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Post by yogibearbull on Jul 8, 2023 11:56:55 GMT
Pg 8-9. President BIDEN is at NATO summit in Lithuania on TUESDAY-WEDNESDAY. 2023/Q2 earnings season starts with several big banks reporting on FRIDAY. REVIEW. Recent Summer MOVIE debuts have been disappointing. Disney/DIS says that many just want to watch movies at home. Big budget Summer movies may be gone. PREVIEW. High demand for NEW HOMES is providing a boost to homebuilders and the rally may continue – DHI, LEN, NUR, GRBK. Sales of existing homes aren’t doing well as many with low-rate mortgages don’t want to move. DATA THIS WEEK. Consumer credit, wholesale inventories on MONDAY; small business optimism index on TUESDAY; CPI (+3.1% yoy; core +5%) on WEDNESDAY; PPI (core +2.5%); weekly initial jobless claims on THURSDAY; UM consumer sentiment on FRIDAY. www.barrons.com/magazine?mod=BOL_TOPNAVBULLISH. 6 attractive small banks (AX, BFH, FFBC, OFG, PFBC, STBA; regional bank ETF KRE has been hit hard by the regional banking crisis but valuations are now attractive; pg 10; Travel boom (cruises RCL, CCL, NCLH; airlines UAL, DAL, AAL; hotel H; pg 11); Pharma (SNY, ZTS, ABBV, GILD, BIIB, ESAIY; R&D, trials, the FDA approvals are expensive and time consuming, but drug pricing is out of control; PBMs and Medicare are pushing back; but why does eczema medicine with the same ingredient is cheaper for dogs than humans?; pg 12). BEARISH. Pg 18: Lori CALVASINA, RBC Capital Markets. She is an observer of market cycles. She thinks that the market now parallels that in 1945 – the stocks rallied then through recession (02/1945-10/1945) on the expectations of post-WWII economic growth. But 1946 was a bad year; inflation was high in 1944, moderated in 1945, but spiked again in 1946. Stocks typically bottom in recessions and October 2022 lows aren’t the final ones for this cycle. Now, we are in post-pandemic recovery period; there are several infrastructure and reshoring initiatives; many sectors are/have been in technical recessions. Her most bearish models project SP500 in range 3,800-4,100; most bullish 4,650; but her current projections are modest at 4,250. Bonds are relatively more attractive than stocks. She isn’t too concerned about the narrow market breadth, but either the rest of SP500 will catchup with the big 7 or will pull them down. Her recommendation is to mix defensive (already expensive), value/cyclicals and growth. She favors old techs, energy, small-caps (recovery plays) but is avoiding consumer-discretionary (except the SCs). Pg 20, INCOME. Don’t stay in T-Bills and money-market funds for too long. Use a barbell to mix short-term and intermediate/long-term bond funds including the MBS. Eventually, when the rates fall, these would have capital gains. Mentioned are preferreds PFLD, PSK, PFF. Pg 20, TECH TRADER. “Threads” from Facebook/Instagram/META may be a huge success at launch, and it may hurt Twitter, but It won’t move the bottom line for META. Facebook has a history of copying/following others but there are several differences now between Twitter and Threads; more features may be added later. There are no ads at Threads yet but those will come later. (Find me as “at”yogibearbull at Threads) Pg 21, ECONOMY. For rolling/trailing 12 month returns, the 2023/Q@ was good (2023/Q1 not so). However, the quarterly data fluctuates widely, and trailing numbers don’t tell much about going forward. Pg 46, OTHER VOICES. Brian GRAHAM, Klaros Group (an advisory and investment firm). There are too many US banks (4,600) and many smaller banks will consolidate or be bought by bigger banks. But smaller community- and regional- banks are important for local businesses. Smaller US banks have 50% of the US banking business (this isn’t reflected in deposit bases and fund flows). A good compromise between scale and local banking services may be medium-size banks. The banking industry needs recapitalization after the rate shocks and underwater HTM portfolios. Unfortunately, the bank M&A are down and applications for pending mergers are taking longer. So, there is room for reforms to shape the future banking consolidations. Excerpts from the FUNDS QUARTERLY supplement will be presented separately. (EXTRAS from online Friday that didn’t make the weekend paper version) See Column Topics. It seems some consolidation/rearrangement of Columns is going on. None LINK
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Post by Capital on Jul 8, 2023 12:11:46 GMT
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Post by Capital on Jul 8, 2023 12:14:00 GMT
win1177 when I read the below it reminded me of your comments on another board. More food for my thoughts. "Pg 20, INCOME. Don’t stay in T-Bills and money-market funds for too long. Use a barbell to mix short-term and intermediate/long-term bond funds including the MBS. Eventually, when the rates fall, these would have capital gains. Mentioned are preferreds PFLD, PSK, PFF"
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Post by mnfish on Jul 8, 2023 12:44:36 GMT
Wells Advisors has been saying to look at longer term treasuries. "Investors who have taken advantage of current short-term rates may find that adding longer term bonds may help to mitigate reinvestment risk without incurring too much interest rate risk, as we expect interest rates to fall once the Fed ends its hiking cycle."
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Post by chang on Jul 8, 2023 12:52:49 GMT
Wells Advisors has been saying to look at longer term treasuries. "Investors who have taken advantage of current short-term rates may find that adding longer term bonds may help to mitigate reinvestment risk without incurring too much interest rate risk, as we expect interest rates to fall once the Fed ends its hiking cycle." All well and good, but why do it now, if there's still another rate hike in the cards ... and while the yield curve is inverted and ST yields are higher than LT yields? fixedincome.fidelity.com/ftgw/fi/FILanding#tbcurrent-yields|median-yieldhttps://fixedincome.fidelity.com/ftgw/fi/FILanding#tbcurrent-yields|median-yieldI don't see the hurry. Note: the 10Y is now at 4.05%. Some people ( retiredat48?) have been "waiting" for this. Again, I don't see the hurry. Unless you feel we should "lock in" 4% for 10 years right now, because rates will start falling and falling fast?
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Post by uncleharley on Jul 8, 2023 13:06:28 GMT
Wells Advisors has been saying to look at longer term treasuries. "Investors who have taken advantage of current short-term rates may find that adding longer term bonds may help to mitigate reinvestment risk without incurring too much interest rate risk, as we expect interest rates to fall once the Fed ends its hiking cycle." All well and good, but why do it now, if there's still another rate hike in the cards ... and while the yield curve is inverted and ST yields are higher than LT yields? fixedincome.fidelity.com/ftgw/fi/FILanding#tbcurrent-yields|median-yieldhttps://fixedincome.fidelity.com/ftgw/fi/FILanding#tbcurrent-yields|median-yieldI don't see the hurry. (Note: the 10Y is now at 4.05%. Some people ( retiredat48 ?) have been "waiting" for this. Again, I don't see the hurry. Unless you feel we should "lock in" 4% for 10 years right now, because rates will start falling and falling fast? FWIW; the daily chart for the 2yr treasurey is developing the same pattern as most of the stock indexes. That is a consolidation or flag pattern that has not been completed. That pattern may be completed next week or it could take a bit longer, but the pattern is not yet complete. BTW, the 5 and 10 yr treasurey rates are rising while the 2 yr is consolidating.
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Post by retiredat48 on Jul 8, 2023 16:04:06 GMT
Wells Advisors has been saying to look at longer term treasuries. "Investors who have taken advantage of current short-term rates may find that adding longer term bonds may help to mitigate reinvestment risk without incurring too much interest rate risk, as we expect interest rates to fall once the Fed ends its hiking cycle." All well and good, but why do it now, if there's still another rate hike in the cards ... and while the yield curve is inverted and ST yields are higher than LT yields? fixedincome.fidelity.com/ftgw/fi/FILanding#tbcurrent-yields|median-yieldhttps://fixedincome.fidelity.com/ftgw/fi/FILanding#tbcurrent-yields|median-yieldI don't see the hurry. Note: the 10Y is now at 4.05%. Some people ( retiredat48 ?) have been "waiting" for this. Again, I don't see the hurry. Unless you feel we should "lock in" 4% for 10 years right now, because rates will start falling and falling fast? YES...I have posted often that at 4% or above, there will be huge demand for ten year treasuries, to lock it in. Does wonders for retiree balanced portfolio outcomes, having a "safest" 4+% rate for ten years. I also previously predicted I didn't think 4+ would last long. Sure enough, look at charts. Past couple times the ten yr touched 4%, then fell to lower rates, fast. Offsetting this demand, however, is the fed need to borrow extensively (billions and billions) to fund the fed debt after the congress debt agreement just settled. Could force rates even higher (lower bond prices). Could be good opportunity to capitalize on this. But look at ten yr rate chart--huge swing up; these things go in sine waves! Falling rates from here means higher bond prices. (Note the two year short fed treasury yield is already falling from its peak). R48
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Post by chang on Jul 8, 2023 16:29:53 GMT
Even if rates don’t rise further — if they just stay where they are (for a while) — then why would I rush into long bonds with lower yields? Remember, the yield curve is inverted, and the highest yields are 6-12 month T-bills.
I’m buying 3M T-bills now … maybe later in the year I will switch to 12M … and I won’t buy the 10Y until rate *reductions* are imminent.
Am I making a mistake in the logic?
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Post by gman57 on Jul 8, 2023 16:55:17 GMT
YES...I have posted often that at 4% or above, there will be huge demand for ten year treasuries, to lock it in. Does wonders for retiree balanced portfolio outcomes, having a "safest" 4+% rate for ten years. I also previously predicted I didn't think 4+ would last long. Sure enough, look at charts. Past couple times the ten yr touched 4%, then fell to lower rates, fast. Offsetting this demand, however, is the fed need to borrow extensively (billions and billions) to fund the fed debt after the congress debt agreement just settled. Could force rates even higher (lower bond prices). Could be good opportunity to capitalize on this. But look at ten yr rate chart--huge swing up; these things go in sine waves! Falling rates from here means higher bond prices. (Note the two year short fed treasury yield is already falling from its peak). R48 Peaked my interest, just looked on VG. Auction: 10yr matures 5/15/33 indicative yield 4.062%. It says "REOPEN" --- does that mean they didn't have enough buyers on the original offering? 30yr 4.044%.
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Post by yogibearbull on Jul 8, 2023 17:35:07 GMT
Re-opened Treasury auctions are not unusual. For example, 52-wk at some point will be 26-wk,13-wk, etc & may be reopened. Rates should be similar to current issue Treasuries.
But it is unusual for 30-yr to be reopened as 10-yr.
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Post by retiredat48 on Jul 8, 2023 18:49:06 GMT
Just noticed I posted this to Mr X in March:
"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."
FD: I wish you good luck with all your trades and investments.
Thanks...and same to you, FD.
------------------------------------- and this: 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.
R48.
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Post by anitya on Jul 9, 2023 1:02:40 GMT
20 yr Treasuries at 4.27%. If 10 year Treasuries at 4.06% are a good deal, why not just go for 20 yr Treasuries?
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Post by anitya on Jul 9, 2023 1:42:14 GMT
yogibearbull, Talking heads say defensives are expensive. XLV at 17.4% P/E per M*. Is that expensive relative to itself?
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Post by retiredat48 on Jul 9, 2023 4:06:45 GMT
20 yr Treasuries at 4.27%. If 10 year Treasuries at 4.06% are a good deal, why not just go for 20 yr Treasuries? One could, I at times have traded TLT (20 yr). But much more risk for long term buy because, if interest rates actually keep going up, you suffer a goodly loss of principal, and time is not on your side to bail you out (like waiting to maturity). Remember the formula: for every 1% increase or decrease in interest rates, funds will go up or down by 1% times the fund duration(linked to maturity). The longer out your maturities, the more volatility. I currently am in 2 and 5 year treasuries and deciding on 7 or ten year maturities...perhaps soon. Also, I am WAITING on corporates for various reasons, before extending maturities. R48
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Post by chang on Jul 9, 2023 5:01:44 GMT
TLT yielding 2.9% at current NAV, doesn’t seem like a very good deal.
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Post by Norbert on Jul 9, 2023 7:17:16 GMT
Indeed, the yield curve has inverted. I wish I understood the ramifications better.
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Post by Deleted on Jul 9, 2023 9:25:32 GMT
The pundits all seem to be basing their predictions on recency. No one imagines a 40 year bear market in bonds like we experienced from 1940-1980. I just listened to a William Bernstein interview where that bond bear was mentioned as the type of real risk investors dont plan for, but should. He considers 2022, 2009, 2001 as insignificant blips in terms of portfolio risks showing up. www.buzzsprout.com/1973223/10794697That said, Bernstein also come from that Fama-French DFA school that generally believes taking any credit or duration risk in bonds doesn't pay off enough to be worthwhile.
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Post by yogibearbull on Jul 9, 2023 12:29:10 GMT
20-yr yields are typically higher as it isn't as liquid as 10-yr or 30-yr.
Roll decision for buying 10-yr at 4.06% and roll vs buying 20-yr now depend on:
Breakeven yield = 2 x 4.27 - 4.06 = 4.48%
So if you don't expect 10-yr in 2033 to be 4.48% or higher, buy 20-yr now.
Many may not to want to go out that far.
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Post by Chahta on Jul 9, 2023 15:04:42 GMT
TLT yielding 2.9% at current NAV, doesn’t seem like a very good deal. Long bond ETFs are volatile and extremely worth trading. Watch rates go down from here and see how much it moves.
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Post by steadyeddy on Jul 9, 2023 15:36:45 GMT
TLT yielding 2.9% at current NAV, doesn’t seem like a very good deal. Long bond ETFs are volatile and extremely worth trading. Watch rates go down from here and see how much it moves. 1% (anticipated) drop in LT rates will make TLT go up 15% in price. Invest in TLT for cap gain, not yield. The lag effect of rapid rate hikes has not fully manifested in the economy. Dunno when it would but not far away from now, and the economy would certainly slide into a recession. Stocks are riskier now than bonds.
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Post by steadyeddy on Jul 9, 2023 15:41:04 GMT
The pundits all seem to be basing their predictions on recency. No one imagines a 40 year bear market in bonds like we experienced from 1940-1980. I just listened to a William Bernstein interview where that bond bear was mentioned as the type of real risk investors dont plan for, but should. He considers 2022, 2009, 2001 as insignificant blips in terms of portfolio risks showing up. www.buzzsprout.com/1973223/10794697That said, Bernstein also come from that Fama-French DFA school that generally believes taking any credit or duration risk in bonds doesn't pay off enough to be worthwhile. With all due respect, I do not believe in permanent bond bear market. The world is awash in debt, and debt servicing costs will certainly weigh on central bank decisions. If inflation does not auto-correct (tame itself) the central bankers would have to tolerate a higher % ..... there is no science behind the 2% target; it is as arbitrary as it is transitory
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Post by mnfish on Jul 10, 2023 12:24:50 GMT
Wells Advisors has been saying to look at longer term treasuries. "Investors who have taken advantage of current short-term rates may find that adding longer term bonds may help to mitigate reinvestment risk without incurring too much interest rate risk, as we expect interest rates to fall once the Fed ends its hiking cycle." All well and good, but why do it now, if there's still another rate hike in the cards ... and while the yield curve is inverted and ST yields are higher than LT yields? fixedincome.fidelity.com/ftgw/fi/FILanding#tbcurrent-yields|median-yieldhttps://fixedincome.fidelity.com/ftgw/fi/FILanding#tbcurrent-yields|median-yieldI don't see the hurry. Note: the 10Y is now at 4.05%. Some people ( retiredat48 ?) have been "waiting" for this. Again, I don't see the hurry. Unless you feel we should "lock in" 4% for 10 years right now, because rates will start falling and falling fast? ILTB - iShares 10yr ETF has paid about $1.11 in 6 mos which would equate to 4.37% for a full year at its current price of $50.74. Since 2009 it has traded a lot more above $60 than below. It bottomed out at $47ish in Oct 22. I might put in a buy order for $48 and see if it fills and then see what happens in a year. May very well end up with a nice cap gain. (for a bond fund)
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Post by retiredat48 on Jul 10, 2023 21:34:44 GMT
TLT yielding 2.9% at current NAV, doesn’t seem like a very good deal. I don't get it..do we have to keep teaching the regulars on bond fund returns? Cursory review shows the M* SEC yield is listed at 3.95%; this is what can be expected on future returns. Further, per M* the average weighted price of underlying bonds is 75 to par (100). This means on average the bonds are selling at 75% of face value now (mark-to-market). So there is a built in capital gain of 33% or call it 25% if you like, over 20 year duration. That is at least 1% cap gain annually if bonds just held to maturity. Much higher return that 2.9%. Edit to add: Another way of looking at it is this: If 20 year treasuries are currently yielding 4%, then all are, approximately. With a fund expense ratio of 0.15%, TLT managers can surely approach 4%. This is almost a no-brainer type fund...not great management needed to buy some treasuries. It wouldn't exist, otherwise, if returns to shareholders lagged. And Vanguard treasury bond funds have even much lower ER's. R48
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Post by chang on Jul 10, 2023 22:13:20 GMT
My bad, that’s what I get for taking Yahoo Finance yield at face value.
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Post by retiredat48 on Jul 12, 2023 15:09:12 GMT
OK, kiss it goodbye!
That is, once again it appears when the LT treasury bonds touch 4%, they gain buyers locking in 7-10 years of yields, raising bond prices.
Kiss 4% goodbye for awhile.
R48
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Post by Capital on Jul 12, 2023 22:33:44 GMT
OK, kiss it goodbye! That is, once again it appears when the LT treasury bonds touch 4%, they gain buyers locking in 7-10 years of yields, raising bond prices. Kiss 4% goodbye for awhile.
R48 Let's make that a Royal Kiss. I can still get almost five and a half at six months.
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Post by retiredat48 on Jul 13, 2023 22:15:09 GMT
OK, kiss it goodbye! That is, once again it appears when the LT treasury bonds touch 4%, they gain buyers locking in 7-10 years of yields, raising bond prices. Kiss 4% goodbye for awhile.
R48 Let's make that a Royal Kiss. I can still get almost five and a half at six months. But in 6 months, what will your rollover rate be??
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Post by Capital on Jul 13, 2023 23:46:16 GMT
Let's make that a Royal Kiss. I can still get almost five and a half at six months. But in 6 months, what will your rollover rate be?? Not quite sure - you try it here
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Post by chang on Jul 16, 2023 18:16:25 GMT
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Post by retiredat48 on Jul 16, 2023 18:21:17 GMT
chang,...It is always: maybe, maybe not. But majority of bond guru's think 4% "plus a little" is peak range. Market has already built-in the next two 25 bp fed rate hikes. R48
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