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Post by fishingrod on Mar 10, 2023 14:49:43 GMT
Interest rate guessing is very tough. One doesn't know if a bond trade is fortuitous until after the fact, and then the window for that trade will be gone. One can not expect to hop on a bond train after it has left the station.
I still remember my best buy on bonds. I locked in 5.70% for 15 years in 2008. It comes due later this year.
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Post by Deleted on Mar 10, 2023 15:06:45 GMT
FD1000: "Right now Fidelity 3 months CD/treasury pays 5%. FZDXX pays 4.46%, VMFXX pays 4.52%, my SNAXX pays 4.62%."
I am just a humble lurker here but given MM ER's and TBill tax advantage, I see a typical return difference more like 4% vs 5%. If this is correct, given this environment and my capital preservation priority that's not trivial.
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Post by retiredat48 on Mar 10, 2023 15:33:31 GMT
At FD1000...a rebuttal to your posts.
You keep stating that funds like 2 yr treasury fund VGSH are "losing money." This is incorrect. Note your chart above shows a gain for VGSH of 0.33%.
You somehow do not want to count that funds are receiving dividends monthly. These go to total return. If one buys a stock with a next day dividend of $1.00, and the stock price falls by $1.00 in two weeks, this is not a loss. Total return is zero.
An investor holding any of these short term funds, if held a year lets say, will give positive returns. Do not let "lose money" scare you on these.
Further, the difference of +0.33% and and 1.33% is miniscule. That is one needs to recognize the y axis on your chart is a tiny range of numbers.
The real key during this time period is degree of success in transitioning from very short term, to longer term duration bonds/funds. In this regard, waiting in money market funds until the bell rings that all is clear, may be way too late.
Note the LT rates of treasuries like 10 and 20 and 30 years is BELOW the last peaks in October. That is, they just again touched 4% yields and fell quickly below. I went to 5 years (VGIT)locked in at 4+%...twice, and the gains on this are not miniscule.
I would not be surprised that LT does not hold at over 4%, even if short rates go to 6%...or 7%. The higher the short term rate, the more the odds of a hard landing, and a flight to quality (treasuries). And as the fed wins the race in lowering inflation, short term rates like in VGSH will fall also, providing a capital gain return.
This short term stuff is just that...short term. The key is to be successful in locking in longer term rates that help your portfolio, and stop fretting on a few basis points.
BTW Here is what Blackrock stated their position is: "They are overweight US short term bonds (bills) for income and capital preservation."
R48 Edit to add: BTW I see VGSH UP 1.38% so far today!!
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Post by mnfish on Mar 10, 2023 19:06:10 GMT
In regard to stock analysts and to FD's point. Here's what one wrote on March 8th about SIVB -
"Weaker core trends and an expectation for higher for longer rates have driven a large securities restructuring and reduced guidance. While SIVB remains a leader in the innovation economy, we lower PT to $300 reflecting the business challenges."
Oops.
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Post by junkster on Mar 10, 2023 21:02:10 GMT
Riverpark is well aware of those attempting to use their funds as a parking place for cash I.e. RPHIX. They will ban you from any further purchases in any of their family of funds. I should know as I just received just such a ban purchase for another fund in their family.
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Post by anovice on Mar 10, 2023 21:47:59 GMT
Riverpark is well aware of those attempting to use their funds as a parking place for cash I.e. RPHIX. They will ban you from any further purchases in any of their family of funds. I should know as I just received just such a ban purchase for another fund in their family. junkster, thanks for the heads up. I have been using RPHIX for my cash.
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Post by junkster on Mar 10, 2023 21:59:23 GMT
Riverpark is well aware of those attempting to use their funds as a parking place for cash I.e. RPHIX. They will ban you from any further purchases in any of their family of funds. I should know as I just received just such a ban purchase for another fund in their family. junkster, thanks for the heads up. I have been using RPHIX for my cash. Since I made my post a friend also received a ban notice from RiverPark. Again not RPHIX but a RiverPark fund and with much smaller AUM. David Sherman who managed RPHIX posts and lurks here. He is no dummy and I am sure he wouldn’t put up with traders using his fund as a parking place for cash. Too disruptive for the fund.
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Post by FD1000 on Mar 10, 2023 22:17:33 GMT
At FD1000...a rebuttal to your posts. You keep stating that funds like 2 yr treasury fund VGSH are "losing money." This is incorrect. Note your chart above shows a gain for VGSH of 0.33%. You somehow do not want to count that funds are receiving dividends monthly. These go to total return. If one buys a stock with a next day dividend of $1.00, and the stock price falls by $1.00 in two weeks, this is not a loss. Total return is zero. An investor holding any of these short term funds, if held a year lets say, will give positive returns. Do not let "lose money" scare you on these. Further, the difference of +0.33% and and 1.33% is miniscule. That is one needs to recognize the y axis on your chart is a tiny range of numbers. The real key during this time period is degree of success in transitioning from very short term, to longer term duration bonds/funds. In this regard, waiting in money market funds until the bell rings that all is clear, may be way too late. Note the LT rates of treasuries like 10 and 20 and 30 years is BELOW the last peaks in October. That is, they just again touched 4% yields and fell quickly below. I went to 5 years (VGIT)locked in at 4+%...twice, and the gains on this are not miniscule. I would not be surprised that LT does not hold at over 4%, even if short rates go to 6%...or 7%. The higher the short term rate, the more the odds of a hard landing, and a flight to quality (treasuries). And as the fed wins the race in lowering inflation, short term rates like in VGSH will fall also, providing a capital gain return. This short term stuff is just that...short term. The key is to be successful in locking in longer term rates that help your portfolio, and stop fretting on a few basis points. BTW Here is what Blackrock stated their position is: "They are overweight US short term bonds (bills) for income and capital preservation."R48 Edit to add: BTW I see VGSH UP 1.38% so far today!! I never said "lose money". I don't see VGSH as a good purchase. I already posted why. A year ago you posted about VGSH, I said no. In one year, VGSH lost -1.9%. So I see 2 options: 1) If you want to hold for safety, then use MM, CD/treasury. Getting 4.5+% is pretty good for a guarantee. Why do I or anyone else wants crazy volatility with low returns. 2) If you are a good trader, you can make a lot more in bonds, not a few basis points. We can agree to disagree. ================= AXE: FD1000: "Right now Fidelity 3 months CD/treasury pays 5%. FZDXX pays 4.46%, VMFXX pays 4.52%, my SNAXX pays 4.62%." I am just a humble lurker here but given MM ER's and TBill tax advantage, I see a typical return difference more like 4% vs 5%. If this is correct, given this environment and my capital preservation priority that's not trivial. FD: that depends on your situation and taxes. Most of my money is in IRA. Even at 0.25% per 3 months it's not worth it. Remember, my MM always waits for the next trade. You got to look at the big money not the 1% difference. If you want certain % in CD/treasury for longer term than do it. Think about 3-5 years at around 5% because inflation should be lower than now. I don't believe in holding months in CD/treasuries, even as a retiree, if I can make more investing it.
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Post by retiredat48 on Mar 10, 2023 23:55:57 GMT
@ FD1000 ,...who posted: "1) If you want to hold for safety, then use MM, CD/treasury. Getting 4.5+% is pretty good for a guarantee. Why do I or anyone else wants crazy volatility with low returns."I do. I seek volatility. You are comparing MM Fund return with longer dated bond funds, saying the small basis points in yield not worth giving up stability. I do not view volatility as a problem; rather an opportunity. Yes, MM Fund fixed in price. But the longer dated treasuries will have a sine-wave chart around a set point (stable) interest rate. I fully plan to sell some VGSH at a cap gain in price, and thus reap far more than MM Fund return. This cap gain (lower yields) may come from at least a couple ways, as follows: First, the fed may have already "blown it" by activity of Silicon Bank failure. Fed may have huge systemic risk on hand. 50 bps for March now likely back to 25. Perhaps even a pause now. Varied financial constraints are emerging on businesses and regional banks. Look at KRE drop this week. Fed created this situation by the click of a mouse (increasing rates); it can undue it just as quickly. This would be huge gain for VGSH. Second, very likely now to see a hard landing. Meaning come December, yes, fed may still have high rates in place. But the market will be looking six months out and anticipate a lowering of rates. Thus 2 yr treasury rallying. Higher VGSH. Point is, there will come a time VGSH is yielding its interest AND providing cap gains, thus outperforming mm funds. Appears VGIT (5 yr) is already doing this. BTW I have my largest cash holdings in history with my exit 1.5 years ago of bond funds. I use MM Funds also; this money targeted for stock fund purchases etc. Some cash I will hold for 6 months to a year, thus something like VGSH is the choice. I plan to make more than MMF. And some monies will go to longer dated maturities. VGIT (5 yr) under accumulation now, with goal of going to 10-20 years when time is right. Taking advantage of the fed dilemma situation fighting inflation will not occur unless investors someday hold bonds or funds with both a good yield and long duration locked in.I also plan to go corporates when a big bankruptcy occurs, expanding the low quality/high quality spreads; I did not anticipate a bank would be the first to go bankrupt! I recently purchased some corporates, and they are up already. Standby for pin-action! Fun times. R48
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Post by FD1000 on Mar 11, 2023 4:24:54 GMT
R48, you are talking about potential instead of actual and what to do each time. In 03/2022 you posted that VGSH looks promising and then you claimed it will make 6% in several months. One year chart proves that VGSH lost -1.9% since. In 11/2022, I posted it's time to go in for the first time in 2022 and why I'm at 99+% and prefer HY Munis, I gave ORNAX as an example. You claimed that VGIT is a good idea, I said it's not, if you want higher-rated bonds use DODIX instead. I also posted that I sold everything in early 02/2023. The charts below are the proof.Sure, one day VGSH will be better than MM, but it was a terrible idea in the last year. Until the Fed isn't going to stop raising or rates stabilize which could be earlier, VGSH risk-adjusted return isn't good enough. So again, for someone who wants safety, 4.5-5% in MM/CD/treasury has been the place to be for a year and NOW. Good traders can do a lot better than VGSH,VGIT. I can tell you another "secret", suppose I know TLT can make 20% in one year, and I can do "only" 10% with much lower volatility bond fund, I will use the second choice because history shows that predicting rates is difficult and I don't want my portfolio to zig-zag 10-20%(chart 3). I also can trade lower volatility much better because it's more predictable. R48: Fed may have huge systemic risk on hand. 50 bps for March now likely back to 25. Perhaps even a pause now. FD: it was 0.25% at 60+% this afternoon it's at 0.5% at 68+% at 11:30PM, I do check actual data very often. See ( www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html). I never predict, markets tell me in real time what to do. I wish you good luck with all your trades and investments.
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Post by retiredat48 on Mar 11, 2023 14:37:17 GMT
R48, you are talking about potential instead of actual and what to do each time. R48 reply in bold: Since I post in real-time WHAT I BUY, AND WHEN, we are dealing with ACTUAL, as well as future returns.In 03/2022 you posted that VGSH looks promising and then you claimed it will make 6% in several months. One year chart proves that VGSH lost -1.9% since. Yes. I buy in buckets. I have one bucket purchase on VGSH that was too early. Since that purchase, the fed twice raised its terminal or ending rate to the current rise in rates. So sure, VGSH NAV is down on that trade. However, I will not lose on this because of the bond rule of thumb. Namely, I will get the starting yield as the total return, if I simply hold this fund the duration (less than 2 years), REGARDLESS OF THE DIRECTION OF INTEREST RATES.In 11/2022, I posted it's time to go in for the first time in 2022 and why I'm at 99+% and prefer HY Munis, I gave ORNAX as an example. You claimed that VGIT is a good idea, I said it's not, if you want higher-rated bonds use DODIX instead. I also posted that I sold everything in early 02/2023. The charts below are the proof. I view Muny's as way too risky for me. Just like what happened to banks in last couple days, down 10%, what should investors do when they wake up one morning and see that Sacramento CA and Yonkers NY each stopped muny payments and declared bankruptcy? Huge decline across all muny bonds will follow. Not so with treasuries.Sure, one day VGSH will be better than MM, but it was a terrible idea in the last year. Hindsight sure easy. Gundlach and other bond pros were using 2 year as the sweet spot. Is down 1.5% on worst single purchase, terrible. A fund that was up +1.38% during the day yesterday? Until the Fed isn't going to stop raising or rates stabilize which could be earlier, VGSH risk-adjusted return isn't good enough. So again, for someone who wants safety, 4.5-5% in MM/CD/treasury has been the place to be for a year and NOW. Good traders can do a lot better than VGSH,VGIT. No. Good traders have already made handsome gains in VGIT (5 yr); its the total package of buying treasuries that counts. And I have some rates (4+%) locked in for at least five years. BTW I am not a trader investor.I can tell you another "secret", suppose I know TLT can make 20% in one year, and I can do "only" 10% with much lower volatility bond fund, I will use the second choice because history shows that predicting rates is difficult and I don't want my portfolio to zig-zag 10-20%(chart 3). I also can trade lower volatility much better because it's more predictable. I use both, or all maturities to 20 years out. I have been posting on fido forum recommended buy times for TLT (20 yr), and as one person posted, "R48, you have been hitting it out of the park." I do not post tlt (or pstix) trades on the forums since these are speculative , for fun, and I don't want to influence investors the wrong way.R48: Fed may have huge systemic risk on hand. 50 bps for March now likely back to 25. Perhaps even a pause now. FD: it was 0.25% at 60+% this afternoon it's at 0.5% at 68+% at 11:30PM, I do check actual data very often. See ( www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html). I never predict, markets tell me in real time what to do. I never invest based on "predicting." I try to buy value where I see it. Value to my portfolio, and strategy. I have been posting often that investors should buy treasuries when yields get above 4%, as they add value to retiree portfolios, and need to take it when you can get it. No prediction, just seizing opportunity.I wish you good luck with all your trades and investments. Thanks...and same to you, FD.
R48 in bold.
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Post by FD1000 on Mar 11, 2023 15:12:44 GMT
R48, you are talking about potential instead of actual and what to do each time. R48 reply in bold: Since I post in real-time WHAT I BUY, AND WHEN, we are dealing with ACTUAL, as well as future returns.In 03/2022 you posted that VGSH looks promising and then you claimed it will make 6% in several months. One year chart proves that VGSH lost -1.9% since. Yes. I buy in buckets. I have one trade on VGSH that was too early. Since that trade, the fed twice raised its terminal or ending rate to the current rise in rates. So sure, VGSH NAV is down on that trade. However, I will not lose on this because of the bond rule of thumb. Namely, I will get the starting yield as the total return, if I simply hold this fund the duration (less than 2 years), REGARDLESS OF THE DIRECTION OF INTEREST RATES.In 11/2022, I posted it's time to go in for the first time in 2022 and why I'm at 99+% and prefer HY Munis, I gave ORNAX as an example. You claimed that VGIT is a good idea, I said it's not, if you want higher-rated bonds use DODIX instead. I also posted that I sold everything in early 02/2023. The charts below are the proof. I view muny's as way too risky for me. Just like what happened to banks in last couple days, down 10%, what should investors do when they wake up one morning and see that Sacramento CA and Yonkers NY each stopped muny payments and declared bankruptcy? Huge decline across all muny bonds will follow. Not so with treasuries.Sure, one day VGSH will be better than MM, but it was a terrible idea in the last year. Hindsight sure easy. Gundlach and other bond pros were using 2 year as the sweet spot. Is down 1.5% on worst single purchase, terrible. A fund that was up +1.38% during the day yesterday? Until the Fed isn't going to stop raising or rates stabilize which could be earlier, VGSH risk-adjusted return isn't good enough. So again, for someone who wants safety, 4.5-5% in MM/CD/treasury has been the place to be for a year and NOW. Good traders can do a lot better than VGSH,VGIT. No. Good traders have already made handsome gains in VGIT (5 yr); its the total package of buying treasuries that counts. And I have some rates (4+%) locked in for at least five years. BTW I am not a trader investor.I can tell you another "secret", suppose I know TLT can make 20% in one year, and I can do "only" 10% with much lower volatility bond fund, I will use the second choice because history shows that predicting rates is difficult and I don't want my portfolio to zig-zag 10-20%(chart 3). I also can trade lower volatility much better because it's more predictable. I use both, or all maturities to 20 years out. I have been posting on fido forum recommended buy times for TLT (20 yr), and as one person posted, "R48, you have been hitting it out of the park." I do not post tlt (or pstix) trades on the forums since these are speculative , for fun, and I don't want to influence investors the wrong way.R48: Fed may have huge systemic risk on hand. 50 bps for March now likely back to 25. Perhaps even a pause now. FD: it was 0.25% at 60+% this afternoon it's at 0.5% at 68+% at 11:30PM, I do check actual data very often. See ( www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html). I never predict, markets tell me in real time what to do. I never invest based on "predicting." I try to buy value where I see it. Value to my portfolio, and strategy. I have been posting often that investors should buy treasuries when yields get above 4%, as they add value to retiree portfolios, and need to take it when you can get it. No prediction, just seizing opportunity.I wish you good luck with all your trades and investments. Thanks...and same to you, FD.
R48 in bold.
VGSH never made 6% in several months in 2022, it actually lost money. Losing 1.5% is terrible? Yes it is when my safe money made 2.3% in MM. Investors want to make money with this portion of their portfolio. You think Munis are risky? I'm a trader, in one year, I made over 12% in HY Munis, look at the chart I posted A fund that was up +1.38% during the day yesterday? No, VGSH wasn't up 1.38% yesterday, it closed up 0.56% Good traders have already made handsome gains in VGIT (5 yr)? Most managed funds of higher-rated bonds + HY munis bond funds made a lot more. See the chart I posted Anyway, we had a similar discussion already with many posts last year. This thread is about all categories. We will see next week if the Silicon Valley bank fiasco is contain or not.
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Post by archer on Mar 11, 2023 15:13:22 GMT
R48, you are talking about potential instead of actual and what to do each time. R48 reply in bold: Since I post in real-time WHAT I BUY, AND WHEN, we are dealing with ACTUAL, as well as future returns.In 03/2022 you posted that VGSH looks promising and then you claimed it will make 6% in several months. One year chart proves that VGSH lost -1.9% since. Yes. I buy in buckets. I have one trade on VGSH that was too early. Since that trade, the fed twice raised its terminal or ending rate to the current rise in rates. So sure, VGSH NAV is down on that trade. However, I will not lose on this because of the bond rule of thumb. Namely, I will get the starting yield as the total return, if I simply hold this fund the duration (less than 2 years), REGARDLESS OF THE DIRECTION OF INTEREST RATES.In 11/2022, I posted it's time to go in for the first time in 2022 and why I'm at 99+% and prefer HY Munis, I gave ORNAX as an example. You claimed that VGIT is a good idea, I said it's not, if you want higher-rated bonds use DODIX instead. I also posted that I sold everything in early 02/2023. The charts below are the proof. I view muny's as way too risky for me. Just like what happened to banks in last couple days, down 10%, what should investors do when they wake up one morning and see that Sacramento CA and Yonkers NY each stopped muny payments and declared bankruptcy? Huge decline across all muny bonds will follow. Not so with treasuries.Sure, one day VGSH will be better than MM, but it was a terrible idea in the last year. Hindsight sure easy. Gundlach and other bond pros were using 2 year as the sweet spot. Is down 1.5% on worst single purchase, terrible. A fund that was up +1.38% during the day yesterday? Until the Fed isn't going to stop raising or rates stabilize which could be earlier, VGSH risk-adjusted return isn't good enough. So again, for someone who wants safety, 4.5-5% in MM/CD/treasury has been the place to be for a year and NOW. Good traders can do a lot better than VGSH,VGIT. No. Good traders have already made handsome gains in VGIT (5 yr); its the total package of buying treasuries that counts. And I have some rates (4+%) locked in for at least five years. BTW I am not a trader investor.I can tell you another "secret", suppose I know TLT can make 20% in one year, and I can do "only" 10% with much lower volatility bond fund, I will use the second choice because history shows that predicting rates is difficult and I don't want my portfolio to zig-zag 10-20%(chart 3). I also can trade lower volatility much better because it's more predictable. I use both, or all maturities to 20 years out. I have been posting on fido forum recommended buy times for TLT (20 yr), and as one person posted, "R48, you have been hitting it out of the park." I do not post tlt (or pstix) trades on the forums since these are speculative , for fun, and I don't want to influence investors the wrong way.R48: Fed may have huge systemic risk on hand. 50 bps for March now likely back to 25. Perhaps even a pause now. FD: it was 0.25% at 60+% this afternoon it's at 0.5% at 68+% at 11:30PM, I do check actual data very often. See ( www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html). I never predict, markets tell me in real time what to do. I never invest based on "predicting." I try to buy value where I see it. Value to my portfolio, and strategy. I have been posting often that investors should buy treasuries when yields get above 4%, as they add value to retiree portfolios, and need to take it when you can get it. No prediction, just seizing opportunity.I wish you good luck with all your trades and investments. Thanks...and same to you, FD.
R48 in bold.
How does the above (in red) work with funds? I can see the rule applying to holding individual bonds, but with funds, at the end of the duration period, if price decline is greater than yield, wouldn't TR be negative?
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Post by retiredat48 on Mar 11, 2023 15:28:18 GMT
FD1000,, who posted: "VGSH never made 6% in several months in 2022, it actually lost money." Where did I say this?? I didn't own VGSH throughout yr 2022. All bond funds lost that year. R48
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Post by retiredat48 on Mar 11, 2023 15:39:55 GMT
at archer ,, who posted this:" How does the above (in red) work with funds? I can see the rule applying to holding individual bonds, but with funds, at the end of the duration period, if price decline is greater than yield, wouldn't TR be negative?"He was replying to my statement: " So sure, VGSH NAV is down on that trade. However, I will not lose on this because of the bond rule of thumb. Namely, I will get the starting yield as the total return, if I simply hold this fund the duration (less than 2 years), REGARDLESS OF THE DIRECTION OF INTEREST RATES."--------------------------------------------- No, the bond rule of thumb works for bond funds as well. We have had several threads on this topic in the past. Several, several studies, including Vanguard's Jack Bogle, have demonstrated this works for funds as well. Don't want to sidetrack this thread. The reason it works, regardless of interest rate changes, is that if you hold for duration, reinvesting dividends, if rates go up (nav goes down) but the fund manager is buying more higher yield stuff. If rates fall, manager has nav price gain, but offset by lower yield in future buys. The returns work out to be very close to ones initial starting yield. The rule also means you can "start over" each day. That means if you currently own/hold a 5 yr duration bond fund that lost a lot of nav price in yr 2022, and its yield today is 5.5%, IF YOU CONTINUE TO HOLD FOR ANOTHER 5 YEARS, YOUR APPROX TOTAL RETURN WILL BE 5.5% (on the remaining value of your holding). Meaning, many investors should just stay put in their bond funds. I consider the bond rule of thumb to be one of the top five tools in an investor tool bag. BTW heated discussions once got some posters (not me!) suspended on M*...but most now acknowledge the RULE. R48
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Post by retiredat48 on Mar 11, 2023 17:03:43 GMT
Recent excerpt from a former M* poster...capecod:
"Just briefly (a theory)....Fed planned to hike rates til something broke. Well, something broke. And it's not a simple or small an event as it may have been portrayed. The failure highlighted the serious disintermediation that has gripped ALL banks as retail-available rates soared rapidly, attracting huge savings and demand deposit flows to t-bills, MMfunds, etc. While it may prove an overstatement, the canary might have started singing OR (just as good) investors may THINK they heard a canary, and the system Fed is obliged to protect may shake a bit. That could pretty easily enter Fed thinking and put a soft cap on their terminal rate views. Consider: do you keep talking about higher and higher policy rates immediately after the 16th largest bank in the country collapses? This view may be bunk, but the big money that bought Treasurys and took FF/SOFR futures up 30-50 bps yesterday decided not to wait. Next week's CPI may play second fiddle to guesses and scare stories about financial system health.
Regards, Dick"
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Post by FD1000 on Mar 11, 2023 20:15:37 GMT
I think the rule of thump is good with treasuries. A year ago VGSH (duration=2 years) had yield under 2%. There is a good chance to make 4% within 2 years which is a year from now. It lost already 1.9%, it has to make 4.1% from now. But wait, VFMXX=VG MM made already 2.3% for one year + it pays now 4.5% = 6.8%. See chart below. You can probably make at least 5.5% when rates starting to go down. So, do you prefer the MM guarantee with no risk/volatility or do you like maybe with a much higher volatility? BTW, VGSH jumped over 1% last week. Is its a trend? I don't know, I never liked the volatility when I have the bird in the hand. seekingalpha.com/news/3946559-former-fed-economist-svb-failure-is-not-a-significant-financial-system-problem-banking-system-is-well-capitalized?mailingid=30798248&messageid=2900&serial=30798248.30544 "In the light of the liquidity crisis at Silicon Valley Bank, former Federal Reserve economist Bill Nelson said Friday that the banking system is "well capitalized" despite pressured caused by higher interest rates.
In an interview with CNBC, Nelson argued that the issues at Silicon Valley Bank is not a "significant financial system problem" and the turmoil it has caused should not impact Fed's decision-making process related to interest rate hikes."
IMO, the Fed must contain it, risky stuff must implode eventually, we had crypto already and now we have VC money. If the Fed contain it, ST rates will start going up again. Regardless of the above, investors of MM don't care, we don't have volatility with this portion of our portfolio that we want to always be positive every day. I never trusted treasuries to save my portfolio, they can also go down in panic selling, VGSH (duration=2) was down about 5.5%, while VGIT(duration=5) was down 15%. MM is always positive. See the second chart. Attachments:
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Post by Fearchar on Mar 11, 2023 20:28:08 GMT
3 month T-Bills are a better analogy to MM
2 year duration bonds are as noted; not as well. But there are some situations where 2 years would be desirable over 3month.
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Post by FD1000 on Mar 11, 2023 20:29:57 GMT
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Post by habsui on Mar 11, 2023 21:13:47 GMT
OK, then we can talk about TLT.. I recently established a larger position in TLT (documented). I'm up over 6%. Does this make me a great trader, or just the failed golfer that I am?
More seriously, to me the question is when (not if) to go longer in duration.
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Post by FD1000 on Mar 11, 2023 22:10:02 GMT
habsui, good post and a trade.
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Post by FD1000 on Mar 16, 2023 19:42:23 GMT
Observations: 1) Growth beat value for over 10 years 2010-2021. Growth lagged in 2022. At the end of 2022, almost every analyst recommended at least 2 of the following categories VALUE, ENERGY, HIGH INCOME, Healthcare, Commodities, International, EM over Tech (QQQ+VUG). YTD these groups lagged badly after Tech which is up 12+%. But wait, Preferred + CEFs started the year great and are lagging badly too. 2) Interest rates have gone down fast lately, you would think MM yield should be down pretty quickly too...NOPE...FZDXX still pays 4.46% (similar to last week) and SNAXX pays 4.64% which is 0.01% more than last week. 3) My ST+LT indicators for several bond categories were screaming buy early-mid of last week. 4) In my world large position means at least 10%, in most cases it's over 20-30%. So, if you had 5-10% in TLT it hardly helped you with the losses of the SP500 + SCHD. Since 2/1/2023 SPY was down -5.7%, SCHD down -8% and TLT up only 2%. Attachments:
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Post by newtecher on Mar 16, 2023 20:44:44 GMT
2) Interest rates have gone down fast lately, you would think MM yield should be down pretty quickly too...NOPE...FZDXX still pays 4.46% (similar to last week) and SNAXX pays 4.64% which is 0.01% more than last week. Very odd statement. Short term-rates (less than 1 month) are still rising.
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Post by Deleted on Mar 16, 2023 21:35:32 GMT
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Post by fishingrod on Mar 16, 2023 21:55:26 GMT
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Post by newtecher on Mar 16, 2023 22:05:54 GMT
Weighted average maturity is 9 days, though. Comparing to 3-month yields is not appropriate
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Post by fishingrod on Mar 16, 2023 22:09:43 GMT
"The rules that govern money market mutual funds permit the funds to buy only securities that mature in 397 days or less. At least 30% of the fund’s total assets must be invested in Weekly Liquid Assets, which can consist of cash, direct obligations of the U.S. government such as U.S. Treasury bills, certain other U.S. government agency debt that is issued at a discount and matures within 60 days or less, or securities that will mature or are payable within 5 business days. For taxable funds, at least 10% of the fund’s total assets must be invested in Daily Liquid Assets, which can consist of cash, direct obligations of the U.S. government, or securities that will mature or are payable within one business day. The remaining investments can be in longer-term issues, provided the overall weighted average maturity of the fund is 60 days or less."
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Post by davidsherman on Mar 18, 2023 18:22:02 GMT
FD1000 , It's really a matter of perspective. The yield on 2 year treasuries is the highest it's been in about 16 years. They are auctioned only once per month. The next auction date is March 27th. While FED fund rates will be higher over the next few months, the yield curve may invert more as rates rise. So, longer term (2 year treasuries yields) may or may not go much higher. It's not clear what will happen with inversion, just pointing out the uncertainty with this. The markets are in a very uncertain situation beyond the next 6 months. The advice was/is to buy ST high quality bonds. I'm considering more 3 month T-Bills, but 2 year treasuries do look pretty smart right now for a portion of ones portfolio. Again, how much into 2 years is a matter of perspective. For me or anyone in my position, holding MM is the easiest way for the bird in the hand. It gives me all the options. It doesn't matter what the Fed does, I make money. I can also buy any time the bond funds I love that really make money. It's almost never a good idea to hold ST treasuries fund, such as VGSH which fluctuate. MM is a guarantee. If you want to hold longer + getting more then you can select 3-6 months CD/treasury which is also a guarantee. But again, how much more do you get? Right now Fidelity 3 months CD/treasury pays 5%. FZDXX pays 4.46%, VMFXX pays 4.52%, my SNAXX pays 4.62%. So for 3 months the difference is about 0.1%. Do I care about 0.1%? I don't, because I can buy much better performing Mid-LT bond fund that will make me a lot more money. Just because the 2 year is highest in 16 years, it's not an indication about the future. Inflation has been the highest in over 40 years. The Fed wants to fight it. If I'm looking beyond simple funds, I can hold RPHIX(only fund close to MM), or I can hold CBLDX. There is a reason I never held a direct treasury fund.
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Post by davidsherman on Mar 18, 2023 18:27:12 GMT
Hesitant to comment on "I can hold RPHIX(only fund close to MM), or I can hold CBLDX." but here it goes:
The two Funds mentioned have different durations, 90 day roll-off as well as return & volatility characteristics. Really depends on one's time horizon. As a general rule based on historical performance (which is not indicative of future performance), RPHIX has a significantly lower duration with higher 90 day roll-off which would imply a lower expected return over time but also less volatility.
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Post by FD1000 on Mar 18, 2023 21:21:35 GMT
Thank you so much David S, I used fund screener for 6-10 thousands funds. Only one fund had a 3 year with 3% average annual performance and SD = 1.05. It is RPHIX, no other fund comes close in the last 3 years. HRSTX comes close sometimes, but is not consistent. HRSTX was crazy in 2016-7, since 2018 it's much better. HSTRX handled 03/2020 better. See chart ( link) But, RPHIX is consistently making money, with a smoother chart going from left to right. Watch the second chart for 2 years. HSTRX made less than 1% for about 1.5 years. RPHIX lost about 3% during Covid-19 crash (03/2020), no other time it lost anything close. ========== Looking for more risk/reward + consistency. CBLDX beat all other funds for 3 years + SD<5 + annual performance of 5+% Attachments:
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