 |
Bogleheads
Investing Advice Inspired by Jack Bogle
|
| View previous topic :: View next topic |
| Author |
Message |
brxn
Joined: 03 Aug 2009
Posts: 45
|
 Posted: Sun Oct 18, 2009 9:59 pm Post subject: |
 |
|
| Mr Bear wrote: | | Scrape together every cent you can, and bet it all on the Under in Sunday's Redskins-Chiefs game. |
Excellent advice, Mr Bear.
The over/under was at 36.5 when I last looked before the game, and the 14-6 final score makes your UNDER call way in the money. I don't bet on these things, but good job. |
|
| Back to top |
|
 |
Mr Bear
Joined: 10 Jan 2009
Posts: 102
|
| Posted: Mon Oct 19, 2009 5:18 am Post subject: |
|
|
Thanks, brxn. How any professional handicapper could calculate that the Redskins and Chiefs would combine for 36 points simply beggars belief. I seldom bet either, but this was such a table-pounder that I made $100!  |
|
| Back to top |
|
|
rrosenkoetter
Joined: 06 Jun 2008
Posts: 762
|
| Posted: Mon Oct 19, 2009 6:21 am Post subject: |
|
|
| trico wrote: | | I am looking at investing in tax liens. Lots of those these days with foreclosures high as they are. I am going to a class to learn how. They say 25% return in most states by law. Good return so I will let you know how it turns out. |
You know who's going to make good money off "investing in tax liens"?
The guy who is teaching the class...
When will people stop falling for "they say I'll make 25% return! Here's my $500 to learn how!" |
|
| Back to top |
|
|
mptfan
Joined: 05 Mar 2007
Posts: 1551
|
| Posted: Mon Oct 19, 2009 3:38 pm Post subject: |
|
|
| rrosenkoetter wrote: |
When will people stop falling for "they say I'll make 25% return! Here's my $500 to learn how!" |
Never. A sucker is born every minute. |
|
| Back to top |
|
|
Default User BR
Joined: 17 Dec 2007
Posts: 362
|
| Posted: Mon Oct 19, 2009 6:18 pm Post subject: |
|
|
| rrosenkoetter wrote: | You know who's going to make good money off "investing in tax liens"?
The guy who is teaching the class...
When will people stop falling for "they say I'll make 25% return! Here's my $500 to learn how!" |
My thought is always, "If this system is so great, why are they selling it?"
Brian |
|
| Back to top |
|
|
james22
Joined: 21 Aug 2007
Posts: 526
|
| Posted: Mon Oct 19, 2009 11:34 pm Post subject: |
|
|
| EmergDoc wrote: | | I don't know, it seems like a pretty good deal to be able to buy stocks at something like 1/3 off the price I thought was reasonably attractive in 2007. |
| Rick Ferri wrote: | | The S&P 500 is still off 28% from its high of two years ago, and off about 13% from October 1999. |
...investors clearly are approaching the current market with every belief that the extreme valuations of 2007 represent the sustainable norm to which stocks should return. This despite the fact that the 2007 peak reflected rich valuation multiples against earnings that were themselves inflated by abnormally elevated profit margins.
http://www.hussman.net/wmc/wmc091019.htm
_________________
Please assume my post refers to my Bogle-approved 15% Tactical Asset Allocation or 5% Funny Money. |
|
| Back to top |
|
|
EmergDoc
Joined: 02 Mar 2007
Posts: 4938
Location: Home sweet home
|
| Posted: Mon Oct 19, 2009 11:54 pm Post subject: |
|
|
| james22 wrote: | | EmergDoc wrote: | | I don't know, it seems like a pretty good deal to be able to buy stocks at something like 1/3 off the price I thought was reasonably attractive in 2007. |
| Rick Ferri wrote: | | The S&P 500 is still off 28% from its high of two years ago, and off about 13% from October 1999. |
...investors clearly are approaching the current market with every belief that the extreme valuations of 2007 represent the sustainable norm to which stocks should return. This despite the fact that the 2007 peak reflected rich valuation multiples against earnings that were themselves inflated by abnormally elevated profit margins.
http://www.hussman.net/wmc/wmc091019.htm |
I presume you were 0% stocks in 2007? If not why not with such profound knowledge of true valuations?
From your source:
| Quote: |
Again, I have to emphasize that I am not "forecasting" that a near-term or extended market decline is a necessary outcome of present conditions. A decline certainly should not be ruled out, and may be more likely at this point than a near-term or extended advance, but our primary focus here is that the expected return for stocks is negative and the risk appears unusually high. Accordingly, the Strategic Growth Fund is fully hedged, for now. |
Interesting that the Strategic Growth Fund is up only 4.82% YTD. I'm currently up over 7 times that amount YTD. As a perma-bear, he weathered the bear market quite well, only losing 9% in 2008. But he sure missed the bull. And when the market eventually crashes again (and it will...eventually), he'll claim he was right.
On Wall Street- "Nobody knows nuthin' " but some are paid to pretend they do.
_________________
1) Invest you must 2) Time is your friend 3) Impulse is your enemy
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course |
|
| Back to top |
|
|
james22
Joined: 21 Aug 2007
Posts: 526
|
| Posted: Tue Oct 20, 2009 12:28 am Post subject: |
|
|
Jeebers, doc. Just offering another perspective. Hussman is pretty well respected and anchoring is a recognized heuristic.
(I had assumed valuations in 2007 reasonable too.)
_________________
Please assume my post refers to my Bogle-approved 15% Tactical Asset Allocation or 5% Funny Money. |
|
| Back to top |
|
|
EmergDoc
Joined: 02 Mar 2007
Posts: 4938
Location: Home sweet home
|
| Posted: Tue Oct 20, 2009 9:48 am Post subject: |
|
|
| james22 wrote: | Jeebers, doc. Just offering another perspective. Hussman is pretty well respected and anchoring is a recognized heuristic.
(I had assumed valuations in 2007 reasonable too.) |
I'm not trying to give you a hard time (honestly), just carrying the ideas presented to what I feel is the logical conclusion.
I'll be the first to admit he could be right.
_________________
1) Invest you must 2) Time is your friend 3) Impulse is your enemy
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course |
|
| Back to top |
|
|
Eureka
Joined: 05 Apr 2007
Posts: 584
Location: Illinois
|
| Posted: Tue Nov 03, 2009 5:35 am Post subject: |
|
|
| EmergDoc wrote: | | Eureka wrote: | | I'm not sure where to do up-to-the-minute calculation, but through Sept. 30, money in a mattress still beat the S&P 500 for 10 years. |
Not true anymore. Money in the mattress is now officially losing to the S&P 500 Index Fund over the last ten years. 2-3 years from now, I doubt we're going to hear that statement much. It only looked bad because the time period only contained one bull and two bears. Now that it contains two bulls and two bears, it looks a lot better. Soon the ten year period will encompass two bulls and one bear, and it will look great. Cherry-picking time periods does that. |
At the risk of resurrecting this thread, the chart at Vanguard through the end of October shows $10,000 stuffed in a mattress 10 years ago being worth $10,000. $10,000 invested in the S&P 500 Index Fund is worth $9,023. $10,000 invested in the Prime Money Market Fund is worth $13,595.
I know I made money in the stock market years ago. I just wonder if it's still possible. Wake me when the S&P closes at 1,565.15 again. |
|
| Back to top |
|
|
EmergDoc
Joined: 02 Mar 2007
Posts: 4938
Location: Home sweet home
|
| Posted: Tue Nov 03, 2009 7:17 am Post subject: |
|
|
| Eureka wrote: |
At the risk of resurrecting this thread, the chart at Vanguard through the end of October shows $10,000 stuffed in a mattress 10 years ago being worth $10,000. $10,000 invested in the S&P 500 Index Fund is worth $9,023. $10,000 invested in the Prime Money Market Fund is worth $13,595. |
You mean the stock market fluctuates?
_________________
1) Invest you must 2) Time is your friend 3) Impulse is your enemy
4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course |
|
| Back to top |
|
|
Eureka
Joined: 05 Apr 2007
Posts: 584
Location: Illinois
|
| Posted: Tue Nov 03, 2009 3:57 pm Post subject: |
|
|
| EmergDoc wrote: | | Eureka wrote: |
At the risk of resurrecting this thread, the chart at Vanguard through the end of October shows $10,000 stuffed in a mattress 10 years ago being worth $10,000. $10,000 invested in the S&P 500 Index Fund is worth $9,023. $10,000 invested in the Prime Money Market Fund is worth $13,595. |
You mean the stock market fluctuates? |
Of course. I'm just hoping to still be alive when "the long term" arrives. |
|
| Back to top |
|
|
Doc
Joined: 24 Feb 2007
Posts: 1307
|
| Posted: Tue Nov 03, 2009 5:33 pm Post subject: |
|
|
| Adrian Nenu wrote: | | Quote: | | Paying off my mortgage yields 3.74 after the tax deduction loss is accounted for. One of my best investments ever at present : ) |
And it's risk free.
Adrian
anenu@tampabay.rr.com |
It is not risk free. It has interest rate risk just like any FI investment. In principle buying a mortgage, even your own, is no different then buying a mortgage backed security backed by Fannie or Freddie. If interest rates go up and you no longer have your "cash" reserve to invest in the higher earning bond you lose.
_________________
Regards,
Doc
"Share the Harvest" |
|
| Back to top |
|
|
grok87
Joined: 27 Feb 2007
Posts: 2510
|
| Posted: Tue Nov 03, 2009 9:50 pm Post subject: |
|
|
| Doc wrote: | | Adrian Nenu wrote: | | Quote: | | Paying off my mortgage yields 3.74 after the tax deduction loss is accounted for. One of my best investments ever at present : ) |
And it's risk free.
Adrian
anenu@tampabay.rr.com |
It is not risk free. It has interest rate risk just like any FI investment. In principle buying a mortgage, even your own, is no different then buying a mortgage backed security backed by Fannie or Freddie. If interest rates go up and you no longer have your "cash" reserve to invest in the higher earning bond you lose. |
Paying down your mortgage is risk free (well I guess it might increase your liquidity risk a bit in an unemployment scenario). Buying Fannie/Freddie mortgage backed securities is not risk free. Their is no explicit government guarantee beyond the end of 2010 I think. After that it is anyone's guess how Fannie/Freddie will be resolved/wound up. So their is the potential for real default risk, just like a corporate bond.
cheers,
_________________
grok, CFA |
|
| Back to top |
|
|
Doc
Joined: 24 Feb 2007
Posts: 1307
|
| Posted: Wed Nov 04, 2009 8:59 am Post subject: |
|
|
| grok87 wrote: | | Doc wrote wrote: |
It is not risk free. It has interest rate risk just like any FI investment. In principle buying a mortgage, even your own, is no different then buying a mortgage backed security backed by Fannie or Freddie. If interest rates go up and you no longer have your "cash" reserve to invest in the higher earning bond you lose. |
Paying down your mortgage is risk free (well I guess it might increase your liquidity risk a bit in an unemployment scenario). Buying Fannie/Freddie mortgage backed securities is not risk free. Their is no explicit government guarantee beyond the end of 2010 I think. After that it is anyone's guess how Fannie/Freddie will be resolved/wound up. So their is the potential for real default risk, just like a corporate bond.
cheers, |
Hey Stranger,
I said interest rate risk not credit risk. Paying down the mortgage means that you do worse if interest rates rise to more than your mortgage rate. You can't take advantage of the higher return because you no longer have the money to invest. That is interest rate risk. It is why the yield curve for Treasuries usually has a positive slope. Interest rate risk increases with the longer term even if there is on no credit risk.
We do not live in a strange land, at lease as far as bonds are concerned. 
_________________
Regards,
Doc
"Share the Harvest" |
|
| Back to top |
|
|
grok87
Joined: 27 Feb 2007
Posts: 2510
|
| Posted: Wed Nov 04, 2009 9:11 pm Post subject: |
|
|
| Doc wrote: | | grok87 wrote: | | Doc wrote wrote: |
It is not risk free. It has interest rate risk just like any FI investment. In principle buying a mortgage, even your own, is no different then buying a mortgage backed security backed by Fannie or Freddie. If interest rates go up and you no longer have your "cash" reserve to invest in the higher earning bond you lose. |
Paying down your mortgage is risk free (well I guess it might increase your liquidity risk a bit in an unemployment scenario). Buying Fannie/Freddie mortgage backed securities is not risk free. Their is no explicit government guarantee beyond the end of 2010 I think. After that it is anyone's guess how Fannie/Freddie will be resolved/wound up. So their is the potential for real default risk, just like a corporate bond.
cheers, |
Hey Stranger,
I said interest rate risk not credit risk. Paying down the mortgage means that you do worse if interest rates rise to more than your mortgage rate. You can't take advantage of the higher return because you no longer have the money to invest. That is interest rate risk. It is why the yield curve for Treasuries usually has a positive slope. Interest rate risk increases with the longer term even if there is on no credit risk.
We do not live in a strange land, at lease as far as bonds are concerned. |
Hey Doc,
I agree with your last comment.
Re your earlier comment about paying down your mortgage being the same as buying a Fannie/Freddie mortgage backed security, I understand the thrust of what you are saying. But there is an important difference:
If you pay down your mortgage there is no way you can suffer a loss of principal.
If you buy a mortgage backed security trading at a premium you can suffer a loss of principal if the security prepays faster than expected. This is because you get the principal back at par. THis is the same as buying a callable bond at a premium. If the thing is called sooner than expected (or called at all when you weren't expecting it to be called) then you can suffer a loss of principal also.
The reason I am dwelling on this is that many people think that you can't lose money (i.e. principal) on GNMA's since they are backed by the full faith and credit of the US Treasury. You *can* lose principal on GNMA's in the same way I described above for Fannie/Freddie MBS-prepayment risk. Fannie/Freddie also have default risk. THis is true even if you hold the GNMA to maturity (unlike a regular treasury).
I wish bonds were simple but they are often "strange" and mysterious!
I don't know if Heinlein would agree, but to me some bonds seem like they were created by Martians (subprime RMBS?)
cheers,
_________________
grok, CFA |
|
| Back to top |
|
|
Doc
Joined: 24 Feb 2007
Posts: 1307
|
| Posted: Thu Nov 05, 2009 10:13 am Post subject: |
|
|
| grok87 wrote: | | Doc wrote: | | ... We do not live in a strange land, at lease as far as bonds are concerned. |
Hey Doc,
I agree with your last comment.
Re your earlier comment about paying down your mortgage being the same as buying a Fannie/Freddie mortgage backed security, I understand the thrust of what you are saying. But there is an important difference:
If you pay down your mortgage there is no way you can suffer a loss of principal.
If you buy a mortgage backed security trading at a premium you can suffer a loss of principal if the security prepays faster than expected. This is because you get the principal back at par. THis is the same as buying a callable bond at a premium. If the thing is called sooner than exp
ected (or called at all when you weren't expecting it to be called) then you can suffer a loss of principal also.
The reason I am dwelling on this is that many people think that you can't lose money (i.e. principal) on GNMA's since they are backed by the full faith and credit of the US Treasury. You *can* lose principal on GNMA's in the same way I described above for Fannie/Freddie MBS-prepayment risk. Fannie/Freddie also have default risk. THis is true even if you hold the GNMA to maturity (unlike a regular treasury).
I wish bonds were simple but they are often "strange" and mysterious!
I don't know if Heinlein would agree, but to me some bonds seem like they were created by Martians (subprime RMBS?)
cheers, |
Agreed. The only point I was trying to make is that paying down your mortgage is not risk free and that potential increases in interest rates should be part of the decision process. The comparison with agency MBS was used only to illustrate that paying down your mortgage is in effect also a mortgage backed security and both have interest rate risk.
(BTW, I think you let the cat out.  )
_________________
Regards,
Doc
"Share the Harvest" |
|
| Back to top |
|
|
G12
Joined: 16 Apr 2007
Posts: 985
|
| Posted: Thu Nov 05, 2009 4:30 pm Post subject: |
|
|
nisiprius wrote:
"You bet. I only wish I'd known what Vanguard REIT index was going to do. For various reasons I only had $10,000 in that fund, and it kept dropping and dropping and dropping and for a while I kept topping it up to $10,000 again. Eventually I got thoroughly tired of pumping out that sinking ship. Last time I paid much attention it was down to $4,000. Then suddenly the other day... it's up to $7,000! Wow!
Oh, if only I'd topped it up to $10,000 back in March.
Oh, if only I'd put my whole darned portfolio in VGSIX in March.
Oh, if only I'd put my whole darned portfolio and mortgaged my house and gotten cash advances on my credit cards and put the whole wad in VGSIX in March.
I'm tellin' ya, I had a feeling about it back then. I mean, they're not making any more land, right? "
nisiprius, I got a laugh out of that. My inclination would have been to tell my inner self who can go to dark places in times of stress, ie losing significant money, "Why did I invest in this dumb ass overvalued leveraged asset class and continue throwing money down a rat hole thereafter?"
I can't help it, I was a nega-REITer since the end of 2006 and still am. That didn't stop me from taking some steep losses on some banks and emerging markets holdings, though. Oh well, win some, lose some. |
|
| Back to top |
|
|
MossySF
Joined: 19 Apr 2007
Posts: 908
|
| Posted: Fri Nov 06, 2009 3:11 am Post subject: |
|
|
I didn't read this thread the first time around. But now that it's resurrected, it's appears to be mostly investor psychology at the root. Our brains lock in price points we think is ours and until the market returns to there, we refuse to do anything.
For example, I used to pick stocks and I decided AMD was a good bet upon reading pre-release benchmarks and architecture review of their then upcoming Athlon CPU. It was a good (lucky) choice -- it rocketed up +600% not too long after release. Then the stock price started dropping but my brain had already locked in that peak price -- I was just waiting for the market to give me back what was mine. I had to wait several years later until the Athlon 64 release and then I sold at a +200% profit versus a 600%. (It actually went up again to +600% ... oh well.) In the end, I learned a valuable lesson -- gotta toss out all emotions and all past history as the future will start from this point on forward.
So what we have is some people now who can't pull the trigger because their brains locked in on March 2009 prices. March 2009, it seemed like we were headed for a Depression -- things were dropping more and more. "Another 10% drop and I'll back up the truck!" And then that 10% drop comes and you think "uhhh... I really meant another 10%". But finally, the drops stopped -- after all, we can't drop to 0 without this world as we know it completely self-destructing -- and now you're in a cycle of remorse about missing the bottom. How can you buy now when it's 20% higher than the bottom? Oh wait, it's now 30% higher than the bottom? I'm going to get an even worse deal (compared to what I could have gotten if I had the guts to pull the trigger).
Solution is simple. Bail completely. Save 50%+ of your salary to fund your retirement. No need to worry. What? What do you mean you can't save 50% of your salary?
_________________
personalbizfinance.com |
|
| Back to top |
|
|
wriggly
Joined: 16 Apr 2009
Posts: 3
Location: Cardiff, Wales
|
| Posted: Fri Nov 06, 2009 6:42 am Post subject: |
|
|
The two hardest purchases I have ever made:
I was buying shares every two weeks because my value-averaging spreadsheet told me to. But the market kept dropping. This was ludicrous. How would I decide when to stop? I needed a new rule in my plan! However, I followed my overriding rule: when changing your plan, wait 30 days and then decide if it still seems to be a good idea. It wasn't -- early March 2009
The market had stormed up and was way higher than before. Everyone was talking about double-dips and taking profits. But my spreadsheet said "Buy". Reluctantly, I followed it. -- late June 2009
Compared to those, early November 2009 was easy: like June but more so, stop analyzing, just follow the plan (and the unemotional spreadsheet). |
|
| Back to top |
|
|
YDNAL
Joined: 10 Apr 2007
Posts: 3824
Location: Biscayne Bay
|
| Posted: Fri Nov 06, 2009 7:08 am Post subject: Re: No attractive investments anymore |
|
|
| Doc wrote: | | I said interest rate risk not credit risk. Paying down the mortgage means that you do worse if interest rates rise to more than your mortgage rate. You can't take advantage of the higher return because you no longer have the money to invest. That is interest rate risk. |
Doc,
Only to a certain point. Thereafter, like some of us, without a mortgage and extra cash one can buy Bonds anytime in any kind of interest rate environment - that would otherwise go to the banks.
_________________
Landy
“The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.” - Warren Buffett |
|
| Back to top |
|
|
Eureka
Joined: 05 Apr 2007
Posts: 584
Location: Illinois
|
| Posted: Sat Nov 07, 2009 2:23 am Post subject: |
|
|
| I was a lot bolder about following my intellect instead of my emotions when I had a weekly paycheck. I'm not sure what that means. |
|
| Back to top |
|
|
exp
Joined: 15 Oct 2009
Posts: 16
|
| Posted: Sat Nov 07, 2009 10:59 am Post subject: |
|
|
| Adrian Nenu wrote: | Inflation is zero or less. There are FDIC insured CDs yielding 2%, which isn't a bad real return with virtually no risk.
The Vanguard Total Bond Market index yields 3.42%. That's real return because there is no inflation.
Vanguard Intermediate Term Tax Exempt bond fund yields 2.80%. Again, this is real return and tax free.
The economy will recover eventually and the stock market will reflect that. Sure the road might be bumpy and the market has had a big runup but it's a mistake to bet against an economic recovery.
Adrian
anenu@tampabay.rr.com |
Total Bond Market Index is VITBX?
And the Intermediate Term Tax Exempt bond fund is VWITX or VWIUX (Admiral Shares)? |
|
| Back to top |
|
|
Doc
Joined: 24 Feb 2007
Posts: 1307
|
| Posted: Sat Nov 07, 2009 11:19 am Post subject: |
|
|
| Adrian Nenu wrote: | Inflation is zero or less. There are FDIC insured CDs yielding 2%, which isn't a bad real return with virtually no risk.
The Vanguard Total Bond Market index yields 3.42%. That's real return because there is no inflation.
Vanguard Intermediate Term Tax Exempt bond fund yields 2.80%. Again, this is real return and tax free. |
 The breakeven on the five year TIPs is 1.7% and I believe the inflation component of the most recent I-bond is just over 3%. I don't understand why inflation is zero.
_________________
Regards,
Doc
"Share the Harvest" |
|
| Back to top |
|
|
Morgan
Joined: 05 Nov 2009
Posts: 23
|
| Posted: Sat Nov 07, 2009 11:20 am Post subject: Re: No attractive investments anymore |
|
|
| renditt wrote: | It took all of 7 months and there are no attractive investments anymore. Stock are overpriced again, bond yields are low, REITs doubled from their lows and commodities look expensive again as well. I am grateful for the fantastic rally and used it to significantly de-risk my portfolio, but on the other hand it would have been nice to be able to invest a low valuations over a sustained period.
What to do now? Most will just stick to their AA which is fine. Personally I have a lot of cash on the sideline, ready for the next significant decline in stocks (which shouldn't be too far away) and an increase in interest rates. |
Quite honestly, in my opinion you're going to be waiting. And waiting.
Naturally a market correction *will* happen in the future, but I believe there is a very good chance you'll lose out by not being exposed to the gains up to that crash.
Historically, I think the wall st crash was one of the few periods in history where 1 maket correction followed another. Most people seem to blame the federal reserve for that.
It makes sense to me, that when the stupid (read speculative) money gets knocked out of the market, what is left is largely the long term investors and insitutions, so there *should* be less volality over the next few years, not more, and a sustained upward trend.
The 'big leap' over the last year is the result of the market correcting itself in advance, the realisation of a reality check, so it is a once off.
(unless loads of new investors begin piling in, then we have a different situation on our hands, but I don't believe this is happening just yet, the average joe is still in the doldrums about the world, people read too many bloody newspapers IMHO)
As for stocks being overpriced, I take it you mean the weirdly high P/E ratios?
This is partly artifical, I'd advise you to use the P/E10 ratio, you cannot trust a P/E ratio in this climate, they don't mean the same thing as per normal after a crash.
If a stock has very very low earnings (which has been the case), even if the stock price has fallen enormously, the P/E ratio would be sky-high after a crash. (which is why you use P/E10 instead)
So; it could still easily be the case that some stocks are a steal.
I hope I haven't misunderstood your position!
I don't act on my 'predictions' no matter how strongly I'm sure of them. I make them at leisure, am prepared to be wrong, and simply never sell what I buy, and so, I am free to philosophise about the short-term without commitment |
|
| Back to top |
|
|
wbond
Joined: 10 Dec 2008
Posts: 360
|
| Posted: Sat Nov 07, 2009 4:22 pm Post subject: |
|
|
| Doc wrote: | | Adrian Nenu wrote: | Inflation is zero or less. There are FDIC insured CDs yielding 2%, which isn't a bad real return with virtually no risk.
The Vanguard Total Bond Market index yields 3.42%. That's real return because there is no inflation.
Vanguard Intermediate Term Tax Exempt bond fund yields 2.80%. Again, this is real return and tax free. |
The breakeven on the five year TIPs is 1.7% and I believe the inflation component of the most recent I-bond is just over 3%. I don't understand why inflation is zero. |
I agree (as I am sure most posters would). The Philadelphia Fed's last inflation expectations survey shows 2.5% for ten years. This may not be correct, of course, but is widely thought to be as good a marker as any of the market's inflation expectations. The benchmark 10-year Treasury is 3.5%, which obviously gives an expected real yield of 1%, significantly below the historical yield demanded by investors. Clearly the fact that we had recent mild deflation doesn't mean that inflation will remain zero over the life of the bond you buy now. |
|
| Back to top |
|
|
|
|
You cannot post new topics in this forum
You cannot reply to topics in this forum
You cannot edit your posts in this forum
You cannot delete your posts in this forum
You cannot vote in polls in this forum
|
Powered by phpBB © 2001, 2005 phpBB Group
|
Wiki
FAQ
Search
Memberlist
Usergroups
Register
Profile
Log in to check your private messages
Log in
