COcheesehead
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Ladder your holdings and you won’t have to guess.
I'm having trouble finding those. Where are they?
What does the rest of your allocation look like?
you dont see them on the CD ladders at schwab and fidelity?
example:
CIBC Bank USA IL 4.5% CD 05/25/2028
12547CBN7
Ladder your holdings and you won’t have to guess.
There’s a 36 month paying 4.85% in Vanguards inventory. Probably should just buy it. 12 month 18 month & 24 month is in the books. Just was wanted to know if Freedom or Monte would pound the table to buy or wait. Seems like one camp makes a good case that inflation is on the run & should be back in its hole in the coming months while the other camp say inflation is far from target & wages are going to continue to push prices up to unacceptable levels. Is building a ladder in an inverted yield environment a great idea? Will long rates push up once the fed is done & the bond market will do the heavy lifting in the future? I need another opinion.
There’s a 36 month paying 4.85% in Vanguards inventory. Probably should just buy it. 12 month 18 month & 24 month is in the books. Just was wanted to know if Freedom or Monte would pound the table to buy or wait. Seems like one camp makes a good case that inflation is on the run & should be back in its hole in the coming months while the other camp say inflation is far from target & wages are going to continue to push prices up to unacceptable levels. Is building a ladder in an inverted yield environment a great idea? Will long rates push up once the fed is done & the bond market will do the heavy lifting in the future? I need another opinion.
Is building a ladder in an inverted yield environment a great idea?
...Is building a ladder in an inverted yield environment a great idea?...
Good idea. Split the difference & quit trying to thread the needle. Roger thatCompared to what?
How long will the inverted yield curve last? When and how quickly will it revert to "normal" and how steep will it be? What else will happen along the way?
The only way to know is with a crystal ball and mine broke a long time ago. Or with 20/20 hindsight.
I'm struggling with this right now... will probably split the different and extend the ladder a little slower than I planned to and cross my fingers.
You could probably use some longer term securities.I’ve only gone out 12- 24 months. Everything else is money market or cash deposits at Vanguard
This group has been a big help. I think paid professionals struggle mightily with this stuff. You’ve stayed consistent with your views. I’m trying to put a positive spin on having to manage money. I really don’t like it but I’m not great at handing the wheel to someone else. It’s such a hot mess right now with politics & debt ceilings. But you know we’ve been here before. We’ve seen worse. I think it’s the TV & the internet that makes it seem worse than it is. Anyway thanks for your constructive input. It’s helpfulYou could probably use some longer term securities.
If you ladder (as I have) then each tranche is less important and approach is systematic. That is what I have done. My ladder extends about 8 years and is done for now.
I doubt that the 10 year is going to drop much more, but it could. The CPI reading has been down 10 months in a row, so the inflation trend is well established, at least for now.
When the yield curve is inverted it usually reverts by a drop in ST rates, not an increase in LT rates. So in my opinion waiting for LT rates to rise is a nonstarter. They could rise, but I doubt by much.
But the path to the new normal will probably take a while.
So maybe start fishing for some longer dated securities to fill your ladder. That takes time under the best conditions. But I would not wait to begin.
Nobody knows. Hedge your bets.
Your observation is spot on. I think I’m effected by people talking about how they nailed this great rate or that great deal. Then I think all my deals need to be perfect. I did notice folks on the other thread posting their average yield across their holdings. So maybe that will help me keeps a bigger picture perspective.You know, you can buy half of your desired position...
I am always amazed at the binary discussions here on ER.org. Not picking on you, just an observation that many think they need to make some magical decision and then put it all on red. We don't. Of course, if we inch in, hedge our thinking, etc., then we can't claim (to ourselves or others) about getting it perfectly correct.
Having said that, I've been staying pretty short....but have also nibbled at 2/3/4/5 year CD's when a more attractive deal came along. Did I go all in? Nope. If I don't see those again, oh well, at least I bought something. If I see even better deals, great as I still have capital OR CAN SELL SOME OF THE SHORT TERM HOLDING to jump on the longer dated issue.
Your observation is spot on. I think I’m effected by people talking about how they nailed this great rate or that great deal. Then I think all my deals need to be perfect. I did notice folks on the other thread posting their average yield across their holdings. So maybe that will help me keeps a bigger picture perspective.
Yes, but...If you have a ladder, you have a ladder. The curve doesn’t matter. Hey that rhymes. Your longer duration bonds eventually become shorter duration, short duration matures, gets reinvested long. You collect the interest, you get your principal back at maturity.
I agree.The total cashflow is what I focus on and the reliability of that cashflow. I am an income investor first.
I suspect this just comes a lot from people answering or replying to specific questions and thus not mentioning other parts of their income spectrum. For example I have mentioned I got in nicely on over 5% five year noncallable CDs. But I also have lower 4.5% or so one yr CDs bought on the way up which are lower yielding than todays present 1 year CDs.
But income wise I cover the spectrum too. Also have IBonds, plus 6% ute debt of 8-12 years, 7%-8% floating rate AllState debt and 12% NuStar adjustable subordinate debt. So I try to diversify across credit quality, cap stack, duration, fixed and float.
I forgot I bought ibonds in 2001 & 2002. I bought $30k both years. I bought some others after that but sold some during the 08/09 mortgage banking shenanigans. I bought some 4 year CDs with the money because the ibond returns zeroed out & the CDs paid 4+%. Then came QE TARP & zero rates. Some ibonds I kept have tripled some have languished. I’ve some 0 rate paper ibonds from 2011 & some electronic from the modern era. I should have kept them all but like now I barely know what I’m doing. I’m going to buy more CDs in the 36-48 month vicinity in the coming weeks. I’m monitoring the debt ceiling situation in case things get squirrelly. I hope the country figure out a path forward that makes sense.I suspect this just comes a lot from people answering or replying to specific questions and thus not mentioning other parts of their income spectrum. For example I have mentioned I got in nicely on over 5% five year noncallable CDs. But I also have lower 4.5% or so one yr CDs bought on the way up which are lower yielding than todays present 1 year CDs.
But income wise I cover the spectrum too. Also have IBonds, plus 6% ute debt of 8-12 years, 7%-8% floating rate AllState debt and 12% NuStar adjustable subordinate debt. So I try to diversify across credit quality, cap stack, duration, fixed and float.
. When the yield curve is inverted you are locking in lower interest rates (relative to the short end) to your disadvantage. The only reason to extend maturities in this environment is if you believe the far end of the curve will not go up. I don't share that belief.
Yes, but…Yes, but...
The original idea behind a ladder was that you kept rolling out to longer durations to take advantage of higher rates in those durations which you would enjoy until maturity. Lather, rinse, repeat. When the yield curve is inverted you are locking in lower interest rates (relative to the short end) to your disadvantage. The only reason to extend maturities in this environment is if you believe the far end of the curve will not go up. I don't share that belief.
IMO, any ladder should be kept in short durations if the yield curve is inverted. I practice that. My average duration right now is 248 days and only 8% of the total is invested in durations longer than 2 years, only 1% is over 3 years. The time to extend maturities is when the yield curve is flat to normal. That's my belief. YMMV.
I agree.