I do understand that when a bank buys treasuries and declares them as “hold to maturity” securities they don’t have to realize the loss in value, even though that loss is real.

Either way, banks like JPMC and BoA are so big and complex no one can really assess their true risk. We find out just how much liquidity they can raise when TSHTF.

 

[audreyh1]

Don’t know if it’s just me, but it sure would be nice to have the spelling corrected on this thread’s title.

 

[FREE866]

Don’t know if it’s just me, but it sure would be nice to have the spelling corrected on this thread’s title.

Hahaha
Been thinking about this for days

 

[Car-Guy]

Would you rather see by, buy or bye.


EDIT: Looks like someone updated it.

 

[MichaelB]

I just happened buy and saw this.

 

[Car-Guy]

^^^^

 

[audreyh1]

Hahaha
Been thinking about this for days

Same here!

Would you rather see by, buy or bye.

EDIT: Looks like someone updated it.

Hallelujah!

Thanks moderators!!!