Is Now The Time for 2 YR Treasury Bond Funds...for Cash?

[fishingrod]

And you thought this thread was dead.

Here are articles about bond immunization.

www.accountinghub-online.com/bond-immunization/

news.morningstar.com/classroom2/course.asp?docId=5397&page=2

[Deleted]

Having been double boostered; I will forego bond immunization.

[FD1000]

Jun 20, 2022 12:46:35 GMT fishingrod said:

I would leave cash as cash. It will be paying more any time, and won't lose anything. Vanguard MM already up to 1.19% SEC yld.

RPHIX looks like it opened.

Closed at Fidelity + Schwab + VG, see below.  

Attachments:

[roi2020]

From RPHYX/RPHIX Summary Prospectus dated 01/26/22:

Sales of Retail and Institutional Class Shares of the Fund are closed to new investors except as noted below.
Existing shareholders of the Fund and certain eligible investors may purchase additional shares of the Fund
through existing or new accounts and may reinvest dividends and capital gains distributions.
New shareholders may open Fund accounts and purchase shares directly from the Fund (i.e., not through a financial intermediary).

[retiredat48]

I previously posted this:

FD, I don’t think your math is quite right.

I will post more after discussing with Vanguard personnel who actually run VGSH.

R48

edit to add.

here’s my issue with the math. Let’s say a fund holds one 2yr treasury bond, 2 years to maturity, current coupon of 0.01%, divvy of 0.01%.

Rates in one day go to 3%. Bond price drops, and the SEC yield is 2.75%. Rate and bond price stays the same for next two years.

You, FD, are saying one needs to wait to two years to achieve that SEC return.

I suggest no. The bond is marked to market daily, with a slowly increasing NAV, such that the SEC yield/return is being earned each day. Sell after 60 days and you get 60/360 times 2.75%.

I’ll find out more on this topic…get Yogi here!

R48

-------------------------------------------------

FD replied: "I never said you have to wait 2 years. I said you will not get 2.6% in the next 12 months, starting now", while you can buy a guaranteed 3+% 2 year treasury with no risk or volatility. Looks like a very simple choice.
How many months it would take VGSH to triple it's monthly distributions? I don't have an idea and I doubt anybody knows.

Turnover is 66 for the last 12 months. How do we know the turnover in the next 12 months? We don't.

--------------------------------------------------------------------

R48 reply:  I disagree with your stating "you do not get the SEC yield in 12 months, starting now".

Where is the flaw in my example?  You get the SEC yield each day that goes by, in the form of an addition to the  NAV/price.

Take the bond type where you have a zero interest rate, bought at a discount, that matures in two years; the discount set to yield 2.75% annually.

That means each day the bond value rises, and at the one year point, if you sold it, you get 2.75% addition to  principal.  Continue to hold for another year, you get another 2.75%. 

There is a daily accrual with this situation.   Otherwise, investors could just wait until a few days before a bond matures, buy it and get the full accrual.  Doesn't work that way.

R48

[retiredat48]

Jun 19, 2022 23:45:04 GMT FD1000 said:

I like to make it simple which I have done thru this thread. The OP started on March 23 searching if it’s a good idea to start buying. VGSH was the chosen one.  I said it was a bad idea. Since then, if you bought after 1-2-3-4-8 weeks, YOU LOST MONEY instead of MAKING MONEY. 

Where do you get this...lost money?

A cursory review last weekend of my purchases to date (posted on the forums),  showed I am in a slightly positive position.  And in repositioning my brother's retirement portfolio, who bought VGSH the day before the fed announcement, he is above water also...a nice gain to date.

R48

[retiredat48]

Jun 19, 2022 22:07:25 GMT mozart522 said:

Well, there is the volatility of principal if you don't hold the entire 2 years, and with rates increasing, that volatility is likely downward at least in the next year or more. Selling T bonds is not as easy or clean as selling funds.

There also is opportunity risk if rates go way up.

Correct...there is a volatility factor that if I sell out of VGSH in three months time, using the money to let's say buy some severely depressed stock funds in the current bear market, I could have a small loss.  

I posted earlier that this is my lifelong practice ...parking cash in intermediate and LT bond funds, getting the higher yield and allowing price to fluctuate.  On balance, this paid off handsomely.  However, I stopped when longer term rates got so low.

Now that the 2 year is back to around 3%, I submit this will payoff also....for holding cash.  Take the 3%, let the price fluctuate.

The two year treasury has already priced in the next fed moves to year end.  I also consider that the oncoming recession is coming sooner than expected.  Thus I consider the 2 yr yield has most likely peaked on day of feds past announcement.  So, I expect a cap gain to occur when I sell to redeploy this cash.

Lastly, I consider such fluctuations of less than 1% to be "chump-change" compared to the decline in stock fund prices going on, and my expectation to buy more of a high yielder like SCHD...at a lower price.

This is not for everyone, but this is a bond forum.  So others can observe and decide.

R48

[retiredat48]

Final post for today!!

Just for information, I also have cash parked elsewhere. One place is money market funds. Now getting,let's say, 1% yield.

Another place is cash used to purchase a hedge, PSTIX, Pimco Short Fund, which moves opposite the stock market trend. Owned since January. In last two weeks, for instance, PSTIX is up about 10%!!

So, my cash holdings has a great total return.

And if I decide to buy stock funds again (which I will), if VGSH is slightly underwater, I can and likely will use proceeds from a PSTIX sale for initial buys. For clearly I must be considering the bear market over, to buy a stock fund...or at least a compelling value exist to start buying again. Pyramid Up from there, of course.

R48

[mozart522]

Jun 22, 2022 15:24:36 GMT retiredat48 said:

Jun 19, 2022 22:07:25 GMT mozart522 said:

Well, there is the volatility of principal if you don't hold the entire 2 years, and with rates increasing, that volatility is likely downward at least in the next year or more. Selling T bonds is not as easy or clean as selling funds.

There also is opportunity risk if rates go way up.

Correct...there is a volatility factor that if I sell out of VGSH in three months time, using the money to let's say buy some severely depressed stock funds in the current bear market, I could have a small loss.  

I posted earlier that this is my lifelong practice ...parking cash in intermediate and LT bond funds, getting the higher yield and allowing price to fluctuate.  On balance, this paid off handsomely.  However, I stopped when longer term rates got so low.

Now that the 2 year is back to around 3%, I submit this will payoff also....for holding cash.  Take the 3%, let the price fluctuate.

The two year treasury has already priced in the next fed moves to year end.  I also consider that the oncoming recession is coming sooner than expected.  Thus I consider the 2 yr yield has most likely peaked on day of feds past announcement.  So, I expect a cap gain to occur when I sell to redeploy this cash.

Lastly, I consider such fluctuations of less than 1% to be "chump-change" compared to the decline in stock fund prices going on, and my expectation to buy more of a high yielder like SCHD...at a lower price.

This is not for everyone, but this is a bond forum.  So others can observe and decide.

R48

retiredat48,I was not taaking about VGSH but and actual 2 year treasury bond.  My comment was in response to FD post:

"I never said you have to wait 2 years. I said you will not get 2.6% in the next 12 months, starting now, while you can buy a guaranteed 3+% 2 year treasury with no risk or volatility."


I was just pointing out that an actual bond has price volitility and and one bought now will likely be lower after the next rate hike.

[fishingrod]

The accounting phenomenon retiredat48 , is referring to is called accretion or amortization. And it has to do with tax cost. And it applies to the bonds held inside the fund.

Accretion is the gradual and incremental growth of assets due to purchasing them at a discount and holding to maturity.

Accretion increases cost and increases income.

Amortization is the writing off of the investments premium over the projected life of its maturity.
Amortization decreases cost and decreases income.

[FD1000]

Jun 22, 2022 15:12:50 GMT retiredat48 said:

Jun 19, 2022 23:45:04 GMT FD1000 said:

I like to make it simple which I have done thru this thread. The OP started on March 23 searching if it’s a good idea to start buying. VGSH was the chosen one.  I said it was a bad idea. Since then, if you bought after 1-2-3-4-8 weeks, YOU LOST MONEY instead of MAKING MONEY. 

Where do you get this...lost money?

A cursory review last weekend of my purchases to date (posted on the forums),  showed I am in a slightly positive position.  And in repositioning my brother's retirement portfolio, who bought VGSH the day before the fed announcement, he is above water also...a nice gain to date.

R48

You is referred to anybody who bought after 1-2-3-4-8 weeks from the OP on 3/23.
Let's refresh the main idea. The OP claimed it's a good time to buy. In the first 2 months after 3/23, it wasn't. Anybody who bought lost money.
I also pointed out that CD/Treasury pay over 3% which is a sure thing.
I also pointed out that VGSH still pays 0.8% annually and it will take months to get to monthly distr to reflect 2.6% while the above already pay much better.

The above all leads to
1) No need to buy VGSH, it lost money for 2 months.
2) CD/Treasury is a better choice
3) Your rule of thump failed several times. All documented by previous posts. We are in a tough, unreliable market. I will take a guarantee 3% annually VS maybe 2.5% with huge volatility of VGSH.

We are still talking about a good place for cash and VGSH isn't the place, while CD/Treasury are.  Who wants/needs to try and time this?
Why not admit the above facts. The risk-adjusted performance is not worth it.

So now, you are talking more about your own trading. That is great. That doesn't change the facts above.
If you like to discuss trading, I'm game, but I don't trade things like VGSH, I'm looking to make 4-5-6% annually, wait, I already made in just several days with NHMAX.

[Deleted]

The OP did not claim it was a good time to buy, but rather asked for thoughts on a strategy for cash while waiting til deploy.

For cash holders, I assume they don't know when they will actually deploy. I would assume it could be a year or more. Or 2 months. No idea probably.

CD's do sound like a good idea for needed short term liquidity - a few months - but with rates rising, the time would be short. All cash is losing every day.

For VGSH - if you hold for a year, with rates rising, will you make money?

I think bonds in general are ill advised and that buying them is trying to guess interest rate progression. Most are miserable at predicting.

It seems to me that cash holders need to decide how long they are will8ng to hold cash and balance the normal risk/reward tradeoffs.

[mozart522]

FD1000,

"I also pointed out that VGSH still pays 0.8% annually and it will take months to get to monthly distr to reflect 2.6%"

You keep saying that but it is wrong. The distribution will never be 2.6 per year based on the current situation. It is the total return that might be based on the increased future NAV because the fund's average price is below par and maturing bonds will be replaced with higher-priced bonds. The distribution will increase some each month for some period.

At this point, most people would be better off with just buying a 2-year treasury. In a couple of months from now, maybe not.

[mozart522]

@slooo,
"All cash is losing every day."

So is the value of equity holdings on top of the paper loss. Even if your holdings were to go up 100% in the future, the value of those holdings will be minus the inflation rate over that period. It is called the time value of money.

[Deleted]

Jun 22, 2022 23:30:27 GMT mozart522 said:

@slooo,
"All cash is losing every day."

So is the value of equity holdings on top of the paper loss. Even if your holdings were to go up 100% in the future, the value of those holdings will be minus the inflation rate over that period. It is called the time value of money.

Again I disagree with this equating of claims on real assets to cash.   No need to re-argue - you have stated your point on this issue and I have as well. 

[mozart522]

Jun 22, 2022 23:47:17 GMT @slooow said:

Jun 22, 2022 23:30:27 GMT mozart522 said:

@slooo,
"All cash is losing every day."

So is the value of equity holdings on top of the paper loss. Even if your holdings were to go up 100% in the future, the value of those holdings will be minus the inflation rate over that period. It is called the time value of money.

Again I disagree with this equating of claims on real assets to cash.   No need to re-argue - you have stated your point on this issue and I have as well. 

With all due respect, Sara, there is no argument.  In january your portfolio had a VALUE in dollars of $1,000,000.  Today it has a VALUE in dollars of $800,000.  Tomorrow it will not have a VALUE of $800,000 just like my cash won't.  Real assets have a dollar VALUE and that dollar VALUE is eroded by inflation just like my cash.  It can't logically be any other way.  You keep saying it is, but you have given no explanation of how.  A house is a real asset.  If I buy it for X and sell it for X 5 years later is that X still have the same purchasing power?

[Deleted]

Jun 23, 2022 1:19:14 GMT mozart522 said:

Jun 22, 2022 23:47:17 GMT @slooow said:

Again I disagree with this equating of claims on real assets to cash.   No need to re-argue - you have stated your point on this issue and I have as well. 

With all due respect, Sara, there is no argument.  In january your portfolio had a VALUE in dollars of $1,000,000.  Today it has a VALUE in dollars of $800,000.  Tomorrow it will not have a VALUE of $800,000 just like my cash won't.  Real assets have a dollar VALUE and that dollar VALUE is eroded by inflation just like my cash.  It can't logically be any other way.  You keep saying it is, but you have given no explanation of how.  A house is a real asset.  If I buy it for X and sell it for X 5 years later is that X still have the same purchasing power?

Mozart - let's just take a company.  Apple - my biggest holding - Let's say I have shares that cost $10,000 on Jan 1.  Today those same shares cost $7500.  What is the value of those claims on real assets?  I believe they are more than that $7500 the market is valuing it at.  Price vs Value.  Now I think the intrinsic value of those shares - representing the claims on real assets - is worth more than $7500. In fact I think it's more than $10,000.  So - I am not going to sell.  Now - next year - the price could be $12,000 or $6,000.  The Mr. Market analogy makes it very clear that price does not have to equal value.  So - you tell me - what is the value of my Apple shares today and how can that value be described in terms of purchasing power?  Once you convert a real asset to the means of exchange - of course the purchasing power of that means of exchange is affected by inflation. 

Mozart  - I very well understand the time value of money, discounted cash flows and real versus nominal returns.  I also understand that stock returns can outpace inflation.  Can dollars?  No. 

Going back to your house example.  You buy a house for $100,000.  5 years later you sell it for $200,000 - a much better return than normal because you bought next to Apple's new campus. You have $100,000 in a savings account too.  5 years later you cash it out after earning simple interest of $15,000.  Now we can back out inflation from both transactions.  The $200,000 is not worth what it would have been on January 1 5 years ago, but it likely is worth more and has likely kept pace with inflation.  That $115,000 is likely less than the $100,000 in terms of purchasing power than on that January 1 5 years ago. The effect on purchasing power of that $100,000 for the two assets is very different. 

Now - if you bought a house next to a toxic waste dump - different outcome.

[mozart522]

Jun 23, 2022 1:31:31 GMT @slooow said:

Jun 23, 2022 1:19:14 GMT mozart522 said:

With all due respect, Sara, there is no argument.  In january your portfolio had a VALUE in dollars of $1,000,000.  Today it has a VALUE in dollars of $800,000.  Tomorrow it will not have a VALUE of $800,000 just like my cash won't.  Real assets have a dollar VALUE and that dollar VALUE is eroded by inflation just like my cash.  It can't logically be any other way.  You keep saying it is, but you have given no explanation of how.  A house is a real asset.  If I buy it for X and sell it for X 5 years later is that X still have the same purchasing power?

Mozart - let's just take a company.  Apple - my biggest holding - Let's say I have shares that cost $10,000 on Jan 1.  Today those same shares cost $7500.  What is the value of those claims on real assets?  I believe they are more than that $7500 the market is valuing it at.  Price vs Value.  Now I think the intrinsic value of those shares - representing the claims on real assets - is worth more than $7500. In fact I think it's more than $10,000.  So - I am not going to sell.  Now - next year - the price could be $12,000 or $6,000.  The Mr. Market analogy makes it very clear that price does not have to equal value.  So - you tell me - what is the value of my Apple shares today and how can that value be described in terms of purchasing power?  Once you convert a real asset to the means of exchange - of course the purchasing power of that means of exchange is affected by inflation. 

The value of those Apple shares today is $7500.  Look at your statment.  Does it say $7000 with an * and a note about supposed intrinsic value or M* fair price or any other valuation system?  Nope.  It says your apple shares are worth $7000.  You may feel they are worth more so you don't sell.  Mr. Market says they are worth $7000

Mozart  - I very well understand the time value of money, discounted cash flows and real versus nominal returns.  I also understand that stock returns can outpace inflation.  Can dollars?  No. 

No $ can't.  We have agreed on that.  We have also agreed that stock returns can outpace inflation, but you seem to believe that they are not lowered by inflation.  This isn't about if cash is better, yet you keep hammering that cash loses  money every day to inflation.  Everything loses money every day to inflation.  Real assets aren't immune.

Going back to your house example.  You buy a house for $100,000.  5 years later you sell it for $200,000 - a much better return than normal because you bought next to Apple's new campus. You have $100,000 in a savings account too.  5 years later you cash it out after earning simple interest of $15,000.  Now we can back out inflation from both transactions.  The $200,000 is not worth what it would have been on January 1 5 years ago, but it likely is worth more and has likely kept pace with inflation.  That $115,000 is likely less than the $100,000 in terms of purchasing power than on that January 1 5 years ago. The effect on purchasing power of that $100,000 for the two assets is very different. 

Of course.  All that shows is that real assets have a much greater potential for inflation beating returns than cash.  In fact, cash has no potential.  But if you had to sell that house for $100,000 then the $115,000 had more purchasing power even though both lost to inflation.  Real assets are valued in money.  Anything valued in money will be affected by inflation.

Now - if you bought a house next to a toxic waste dump - different outcome.

[Deleted]

Mozart - we aren't going to agree. Actually - I do agree that stocks are a hedge against inflation. I never said real returns = nominal returns, which would have to be the case if one believed inflation did not affect assets. As far as hammering - you keep putting the nail out there. 

[mozart522]

Jun 23, 2022 2:49:16 GMT @slooow said:

Mozart - we aren't going to agree. Actually - I do agree that stocks are a hedge against inflation. I never said real returns = nominal returns, which would have to be the case if one believed inflation did not affect assets. As far as hammering - you keep putting the nail out there. 

Nothing you have said indicates in any way that stocks do not suffer from inflation just like cash.  This is simple logic.  You have not provided any outsode source that supports your position.  Just like a rising tide lifts all boats, inflation lowers all assets.  It doen't matter if, over time, the asset beats inflation, any more than it doesn't matter that your assets are losing to inflation now.

[mnfish]

Portfolio Visualizer calculates inflation effect for both SPY and CASHX at -12% for 2020 to YTD, if that helps.

As far as holding cash during the most volatile years it can make sense if you could use hindsight today. PV calcs that $10,000 in SPY in 2000 would be worth $42,374 YTD. So, I played around and used CASHX from 2000-02, SPY 2003-07, CASHX 2008-09, SPY 2010-19, CASHX 2020, SPY 2021, CASHX 2022 YTD. The end result was $95,993 YTD. Anyone know someone with that crystal ball?

[Deleted]

Again - I disagree that inflation affects stocks "just like" cash or that PV is an authority on this. There is going to be no meeting of the minds. Quote outside sources? Value = price? I strongly disagree. Google it if you want outside sources. There's a lot. These are pretty fundamental differences here. I really don't feel a need to prove to a group of experienced investors that stocks do not suffer from inflation "just like" cash. One only needs to look at long term expected returns of the stock market. No one has said inflation doesn't affect all assets. No one. It affects cash much worse to the extent of negative real returns directly in proportion to the price of money. That value does equal price. One only needs to look at the change of the value over time. That's all. Sorry - I just don't see the value of Apple's assets having a guaranteed negative return or that its value is it's price. If I get a house worth $100,000 for $50,000, it's value is $100,000.

This has gotten very off track from the OP. My apologies to all. Mozart - feel free to have the last word. I truly think this will be a continuing circle.

[mozart522]

@slooow,

I think we are just talking past each other. You already said the nominal value of your holdings is different than the real (inflation-adjusted) value. That is all I have been saying. Everyone knows cash loses to inflation. That makes my job harder in that I have to utilize that cash to overcome the inflation loss. You can just wait until the market overcomes inflation for you.

Good discussion, no hard feelings here.

[retiredat48]

FD, you keep rehashing same ol, same ol, as though you are flailing.

You refuse to acknowledge that by "accretion" (thanks fishingrod) VGSH will slowly increase in nav price as bonds head daily towards maturity, and a capital gain.  The SEC yield has meaning.

You don't acknowledge that funds like VGSH and PDI pay out cap gains in december, uping total return.

You refuse to admit I am UP on my VGSH purchases.

You refuse to admit my brother, who bought the day before fed announcement, right at the VGSH low, is up (ahead).

You refuse to acknowledge that I have been discussing for past two years bond convexity and its affect on various "bond rules of thumb", that as rates go to zero or negative, the rules don't apply...but now at 3% or more they are useful.

And BTW here is a recent Gundlach take, posted on another forum:

"Jeffrey Gundlach
@truthgundlach
30-year yield took out the 2018 closing high today only to powerfully reverse by 25 bp. This action is called a “throw over” and often marks an important trend reversal."

Indeed, the 2 yr and ten yr may have put in lows (peak yields), as yields are falling. I posted I don't see the two year staying above 3%, and the yield is declining now..

And Sara is right, this thread/OP DID NOT open with a recommendation to buy that day. Came way later for me.

Final point...some of you are saying that when fed raises rates again shortly, the 2 yr and ten yr rates will rise also. Not a given. The market has priced in the full fed expected rate hike through election day. Gundlach charts show the fed funds rate tracks the two year (or vice versa).

Any large downturn in economy before September, and fed will likely "pause", giving another boost to VGSH.

R48

[FD1000]

Jun 22, 2022 23:26:06 GMT mozart522 said:

FD1000 ,

"I also pointed out that VGSH still pays 0.8% annually and it will take months to get to monthly distr to reflect 2.6%"

You keep saying that but it is wrong. The distribution will never be 2.6 per year based on the current situation. It is the total return that might be based on the increased future NAV because the fund's average price is below par and maturing bonds will be replaced with higher-priced bonds. The distribution will increase some each month for some period.

At this point, most people would be better off with just buying a 2-year treasury. In a couple of months from now, maybe not.

And where is my post, I said that dist are all you get?
For weeks now I posted how VGSH lost money, regardless of distributions.
We agree about 2 years treasury, I posted about it, maybe 10 times already?

[FD1000]

Jun 22, 2022 23:09:44 GMT @slooow said:

The OP did not claim it was a good time to buy, but rather asked for thoughts on a strategy for cash while waiting til deploy.

For cash holders, I assume they don't know when they will actually deploy. I would assume it could be a year or more. Or 2 months. No idea probably.

CD's do sound like a good idea for needed short term liquidity - a few months - but with rates rising, the time would be short. All cash is losing every day.

For VGSH - if you hold for a year, with rates rising, will you make money?

I think bonds in general are ill advised and that buying them is trying to guess interest rate progression. Most are miserable at predicting.

It seems to me that cash holders need to decide how long they are will8ng to hold cash and balance the normal risk/reward tradeoffs.

The OP started on March 23. On March 24, see attachment R48 said

--I am OK starting to buy at "compelling value" prices.

--Sure, prices may go even lower to an absolute eventual bottom, but if I buy now at 2.15%, hold for up to 2 years, the odds are above 50% that the bond fund price will have stabilized and likely be HIGHER.

In the next several weeks, the discussion defintently was it's time to buy. It wasn't that great.  I also pointed that 2 year treasury was a better, no brainer, guarantee choice. Trading is worth it when the result are much better, why do it when you have guarantee?
We also know the rule of thumb can be off during erratic markets as now.

Attachments:

[mozart522]

Jun 24, 2022 13:47:12 GMT FD1000 said:

Jun 22, 2022 23:26:06 GMT mozart522 said:

FD1000 ,

"I also pointed out that VGSH still pays 0.8% annually and it will take months to get to monthly distr to reflect 2.6%"

You keep saying that but it is wrong. The distribution will never be 2.6 per year based on the current situation. It is the total return that might be based on the increased future NAV because the fund's average price is below par and maturing bonds will be replaced with higher-priced bonds. The distribution will increase some each month for some period.

At this point, most people would be better off with just buying a 2-year treasury. In a couple of months from now, maybe not.

And where is my post, I said that dist are all you get?
For weeks now I posted how VGSH lost money, regardless of distributions.
We agree about 2 years treasury, I posted about it, maybe 10 times already?

Well, at the time it yielded 2.6%.  And you said " VGSH still pays 0.8% annually and it will take months to get to monthly distr to reflect 2.6%"  Is this not implying that the monthly distribution will take months to reach reach a level equal to 2.6% annually?  If not, then what are you saying?

[FD1000]

Jun 24, 2022 14:02:52 GMT mozart522 said:

Jun 24, 2022 13:47:12 GMT FD1000 said:

And where is my post, I said that dist are all you get?
For weeks now I posted how VGSH lost money, regardless of distributions.
We agree about 2 years treasury, I posted about it, maybe 10 times already?

Well, at the time it yielded 2.6%.  And you said " VGSH still pays 0.8% annually and it will take months to get to monthly distr to reflect 2.6%"  Is this not implying that the monthly distribution will take months to reach reach a level equal to 2.6% annually?  If not, then what are you saying?

I have been saying the following for at least 10 years. Total return (TR) includes distributions too, that implies that distributions are only a part of TR. But hey, you are looking very hard for any word I said to find something wrong, and play gotcha, you are not the first or last.

[FD1000]

Jun 23, 2022 16:12:51 GMT retiredat48 said:

FD, you keep rehashing same ol, same ol, as though you are flailing.

You refuse to acknowledge that by "accretion" (thanks fishingrod) VGSH will slowly increase in nav price as bonds head daily towards maturity, and a capital gain.  The SEC yield has meaning.

You don't acknowledge that funds like VGSH and PDI pay out cap gains in december, uping total return.

You refuse to admit I am UP on my VGSH purchases.

You refuse to admit my brother, who bought the day before fed announcement, right at the VGSH low, is up (ahead).

You refuse to acknowledge that I have been discussing for past two years bond convexity and its affect on various "bond rules of thumb", that as rates go to zero or negative, the rules don't apply...but now at 3% or more they are useful.

And BTW here is a recent Gundlach take, posted on another forum:

"Jeffrey Gundlach
@truthgundlach
30-year yield took out the 2018 closing high today only to powerfully reverse by 25 bp. This action is called a “throw over” and often marks an important trend reversal."

Indeed, the 2 yr and ten yr may have put in lows (peak yields), as yields are falling. I posted I don't see the two year staying above 3%, and the yield is declining now..

And Sara is right, this thread/OP DID NOT open with a recommendation to buy that day. Came way later for me.

Final point...some of you are saying that when fed raises rates again shortly, the 2 yr and ten yr rates will rise also. Not a given. The market has priced in the full fed expected rate hike through election day. Gundlach charts show the fed funds rate tracks the two year (or vice versa).

Any large downturn in economy before September, and fed will likely "pause", giving another boost to VGSH.

R48

R48, your trades were great, fantastic, unbelievable with great timing.

I'm talking about the generic concepts.
1) You started the OP on March 23rd, was it a good idea to buy 1-2-4-8 weeks later? That's a long time to wait for a great buy SOON. When I post that something looks good, it means right now, not 10 weeks later. This thread was about timing ST bonds.
2) Why use VGSH and not a guarantee CD/treasury instead?
3) Why the rule of thumb can be off in erratic markets, as we experienced it in other periods?

[mozart522]

Jun 24, 2022 14:09:49 GMT FD1000 said:

Jun 24, 2022 14:02:52 GMT mozart522 said:

Well, at the time it yielded 2.6%.  And you said " VGSH still pays 0.8% annually and it will take months to get to monthly distr to reflect 2.6%"  Is this not implying that the monthly distribution will take months to reach reach a level equal to 2.6% annually?  If not, then what are you saying?

I have been saying the following for at least 10 years. Total return (TR) includes distributions too, that implies that distributions are only a part of TR. But hey, you are looking very hard for any word I said to find something wrong, and play gotcha, you are not the first or last.

What?  I'm just trying to understand what you meant by 0.8% taking months to reflect 2.56%.   You don't need to be so defensive.