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Post by FD1000 on Nov 8, 2022 13:38:04 GMT
Let's open with the obvious: I hate forecasting. 1) The time to invest is when the Fed stops increasing rates or close to it. The CME tools says it's going to be 5-5.25 in Q1/2023(most likely in 03/2023). It's going to stay that way until 11/2023 and reduce in 12/2023 2) An easy choice will be to use VGSH for several months until...is it the best? 3) If we see stabilization. We can use longer term bonds because the Fed fund is correlated to the 2 year = VGSH, but the markets control inter+long term bonds. These longer term rates should start going down prior to VGSH. It's safer to go with inter-term bonds. 4) Which IT(inter-term)? I checked 3 funds from the time the rate stopped going up all the way when they were lower to the bottom 01/2018-2/29/2020... I looked at...VBTLX=US tot index(has 51% Gov+26% Corp+21% MBS), duration=6.5...VGIT-IT treasuries, duration=5.2...VCIT=IT Corp. duration=6.2 I added VGSH=2 year treasury...LQD=Corp duration 8+ Results: LQD +21.55...VCIT 17.9...TBLTX 13.4%...VGIT 10.8...VGSH=5% ( chart) PV( link) shows that the first, LQD, had higher SD but only by one but performance was much better. The next 3 had similar SD and why Corp were much better. The best risk-adjusted=Sharpe was VCIT. Remember, these are indexes, there are a lot more bond OEFs. Example: ORNAX(HY Muni) has better Sharpe than all the above, with performance closer to LQD but SD similar to VCIT,VBTLX. I love HY Munis. PIMIX did poorly, worse than VGIT. I ditched PIMIX in 01/2018 after holding for about 7 years at a huge %. BTW, you didn't have to wait for rate cuts. Longer term funds worked right away after rates stabilized.PDI made 27+% with SD=15+ (only looking to mid 02/2020) SPY made 38+% with SD=15+ (obviously better Sharpe). If I had to make a choice, I go with SCHD now. Both started the meltdown in mid 02/2020, but bond OEFs gave you 2 weeks to get out.5) I looked at the Fed fund rates( link), the only significant cut was in 2000 + 2007. In all 3 (2000,2007,2019) stocks did very bad after that. We didn't have such a high inflation. The situation was different. I didn't look at charts+PV for 2002,2007 because it takes too much time and some of the funds didn't exist. 6) The future is always unknown, and why most models that depend on previous markets + regression to the mean don't necessary work. The charts + current markets always work See chart below Attachments:
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Post by sortatino2 on Nov 8, 2022 19:18:27 GMT
Great analysis. I had looked at just the period of rate cutting, over the last 5 periods of rate cutting going back 2001, in another post and it led to Intermediate Treasury being the answer for that period. Maybe an optimal strategy would be to do this in 2 parts. Part 1 maximize stable period when fed funds stops going up which leads to Intermediate + corporate bonds. Might be interesting to look at HY corp and HY muni in here too. Part 2 maximize fed rate cut period which would lead to Intermediate Treasury. This would mean go with Intermediate Corporate (maybe further analysis has HY Corp or HY Muni) from March 2023 to November 2023 and then switch to VGIT from November 2023 until close to end of rate cut cycle. All of this subject to how the futures market evolves.
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Post by FD1000 on Nov 8, 2022 20:02:12 GMT
Since 2000, I found only 3 times when rates were cut at least 1-1.5%. 2000-1..2007-2008...and 2018-9 which I posted in the first post. I found 2 VG funds: VBMFX=Tot bond index...VFITX=IT treasuries. For Corp I use ACCBX which is a decent fund, but who know what happened 20 years ago. Both time 2007-8 + 2018-9 VFITX(treasuries) was the best one...BUT...prior to it, bond funds were doing fine, between very small loses to going up. Now, all these funds lost a huge % which means, the biggest losers, may generate higher come back. If you want to do really well, maybe use TLT=LT treasuries, they lost the most. Attachments:
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Post by FD1000 on Nov 8, 2022 23:43:44 GMT
What I found is the followings:
1) When The Fed fund stopped going up, bond funds start going up, no need to use ST duration bonds, maybe 1-2 months, if you want to be sure. I will use IT+LT bonds.
2) Since 2000, each time rates were raised at least 2%, then the Fed started to cut at least 2%, about 3-12 months later, stocks went down at least 30+%. 1999-2000=Fed fund rate went up 2% to 6.5%, then rates went down in 2001-2 from 6.5 to 1%, stocks lost 50% 2006-2008=Fed fund rate went up from 1% to 5% in 2006, then rates went down to 2% in Mid-2008, stocks went down 50% 2018-2019=Fed fund rate went up from 0% to 2.5% in 2019, then rates went down to 0% in 04/2020, stocks went down 34%. 2021-2022=Fed fund rate went up from 0% to 4% going to 5%, then...we will see.
What came first, the chicken or the egg, raising rates constrain the economy+earning, several months later, we go into a recession/hardship, stocks go down, rates are lowered, bonds do well, the economy/earnings improve, stocks come back. Looking at the above scenario, I'm the most confident, bonds are coming back, possibly recouping all the losses. This is at least 15% with IT-LT bonds. Any one who follows markets and the Fed closely knew to sell very early in 2022. The Fed was very clear.
Of course, the markets can change any time. Example: if crazy Putin send an atomic bomb, even a small one...OMG. At least bonds give you more time to sell.
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Post by Deleted on Nov 9, 2022 0:10:06 GMT
I did not sell bond funds in my IRA and don't plan to. Expect the NAVs to recover eventually; meanwhile the cash dividends provide an opportunity for future investment. If the current managers hold treasuries, that is fine, but I am not interested in going there myself.
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Post by FD1000 on Nov 9, 2022 0:23:42 GMT
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Post by mozart522 on Nov 9, 2022 21:03:08 GMT
Since 2000, I found only 3 times when rates were cut at least 1-1.5%. 2000-1..2007-2008...and 2018-9 which I posted in the first post. I found 2 VG funds: VBMFX=Tot bond index...VFITX=IT treasuries. For Corp I use ACCBX which is a decent fund, but who know what happened 20 years ago. Both time 2007-8 + 2018-9 VFITX(treasuries) was the best one...BUT...prior to it, bond funds were doing fine, between very small loses to going up. Now, all these funds lost a huge % which means, the biggest losers, may generate higher come back. If you want to do really well, maybe use TLT=LT treasuries, they lost the most. EDV is down 44%
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Post by FD1000 on Nov 9, 2022 21:13:48 GMT
Since 2000, I found only 3 times when rates were cut at least 1-1.5%. 2000-1..2007-2008...and 2018-9 which I posted in the first post. I found 2 VG funds: VBMFX=Tot bond index...VFITX=IT treasuries. For Corp I use ACCBX which is a decent fund, but who know what happened 20 years ago. Both time 2007-8 + 2018-9 VFITX(treasuries) was the best one...BUT...prior to it, bond funds were doing fine, between very small loses to going up. Now, all these funds lost a huge % which means, the biggest losers, may generate higher come back. If you want to do really well, maybe use TLT=LT treasuries, they lost the most. EDV is down 44% Actually over 50% Attachments:
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Post by Chahta on Nov 10, 2022 0:51:52 GMT
TR = -44% YTD per Yahoo Finance Price = -52% YTD per StockCharts
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Post by FD1000 on Nov 10, 2022 4:20:35 GMT
TR = -44% YTD per Yahoo Finance Price = -52% YTD per StockCharts My chart starts on 8-1-2020, not YTD and it's TR.
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Post by FD1000 on Nov 10, 2022 23:29:46 GMT
Today was a good test what might happen in 2023. Treasuries: ST=VGSH=0.5%....IT=VGIT=1.6...LT=TLT=3.85...Even longer=EDV=4.7% US tot index=VBTLX/BND=1.9-2.1% Corp: IT=VCIT=2.6%...Longer term=LQD=3.35 HY Munis: IT=PHMIX=1.5...Longer term=ORNAX=2.2% HY: PHIYX=1.9...the riskiest FAGIX=only 2%...HYG=3.1(don't pay attention because this index has higher SD is volatile markets Exactly what I forecasted above. IT treasuries did the least US tot bond index made more Corp made more than the US bond index HY Munis made more the treasuries+US bond index, but less than corp, but they have lower SD in "normal" markets. HY making only 1.9% was lower than Corp+HY Munis, but if you look for YTD( chart). It did pretty well up to date.
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Post by retiredat48 on Nov 11, 2022 1:29:42 GMT
Jeez, now were down to cherry picking ONE DAY, and making comparisons and conclusions??
Can't comprehend when you say "IT Treasuries (1.6%) did the least", when short term treasuries = 0.5% was smaller??
Or am I to invest in the "total bond fund"...a poor performer so far, based on one day?
And of course corporates have more inherent risk than treasuries, so on a rebound day would expect to do more!
The thing is: Did you buy anything?? I bought VGIT (posted same) a few days back and am way ahead!
R48
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Post by FD1000 on Nov 11, 2022 3:59:04 GMT
R48, I love when investors make money. Looks to me, I explained each category and it's risk-reward. Some use stocks for risk, others use riskier bonds instead, from Munis, Multi, corp, HY, and all the way to CEFs. I compared inter-term funds and Treasuries made the least. I hardly ever used treasuries, especially not directly. Over 10 years, my bond funds made a lot more money than Treasuries with lower SD, I don't think I would change now, but who knows. Flexibility is the key.
What happened to PDI? Up only 0.25% while stocks exploded. BTW, when you say I bought VGIT, what % of your total portfolio did you buy? 2-3%?
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Post by fritzo489 on Nov 11, 2022 14:24:25 GMT
FD1000, Any thoughts on Mr. Markets big up day. Yes I know 1 day doesn't make a trend !
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Post by win1177 on Nov 11, 2022 15:34:37 GMT
I’m curious if the most recent (one month) drop in the CPI as changed anybodies thoughts as to adding to bonds? I’m holding a sizable “chunk” in cash/ money markets (14% of portfolio), and wanting to lo some of that into bonds. Anybody else adding to fixed income?
Win
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Post by Chahta on Nov 11, 2022 16:27:13 GMT
I would question why the aggressive drop in interest rates yesterday. Was it money sucked out of bonds due to stocks? Or was it bonds trying to escape the downturn? I suppose the December increase will tell a lot. I am not sure if 50bp vs. 75bp makes any difference at that point. But win1177, the low point for bonds must be somewhere around here I would think. Still don't fight the Fed. One thing for sure it will get better or get worse I think.
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Post by mozart522 on Nov 11, 2022 17:10:11 GMT
win1177, I opened a small amount of VGLT at the open yesterday and made a little money. I will probably add more over time. Currently over 4 SEC yield and over 3% distribution yield as of October. The fund is down over 30% YTD, so I expect large price increases starting before the recession and increasing as the FED cuts rates. Meanwhile, I'll collect the 3+% until it happens. LT treasuries always do well in recessions anyway, as people leave stocks.
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Post by habsui on Nov 11, 2022 19:28:42 GMT
I’m curious if the most recent (one month) drop in the CPI as changed anybodies thoughts as to adding to bonds? I’m holding a sizable “chunk” in cash/ money markets (14% of portfolio), and wanting to lo some of that into bonds. Anybody else adding to fixed income? Win No change. I have been re-establishing bond positions for the last few weeks or so. I'm still careful with HY, but will end up with a larger HY bond allocation than before last year (reduced equities allocation).
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Post by FD1000 on Nov 26, 2022 14:24:59 GMT
As promised, my posts about what I do would be late by weeks instead of days (you know why). Let's start from the end. My first "nibble" wasn't 1-2-5%, it was 20+% and within days I was in at 99+% first time after I sold early in 2022. I was late a bit because 2022 has been the trickiest year I have experienced. This time it feels different. This is based on the price/chart/uptrend. Attachment 1 shows: 1) the bottom was at the third week of October 2) A base was build in the next 2 weeks 3) A clear uptrend started on the second week of Nov (and why I started this thread ) 4) From the bottom: ORNAX(HY Munis)up about 7%...VGIT(treasuries)=less than 3%...LQD(LT IG Corp)=about 8%...EMB(EM)= about 10% Generic comments: 1) If you want to make money in bonds, don't use treasuries(VGIT), they depend on rates more than others. My favorite is HY Munis because of their risk/reward. Watch the first chart for lower volatility + a good uptrend. 2) The Fed blinked after the CPI+PPI reports. The CME Fed Watch tool( link) is now forecasting a 4.75-5% for 2023, instead of 5-5.25% and a 0.5% increase in Dec 2022. 3) The yield is inverted, the gap between 2-10 year treasury got wider, see attachment 2. It stands now at -0.75( link). The Fed controls the ST rates, the market controls the LT which are down in the last several weeks. Inverted yield signals recession. Is it going to happen? I don't have an idea or care if it's mild or how long. I just want to make money. Actions: Forget the "experts", their opinions don't matter, your opinion doesn't matter either, only the price/uptrend matter and both gave you clear signals and preceded many of the endless talk. Coming out of volatile markets, I like to play HY Munis first, but Multi (examples: PIMIX,PDIIX) may emerge later. I'm not interested holding HY,EM for weeks/months. Good chance, that the biggest losers of 2022, will be the biggest winners from the bottom. I also said several times before that a 10+% rebound from the bottom for most bond categories is in the cards in the next 12-18 months....if you wait for clear signals to go in, you are late, you already missed the easiest one. BTW, the third attachment is another way to show why I made most of my money this year, in HY munis. You can see clearly 3 periods where I traded them. Disclaimer: the above is just an opinion about bond OEFs. If you take actions based on it, it's your responsibility. I dance near the exit in most cases.
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Post by mozart522 on Dec 1, 2022 19:30:55 GMT
win1177 , I opened a small amount of VGLT at the open yesterday and made a little money. I will probably add more over time. Currently over 4 SEC yield and over 3% distribution yield as of October. The fund is down over 30% YTD, so I expect large price increases starting before the recession and increasing as the FED cuts rates. Meanwhile, I'll collect the 3+% until it happens. LT treasuries always do well in recessions anyway, as people leave stocks. Since Nov. 7th, VGLT is up 11.7%. I have added along the way. And it is still down over 26% Lots of room for recovering lost NAV.
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Post by FD1000 on Dec 2, 2022 4:46:17 GMT
win1177 , I opened a small amount of VGLT at the open yesterday and made a little money. I will probably add more over time. Currently over 4 SEC yield and over 3% distribution yield as of October. The fund is down over 30% YTD, so I expect large price increases starting before the recession and increasing as the FED cuts rates. Meanwhile, I'll collect the 3+% until it happens. LT treasuries always do well in recessions anyway, as people leave stocks. Since Nov. 7th, VGLT is up 11.7%. I have added along the way. And it is still down over 26% Lots of room for recovering lost NAV. The chart below shows even more. VGLT did great, congrats. EDV made 50% more, both are not in my wheelhouse. As I said before, bonds will likely will make it all(or most back) within 12-18 months. FOR ME: 1) I only invest in 2-3 funds at least 20% in each 2) I don't like high volatility, VGLT lost 1.5% in one day, and a lot more before. In general, bonds are the smart money, as they say in Wall St. When rates go down rapidly because the economy improving and inflating is going down, it's great, but it's not. Attachments:
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Post by mozart522 on Dec 2, 2022 13:32:03 GMT
Since Nov. 7th, VGLT is up 11.7%. I have added along the way. And it is still down over 26% Lots of room for recovering lost NAV. The chart below shows even more. VGLT did great, congrats. EDV made 50% more, both are not in my wheelhouse. As I said before, bonds will likely will make it all(or most back) within 12-18 months. FOR ME: 1) I only invest in 2-3 funds at least 20% in each 2) I don't like high volatility, VGLT lost 1.5% in one day, and a lot more before. In general, bonds are the smart money, as they say in Wall St. When rates go down rapidly because the economy improving and inflating is going down, it's great, but it's not. Agree, FD, but the bond market is forward looking and prices always rise before the recessions. But I'm not betting the farm at this point.
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Post by FD1000 on Dec 3, 2022 5:02:53 GMT
I was about to go thru memory lane. So here it goes. In March 2022, on another thread, Gundlach talked about where ST rates would be and why it's time to invest in ST treasuries, AKA VGSH. I said, the chart looks terrible, rates are going up, and MM is a better choice. Within several months, VGSH lost money, while MM made money without any risk. In June, after rates climbed nicely, I said that buying 3-6-9 treasuries are the way to go and again, not VGSH...AKA, the bird in the hand As months pass, we witnessed rate increase and 3-6-9 treasuries paid even more, while MM also paid more But, I still stayed in MM paying about 1% less than 3 months treasuries...because, I predicted that we will see good trades thru 2022, and I did trade twice, in May and June. My biggest wait was since June because I knew that sometimes in the near future, the Fed will blink and bonds will make it big very quickly. I also post that HY munis would be my choice. My third and most successful trade came in Nov. I thought it would come in Oct, but the chart only signaled a buy in November. In just one month, HY Munis(and other IT-LT categories) had one of the best performance I have seen in just several weeks. I can't predict the future, but it seems to me, that ST isn't the way now. LT is in the house because the Fed controls the ST, while the market controls the LT and why LT bond funds made so much more. Remember, bonds SD/Risk is still a lot lower than stocks. So, why would anyone want to be in a ST bond fund? Just as...why would anyone want to be in bonds at all in 01/2022Below is a ( chart) for one month for ORNAX,VWALX,VGIT,LQD,DODIX. This is where you benefit the most from good funds/managers and that can last for months. HY Muni: ORNAX vs VWALX. ORNAX is "risky" while VWALX is the least risky. We may see 3-4% difference from the bottom. Higher rates bonds: VGIT VS DODIX = treasuries vs managed fund. Treasuries depend on rates, DODIX depend on the managers who should increase duration and will look for better performing bonds, instead of an index without a pilot. Corp: good chance it will make more than HY Muni, but SD surely will be higher and you never know when it will show up. The above is how your bond funds can make 2-3% more annually, if you trade them right, and 2% in the next several years could be significant. The chart shows clearly the above, ORNAX performance is the best for its risk. See how the chart is really smooth. BTW, read the OP, it was all there about 3.5 weeks ago. Disclaimer: I don't own any of the funds I mentioned above. I could be out or change funds at any time. Attachments:
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Post by chang on Dec 3, 2022 13:16:06 GMT
“So, why would anyone want to be in a ST bond fund?”
Because the yield curve is badly inverted.
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Post by FD1000 on Dec 3, 2022 14:43:17 GMT
“So, why would anyone want to be in a ST bond fund?” Because the yield curve is badly inverted. Inverted yield reinforce my case. See investopedia.com( link) quote: An inverted yield curve occurs when short-term debt instruments have higher yields than long-term instruments of the same credit risk profile. An inverted yield curve is unusual; it reflects bond investors' expectations for a decline in longer-term interest rates, typically associated with recessions.Decline LT rates = making more money investing is IT-LT duration bond funds. In just one month, the performance between ST to IT-LT is striking.
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Post by chang on Dec 3, 2022 15:03:24 GMT
I wouldn’t bet on declining rates, and I see no reason to go LT with the yield curve the way it is.
But I will be stashing my cash in FZDXX on Monday, until I can figure things out.
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Post by Fearchar on Dec 3, 2022 15:40:06 GMT
I will be stashing my cash in FZDXX on Monday, until I can figure things out. At Fidelity, 3 Month T-Bills are yielding 4.39% while agencies are 4.48%
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Post by chang on Dec 3, 2022 17:05:12 GMT
I will be stashing my cash in FZDXX on Monday, until I can figure things out. At Fidelity, 3 Month T-Bills are yielding 4.39% while agencies are 4.48% The only thing is ... MM rates have been going up daily. After 3-6-12 months, will they be higher than the T-Bill rate that I can lock in now. Another question: I've never bought treasury bonds through Fidelity. Is it fairly straightforward (assuming I plan to hold them to maturity)? Do the rates dependent on what sum you buy (i.e., can you get a better rate with a larger purchase)?
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Post by yogibearbull on Dec 3, 2022 17:12:54 GMT
At Fidelity, 3 Month T-Bills are yielding 4.39% while agencies are 4.48% The only thing is ... MM rates have been going up daily. After 3-6-12 months, will they be higher than the T-Bill rate that I can lock in now. Another question: I've never bought treasury bonds through Fidelity. Is it fairly straightforward (assuming I plan to hold them to maturity)? Do the rates dependent on what sum you buy (i.e., can you get a better rate with a larger purchase)? There have been posts about T-Bill ladders (13, 26, 39, 52 weeks) at brokerages that easily and handily beat m-mkt funds. T-Bills can be bought at Auctions - SAME price for EVERYBODY, whether $1,000 (only $100 at Treasury Direct) or $10,000,000! They can also be bought in the secondary market, and bid-ask depends on the size of the order. I have details for buying Treasuries elsewhere - title says TIPS but the process is basically the same for most Treasuries, ybbpersonalfinance.proboards.com/thread/278/mechanics-buying-selling-yr-tips
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Post by gman57 on Dec 3, 2022 17:22:31 GMT
At Fidelity, 3 Month T-Bills are yielding 4.39% while agencies are 4.48% The only thing is ... MM rates have been going up daily. After 3-6-12 months, will they be higher than the T-Bill rate that I can lock in now. Another question: I've never bought treasury bonds through Fidelity. Is it fairly straightforward (assuming I plan to hold them to maturity)? Do the rates dependent on what sum you buy (i.e., can you get a better rate with a larger purchase)? After 3-6-12 months doesn't matter... you're only buying 3 month @~4% (only 3 months). I don't know about Fidelity but I can buy 3 month bonds with a couple clicks at VG. I would imagine Fidelity is easy too. I recently moved a bunch of MM to 3 months which mature early Jan,Feb at ~4%. Better than letting it sit in MM. I'll re-evaluate in 3 months. I only buy new issue so you're not playing with spreads. Amount purchased doesn't affect price. You buy them in $1000 increments.
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