Bogleheads.org

When the long term TIPS real rate hits 3%

tibbitts wrote: ↑Thu Mar 23, 2023 11:18 am

CletusCaddy wrote: ↑Thu Mar 23, 2023 12:50 am I am looking for a way to lock in high long term interest rates.

What if it turns out the current long-term rates aren't high rates?

5% is good enough for me, when you consider that equity returns for 100 years have averaged 9% nominal

DaveTH wrote: ↑Thu Mar 23, 2023 11:08 am

jmk wrote: ↑Thu Mar 23, 2023 9:57 am The ishare "ibond" funds have fixed maturity dates, so they do "lock in the rate".

I'm not sure the rate is "locked", but yes the final maturity date of the portfolio is known.

The rate on those is locked, defaults notwithstanding

EnjoyIt wrote: ↑Thu Mar 23, 2023 10:53 am We are not so lucky...or unlucky....today. The world believe inflation will be under control soon and long term treasuries are yielding accordingly.

And yet the YTM on a well diversified long term corporate bond index is still 5.6%.

So there is no way for me to lock this in, short of buying hundreds of individual bonds?

Is a 3 series big enough for your family with kids? I don't have any experience with it specifically--almost all thr PHEVs owned by my acquaintances are Volvo XC90s, which seem nice but perhaps bigger than we would actually need. The 3 Series has very limited rear leg room which would make it difficult for a primary hauler for kids in car seats or older kids in our case. I ruled out the BMW i4 for similar reasons, though admittedly the rear seat seems to be even a touch smaller on that vs the 3 Series! It would be a challenge to downsize to a sedan from a small SUV. I like the XC90, but the prices are insane for the PHEV models. They are starting at $80k+, which I just can’t justify. Regular cars get dinged up enough with kids, dogs, and i...

I am looking for a way to lock in high long term interest rates.

iShares IBonds and Invesco Bulletshares only go out to 2032 right now.

But VCLT has a duration of 13 years and is paying 5.5%

How do I lock in this rate for 13 years? Do I hold VCLT with cash and just do a glide path (selling VCLT into cash) over 13 years?

How are you in the 24% tax bracket in retirement? That’s over $200k in AGI. Do you have large pensions?

Is a 3 series big enough for your family with kids? I don't have any experience with it specifically--almost all thr PHEVs owned by my acquaintances are Volvo XC90s, which seem nice but perhaps bigger than we would actually need. The 3 Series has very limited rear leg room which would make it difficult for a primary hauler for kids in car seats or older kids in our case. I ruled out the BMW i4 for similar reasons, though admittedly the rear seat seems to be even a touch smaller on that vs the 3 Series! It would be a challenge to downsize to a sedan from a small SUV. I like the XC90, but the prices are insane for the PHEV models. They are starting at $80k+, which I just can’t justify. Regular cars get dinged up enough with kids, dogs, and i...

Wow this is so interesting thank you for sharing AVGV or AVGE? Let the debate commence! AVGV = higher expected returns, stronger tilts to Value and exUS. For those with an appetite for higher risk/reward AVGE = lower expected returns, smaller tilts to value, home country bias (US). For those that want something closer to VT with less potential tracking error AVGV still feels expensive. I’m guessing we could still replicate it with some ratios of VT + AVDV + AVUV for a lower total cost. Perhaps not quiet as valuey, but I’m not sure .26% is cheap I am still using vanguard funds plus the high factor tilted Avantis funds, though. I don’t really want a one fund solution, since it limits TLH options and I prefer to tilt a bit differently and mor...

Wow this is so interesting thank you for sharing

AVGV or AVGE? Let the debate commence!

Thanks Stinky

I’ve been retired from the insurance industry for several years now, but I still keep up with many aspects of the industry. I’ve just seen an annuity “new sales” report for 2022, and MYGA sales are soaring. Sales in the 4th quarter of 2022 were up almost 30% from the third quarter, and were up 217% from the fourth quarter of 2021. Sales for all of 2022 were up 105% from sales for 2021. Evidently, people were really liking the MYGA rates compared to alternatives like CDs. As I’ve mentioned upthread, this may go to explain (but not excuse) why some folks have reported slow processing times on MYGAs. Getting interest rates above 5% seems to have unleashed a torrent of MYGA business. Stinky, with all the new money flowing in at high interest r...

Add to that, there's other costs such as many EVs go through tires much faster I didn't know this. Why do EVs go through tires faster? They don't use the same type of tires that many passenger cars use because they are very heavy vehicles to begin with and thus the tires wear out faster. They also do more damage to a roadway vs. their ICE cousins. At the moment there is no way to tax them for that damage i.e. they don't use gas so they don't pay for gas taxes at the pump. Eventually someone will have to figure out a way to collect taxes from EV owners to maintain the roads. Last time I checked those vehicles used to maintain a roadway still pollute a lot and now they'll be repairing the roads more frequently i.e. causing even more pollutio...

Add to that, there's other costs such as many EVs go through tires much faster I didn't know this. Why do EVs go through tires faster? They don't use the same type of tires that many passenger cars use because they are very heavy vehicles to begin with and thus the tires wear out faster. They also do more damage to a roadway vs. their ICE cousins. At the moment there is no way to tax them for that damage i.e. they don't use gas so they don't pay for gas taxes at the pump. Eventually someone will have to figure out a way to collect taxes from EV owners to maintain the roads. Last time I checked those vehicles used to maintain a roadway still pollute a lot and now they'll be repairing the roads more frequently i.e. causing even more pollutio...

Also if you’re 20 years old and not planning on retiring for over 40 years from now I’d argue that holding any bonds is only appropriate if your risk tolerance is very very small. At 20 with a 40 y period before retirement you don’t need mo at that only keeps up with inflation. You need money to grow. In that case I’d argue unless your risk tolerance is very very small you should be 100/0. Otherwise you’ll find your best egg did not take sufficient advantage of the market over long time periods and you don’t have enough to retire. The closer you get to retirement the less volatility you can tolerate so as you get closer to retirement that’s when you transition to less volatile vehicles. Growth is for money you need a long time from now - s...

Scrooge McDuck wrote: ↑Fri Mar 17, 2023 6:36 pm

CletusCaddy wrote: ↑Fri Mar 17, 2023 4:00 pm Correct, the long 1099 objection is a red herring

Why? Doesn't schedule D need to list the individual stocks you sold, along with the cost basis and sales price?

No it doesn’t. All you need to enter are two summary figures:

Short term gain/loss
Long term gain/loss

prd1982 wrote: ↑Fri Mar 17, 2023 3:41 pm

David Jay wrote: ↑Fri Mar 17, 2023 3:25 pm In this thread, Allan Roth said that the tax document from his broker was 86 pages long: viewtopic.php?t=400137

Assuming you don't own any other individual stocks that could cause a wash sale, i assume you just need to enter a few lines into schedule D?

Correct, the long 1099 objection is a red herring

HueyLD wrote: ↑Fri Mar 17, 2023 12:42 pm First Republic just received 30B of deposits from about 12 mega banks. I think your deposit should be safe.

Stock continuing to crash despite that

km91 wrote: ↑Fri Mar 17, 2023 1:14 pm

CletusCaddy wrote: ↑Fri Mar 17, 2023 12:57 pm Ok I see. You wouldn’t “achieve the same benefit” however, you’d miss out on all the TLH opportunities mid quarter if the market dips and then recovers.

Fair, but there's a trade off between operational complexity and TLH that needs to be made somewhere

But that’s the point with direct indexing. Zero operational complexity for the investor and maximal TLH benefit in exchange for the 0.4% expense ratio.

How is this quite extreme? Literally everyone I know gets paid twice a month or every two weeks. Assuming you are investing in taxable at all then you should be investing with every paycheck. And if you do so then you are forced into the three fund approach I described above or else you would also find yourself in a wash sale situation. If you lump sum your taxable investments once per month then you don’t have this problem I agree, but then what are you doing with your other paycheck mid month? You don't need to TLH every two weeks, you could do quarterly TLH trades and achieve the same benefit. I make contributions every 2 weeks and have never needed to juggle between 3 funds Ok I see. You wouldn’t “achieve the same benefit” however, you...

DIY tax loss harvesting is not simple. At least not for people who get paid twice a month and send their paychecks to their brokerage for immediate investing. It’s been my experience that you actually need to juggle as many as three separate funds: 1. Start out with VTI 2. Two weeks later, your paycheck deposits and VTI has experienced a loss. However you can’t just sell VTI because that would be a wash sale. You also can’t buy more VTI with your new paycheck because that would reset the clock on the wash sale. So you buy ITOT. 3. Two weeks later, you get another paycheck and the market has gone down even more. Now you can sell VTI for a tax loss. But you can’t buy or sell ITOT yet, again, that would reset the clock. So you buy SCHB. This ...

Hfearless wrote: ↑Fri Mar 17, 2023 11:56 am After a long time of behaving very differently, SPX and Treasurys have suddenly started being perfect mirror images of each other. That is, doing exactly what we want them to. Is there an explanation for this? Is this likely to continue on longer time scales?

The explanation is that long term treasuries are in fact reliably negatively correlated to equities in a declining interest rate environment, which the market as of last week has determined that we have just entered.

I reached out to the CA Guarantee Association and they confirmed that it is only the “excess interest” portion that is uninsured. But there is also the 80% cap.

So an example works like this:

$100k principal invested in MYGA
Grows to $150k over some number of years
Insurance company fails
The insured interest is only $20k instead of $50k due to the Moody’s Average rule
But even the $120k is subject to the 80% rule
So I only get $96k back in a worst case scenario

Well team MYGA, I may have just found the Achilles heel for California residents. Here is language from California Life & Health Insurance Guarantee Association : What kinds of plans, policies, and benefits are not protected by the California Life and Health Insurance Guarantee Association? Policies sold by insurers not licensed to do business in California; policies issued by medical, health, or dental care service corporations; managed care plans; self-insured employer plans; fraternal benefit society insurance certificates; policy benefits the insurer does not guarantee such as the non-guaranteed portion of a variable life insurance contract sold by prospectus, or benefits for which the individual policyholder has assumed the risk o...

Tax loss harvesting is nice but it's a marginal benefit. Optimizing tax loss harvesting seems like a marginal optimization of the marginal. The maximum benefit to anyone is $3,000 deduction per year. Anyone who has enough money for direct indexing to make a difference is going to have big enough losses to max out the deduction through tax loss harvesting with ordinary index funds. Just seems like a solution in need of a problem. There are many other uses for tax losses than just the $3k ordinary income offset. I own a home in the Bay Area. With a very conservative assumption of 3% CAGR, the home will appreciate to a $1.5M capital gain in 20 years when I retire and might want to downsize or move to LCOL. Homestead exemption is $500k, leavin...

Well team MYGA, I may have just found the Achilles heel for California residents. Here is language from California Life & Health Insurance Guarantee Association : What kinds of plans, policies, and benefits are not protected by the California Life and Health Insurance Guarantee Association? Policies sold by insurers not licensed to do business in California; policies issued by medical, health, or dental care service corporations; managed care plans; self-insured employer plans; fraternal benefit society insurance certificates; policy benefits the insurer does not guarantee such as the non-guaranteed portion of a variable life insurance contract sold by prospectus, or benefits for which the individual policyholder has assumed the risk of...

Cost of money has gone up. Nothing you can do about that.

Partial saving grace is that depreciation has also slowed down so you are probably getting more for your used car than you otherwise would.

Some serious tracking error today relative to VT. Anyone getting cold feet?

For someone in their 30s like me and a small but growing bond allocation I am thinking about the following:

1. 50% I bonds (and TIPS if I bond space runs out)
2. 50% long term treasuries

Triple punch of inflation protection, principal protection, and negative correlation during crises (like today!)

Thoughts?

Compare the match on your last full paystub with what was actually deposited into Fidelity. Do the amounts match what you would expect?

My Bay Area dream house just sold for 14% over asking.

https://www.zillow.com/homedetails/20-T ... 7015_zpid/

No sign of a slow down at the top end of the market.

So I was looking to buy hyundai ioniq5. They give $7500 rebate but only on lease. (they don't get the rebate from US govt because they are not made in USA so they just take it of their base price) Its only on lease So, say I take it on lease and after 1 month just purchase the car outright. That way I get to keep the 7500$ rebate and just loose 1 month of lease payment which is okay. Any pitfalls of doing this. If the terms of your lease allow it, you'd have to pay all of your lease payments plus the residual value (lease buyout), along with whatever lease close our fees and sales taxes, title fees, registration, etc. Find out what your money factor / interest rate is on the lease payments. That will tell you what the "rent" is c...

Depositors are already lining up to wire money out of the new bank tomorrow. The FDIC will have to sell those MBSes at firesale prices. The shortcoming will be made up from the FDIC fund. No, I can guarantee the large depositors are getting phone calls this weekend asking them to not do this. And most will not. So SVB depositors will be forced not to withdraw their funds as a condition of being made whole? Doesn’t make any sense to me. Those funds will be spent down and not replenished. Meaning the assets will be sold at whatever prices the market will bear. Yes, but there's a difference between an immediate $150bn withdrawal vs slowly spooling them out over the course of months as the cash is needed. The bank had loans on its books. As th...

The lease you sign is not with the dealer but with the leasing company, in this case Hyundai Motor Finance. It is a standard contract used across all dealers. You just need to get your hands on one contract and read it carefully.

But I already told you the answer. There are no penalties for buying out the car early.

stan1 wrote: ↑Sun Mar 12, 2023 10:18 pm

moneyflowin wrote: ↑Sun Mar 12, 2023 10:15 pm Depositors are already lining up to wire money out of the new bank tomorrow. The FDIC will have to sell those MBSes at firesale prices. The shortcoming will be made up from the FDIC fund.

No, I can guarantee the large depositors are getting phone calls this weekend asking them to not do this. And most will not.

So SVB depositors will be forced not to withdraw their funds as a condition of being made whole? Doesn’t make any sense to me. Those funds will be spent down and not replenished. Meaning the assets will be sold at whatever prices the market will bear.

I think it all depends on whether there’s a “solution” announced for Silicon Valley Bank by early Monday morning. If so, I expect that First Republic survives. And your money, bill pays, etc are all fine. If not, I don’t expect First Republic to see Tuesday morning in its current form. I would agree with your assessment. Again, I am not concerned about my FDIC insured deposits. I am concerned about uninterrupted access to my accounts, as well as an FDIC receivership potentially changing the terms of my outstanding loans. I have a five-figure bonus payment hitting the account this Wednesday that I was going to deploy into my taxable equities as is my usual practice. But now I may hold onto it as liquid cash in case the terms of my PLOC are ...

Just received the following email from First Republic. Honestly, would this make you panic less? Or more?

Not really a high earner, but thread specified over $100k so I'll comment based on that. 2 year degree at a low cost community college for ultrasound tech. Wife also has low cost 2 year degree for medical lab tech. After getting a couple/few years experience, we both started traveling, like travel nursing but for our professions. Our pay can vary quite a bit depending on which contracts we choose to take, but we are currently making combined $6400/week, with unpaid time off. So if we work 44 weeks i.e. 8 weeks vacation, we make ~$280,000, or about $140k each. However, this doesn't paint an accurate picture as we have extremely low federal tax liability. Last year was about $7500 which went to zero with an EV purchase. This year will be zer...

ChrisC wrote: ↑Sun Mar 12, 2023 12:26 pm Of course, the FDIC, as Receiver, wants loan customers to make loan payments, but good luck with the FDIC continuing to honor SVB loan commitments or terms of outstanding borrowings of existing customers; as Receiver, the FDIC has enormous powers to "repudiate" or change prior contracts or relationships with customers of SVB.

Very pertinent call out for those of us who maxed out the 2.25% PLOCs from First Republic...

In case any banking regulators are reading this, I think it would be hugely reassuring to the public if standard operating procedures were to be published on how continuity of payments work (or don’t) in the event of a bank failure.

For example:
1. Debit cards still work, up to the insured limit in your accounts
2. Same with ACH transfers and incoming deposits
3. Online access will be maintained

This in itself may serve to stem panic and prevent the next failure.

dual wrote: ↑Sat Mar 11, 2023 2:08 pm I have payments sent to my Fidelity money market account. They give you a bank ABA number and account number that works well. For example, I link it to my treasury direct account. That may not be possible for you but it’s something to look into.

I think it’s too late to change my payroll directions for this Wednesday’s paycheck unfortunately

[Thread merged into here --admin LadyGeek]

One thing that caught my eye regarding SVB’s failure is that their website went down on Thursday, preventing online access to accounts.

Given FDIC insurance I’m not concerned about losing money. But how about access to money? Will ACH pulls still work? Bill autopay?

My paycheck is scheduled to be direct deposited to First Republic on Wednesday so this is not a theoretical question for me.

Apparently it is beyond the ken of bankers to understand asset/liability matching strategies. :oops: Are you suggesting that banks actually match the timing of all assets and liabilities, for example, having cash or cash equivalents to cover all deposits that could be redeemed on demand or close to it? That would be a sound bank. They used to exist. I used to bank with one. I don't think any of them are still around because banks that mismatch maturities are more profitable. Until they blow up. That essentially means no bank lending - no mortgages, no business loans, no personal loans, etc., etc. Not necessarily. Lending is not the only revenue source available to a bank. Here’s one that Bogleheads turn their noses up at - charging 1% AUM ...

BF3000 wrote: ↑Fri Mar 10, 2023 8:01 pm BND isn’t a good proxy for the bond holdings. Consider half long term treasuries (TLT) and half long term corp bonds (SPLB).

Or just the actual bond holding: PLRIX

tixoboy wrote: ↑Fri Mar 10, 2023 5:27 pm

manlymatt83 wrote: ↑Fri Mar 10, 2023 1:09 pm

tixoboy wrote: ↑Fri Mar 10, 2023 12:51 pm SVB collapsed - investors are concerned that FRC might be subject to the risks.

They aren’t. But a bank run could still put them in Jeopardy

Yep! I meant to say that FRC might be subject to the same risks that would cause a bank run. I don't really see any relationship between SVB and FRC besides the fact that they are/were both subject to bank runs, like all banks.

You forget that they are both based in Silicon Valley and share a customer base that works in tech

This might be only time I am happy what I owe the bank is significantly more than what the bank owes me.

First Republic Bank now down -50% today.

Smells like Lehman contagion to me.

Hello: Hoping some experts can help with this. I took the advice given here and sold my FZROX and FZILX shares to buy VTI and VXUS. I incurred a loss of about $4800. I'm filing my 2022 taxes and would like some help understanding capital loss. I did not have any capital gains so my tax software is deducting $3000 from my ordinary income. 1. Do I have to deduct up to $3000? 2. I know you're allowed to carry over your losses into the following years. But I was wondering if I can pick an amount lower than $3000? 3. If I have to stick to $3000 because of IRS rules, the remaining balance of $1800 can be used next year when I file my 2023 taxes? Sorry if these are very silly questions, I file my own taxes so figured I can use input from the folk...

Thanks everyone who answered. It’s good to know that the increased distributions overcome the constant NAV losses in such a scenario.

The SEC yield on BND is 4.4% today.

Here is a thought experiment:

What if the yield on intermediate bonds slowly ground upwards over the next 6 years to 14%? I.e. where rates were 40 years ago.

1. Would BND have a negative return for every single year of the next 6 years?

2. Would BND have a positive return, but just lower than the 4.4% current yield?

3. Something else?

I chose 6 years because that is duration of the fund.

Would the answers be different if the time period of yield appreciation was 12 years?