Search found 935 matches

by gmaynardkrebs
Sun Dec 09, 2018 7:53 pm
Forum: Investing - Theory, News & General
Topic: Tips breakevens and illiquidity premia
Replies: 69
Views: 4163

Re: Tips breakevens and illiquidity premia

I have a vague recollection that the introduction of TIPS was partly based on developing a market prediction of future inflation. If so it was a complete failure as this theard illustrates. :D You’re right. Larry Summers idea. The public doesn’t understand them, or the concept of real returns. Pret...
by gmaynardkrebs
Sun Dec 09, 2018 9:09 am
Forum: Investing - Theory, News & General
Topic: Tips breakevens and illiquidity premia
Replies: 69
Views: 4163

Re: Tips breakevens and illiquidity premia

I guess there are several definitions of liquidity. Wide spreads is one definition, but it was not the one I was focusing on with regard to the situation with Lehmann Brothers in 2008. The definition of illiquidity in that case was "if you sell, you will move the market." That does not happen in liq...
by gmaynardkrebs
Sat Dec 08, 2018 11:07 pm
Forum: Investing - Theory, News & General
Topic: Tips breakevens and illiquidity premia
Replies: 69
Views: 4163

Re: Tips breakevens and illiquidity premia

I don't find the idea that TIPS offer a 1/4 or 1/2% in extra interest from illiquidity to be credible. TIPS trade with quite narrow spreads (< 20 bps). More than nominals, but much less than brokered CDs. Brokered CDs tend to offer about .6% or so of extra interest over Treasuries, but spreads for ...
by gmaynardkrebs
Sat Dec 08, 2018 7:12 pm
Forum: Investing - Theory, News & General
Topic: Tips breakevens and illiquidity premia
Replies: 69
Views: 4163

Re: Tips breakevens and illiquidity premia

thanks for posting the cleveland data. that's really interesting. this chart shows there term structure of expected inflation https://www.clevelandfed.org/our-research/indicators-and-data/inflation-expectations.aspx the model was run on 11/14/18. the figures were Expected inflaton (cleveland fed mo...
by gmaynardkrebs
Fri Dec 07, 2018 10:39 pm
Forum: Investing - Theory, News & General
Topic: Tips breakevens and illiquidity premia
Replies: 69
Views: 4163

Re: Tips breakevens and illiquidity premia

The "problem" is with the term breakeven inflation. The "breakeven inflation" includes inflation, a risk factor and a liquidity factor. So it is not an estimate of actual inflation predictions unless the other two factors are very small . Or if they are about the same size. The TIPS illiquidity yie...
by gmaynardkrebs
Thu Dec 06, 2018 10:50 pm
Forum: Investing - Theory, News & General
Topic: Tips breakevens and illiquidity premia
Replies: 69
Views: 4163

Re: Tips breakevens and illiquidity premia

If you look back over the past 100 years or so there were actually 3 periods when there were bad bouts of high inflation. The late 1910s. The 1940s. And the 70s. I think the common linkage is that these were all periods of wartime deficit spending. In the Volker period the Fed changed their objecti...
by gmaynardkrebs
Thu Dec 06, 2018 4:55 pm
Forum: Investing - Theory, News & General
Topic: Tips breakevens and illiquidity premia
Replies: 69
Views: 4163

Re: Tips breakevens and illiquidity premia

The issue that I always run into in discussions about the inflation breakeven points is that they don't fundamentally address the main reason I have a lot of TIPS in my portfolio, which is to protect myself against inflation that runs a lot higher than the Fed's target rate. I've always thought TIPS...
by gmaynardkrebs
Wed Dec 05, 2018 5:43 pm
Forum: Investing - Theory, News & General
Topic: The risks of equities when saving for retirement
Replies: 38
Views: 3372

Re: The risks of equities when saving for retirement

There's a limit on how pessimistic your future predictions can be before your plans should stop relying on market mechanisms altogether. If the 30-year real return on global cap-weighted equities is negative, that basically implies widespread societal collapse. If you think this is a real possibili...
by gmaynardkrebs
Wed Dec 05, 2018 2:38 pm
Forum: Investing - Theory, News & General
Topic: The best way to invest is through benign neglect
Replies: 16
Views: 2082

Re: The best way to invest is through benign neglect

I totally missed the horror of the 2008 crash in my 401k because I literally did not know how to log in and check it. I think I got a paper statement once a year but didn't track or compare them by any means. I just kept plugging in my 6 percent even though the employer dropped the 3 percent match ...
by gmaynardkrebs
Wed Dec 05, 2018 2:35 pm
Forum: Investing - Theory, News & General
Topic: The risks of equities when saving for retirement
Replies: 38
Views: 3372

Re: The risks of equities when saving for retirement

ThrustVectoring wrote:
Wed Dec 05, 2018 2:23 pm
...If the 30-year real return on global cap-weighted equities is negative, that basically implies widespread societal collapse...
Far more likely, excessive valuations at the start of the 30 year period. The stock market is not the economy, nor the society.
by gmaynardkrebs
Wed Dec 05, 2018 12:30 pm
Forum: Investing - Theory, News & General
Topic: The best way to invest is through benign neglect
Replies: 16
Views: 2082

Re: The best way to invest is through benign neglect

Every day I find more value in these forums. I keep seeing people's signature blocks say things about " I don't know anything." So what is the underlying story to that -- just that buying index funds and pretty much keeping your hands off of them beats "traders" and actively managed funds? https://...
by gmaynardkrebs
Wed Dec 05, 2018 11:49 am
Forum: Investing - Theory, News & General
Topic: The risks of equities when saving for retirement
Replies: 38
Views: 3372

Re: The risks of equities when saving for retirement

I've run a lot of Monte Carlo simulations over the years. In order to get results like those in the article, I have to punch in numbers for stocks that are way worse than past history, including the Great Depression. I just don't see that happening.
by gmaynardkrebs
Sun Dec 02, 2018 1:52 pm
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Munis Increasingly Risky
Replies: 94
Views: 8986

Re: OK with AAA/AA Munis and some A Munis

After saying all of that, I'm thinking that brokered cds rates are now competing with muni funds like VWIUX...Vang. Intermed. Muni. (After taxes...of course) It depends on whether or not you pay state tax, in which case Treasuries could be more attractive than CDs, your federal and state marginal t...
by gmaynardkrebs
Sun Dec 02, 2018 9:16 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Munis Increasingly Risky
Replies: 94
Views: 8986

Re: OK with AAA/AA Munis and some A Munis

I just read L. Swedroe's article again. I don't see a new problem with Vanguard's credit quality 2 muni funds like VWIUX or Baird's BMBIX. Larry said this: investors should limit their investments in municipal bonds to only bonds that are rated AAA or AA (rated A for maturities of under three years...
by gmaynardkrebs
Thu Nov 22, 2018 12:10 am
Forum: Investing - Theory, News & General
Topic: Larry Swedroe: Munis Increasingly Risky
Replies: 94
Views: 8986

Re: Larry Swedroe: Munis Increasingly Risky

I read Larry to be saying that munis may be riskier than you think. But who is the "you"? I doubt that many people here are unaware of Illinois, Meredith Whitney, unfunded pensions etc. I think many Mom and Pops may be less informed, but there was nothing new for me in what he said. I feel that the ...
by gmaynardkrebs
Tue Nov 06, 2018 11:08 am
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

The thing I keep coming back to on bonds, is: a) They are cheap. BND is nearing it's 2008 nadir. b) There is a certain zeitgeist at the moment that 'bonds are unnecessary' c) 'Rising interest rates' fears are scaring people away d) Equities have had fantastic returns in recent years In a way, the c...
by gmaynardkrebs
Tue Nov 06, 2018 9:48 am
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

When folks argue that stocks provide higher returns than bonds because of the "equity risk premium" they sometimes forget that the "risk" can show up as dead money for 20 years. How long is your risk horizon? It's not just the ERP, it's the Excess ERP that has made stocks so lucrative, at least up ...
by gmaynardkrebs
Tue Nov 06, 2018 8:47 am
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

When folks argue that stocks provide higher returns than bonds because of the "equity risk premium" they sometimes forget that the "risk" can show up as dead money for 20 years. How long is your risk horizon? It's not just the ERP, it's the Excess ERP that has made stocks so lucrative, at least up ...
by gmaynardkrebs
Sun Nov 04, 2018 4:50 pm
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

... That doesn't mean you shouldn't hold bonds, it just means you shouldn't expect them to beat stocks. They might. They could. But not likely. Hold bonds for the reason you should hold bonds. To dampen the overall volatility of your portfolio. To keep some of your money safer, etc. Not because you...
by gmaynardkrebs
Sun Nov 04, 2018 10:48 am
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

Starting yield matters when it comes to bond returns. It matters with everything. Equities too. Sure, but I don't think equities are that overvalued. Especially if you look at a globally diversified portfolio and take into account current interest rates. Not so sure I'm totally with you on that. To...
by gmaynardkrebs
Sun Nov 04, 2018 10:09 am
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

ignition wrote:
Sun Nov 04, 2018 8:51 am
Starting yield matters when it comes to bond returns.
It matters with everything. Equities too.
by gmaynardkrebs
Sun Nov 04, 2018 8:11 am
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

I think comparing the raw historical returns of stocks vs bonds, while interesting, leaves out a critical piece of information--yields at the time. Suppose that at some point in the past, bonds were paying out 7% (real) interest rates and stocks had earnings yields of 2%. Having bonds outperform st...
by gmaynardkrebs
Sat Nov 03, 2018 1:07 pm
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

... buying bonds for stability is one thing. Buying long bonds and hoping to outperform stocks is another. Note how they never talk about total bknd outperforming stocks over 30 year periods If by "They" you mean CNBC, brokerage agents, mutual funds etc, "they" never spoke about bonds outperforming...
by gmaynardkrebs
Sat Nov 03, 2018 12:13 pm
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

... buying bonds for stability is one thing. Buying long bonds and hoping to outperform stocks is another. Note how they never talk about total bknd outperforming stocks over 30 year periods If by "They" you mean CNBC, brokerage agents, mutual funds etc, "they" never spoke about bonds outperforming...
by gmaynardkrebs
Sat Nov 03, 2018 11:29 am
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

Bonds were denominated in gold and paid interest in more gold. This seems quite significant, as it wipes out some (but not all) of the inflationary-harm to bonds. I say "not all," as I believe that the huge new gold strikes of the mid 1800s (Klondike, Sutters) were inflationary. However, not as inf...
by gmaynardkrebs
Sat Nov 03, 2018 10:31 am
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

randomguy wrote:
Sat Nov 03, 2018 10:23 am
...
c) if the data is accurate, does it worry you that almost all of the outperformance came in one chunk 175 years ago? ...
No. What worries me is that the last one was in 2011, which is like yesterday to me. Glad I was "underweight" stocks then, and happy to stay that way today.
by gmaynardkrebs
Sat Nov 03, 2018 10:12 am
Forum: Investing - Theory, News & General
Topic: WSJ: Sometimes, It’s Bonds For the Long Run
Replies: 72
Views: 6132

Re: WSJ: Sometimes, It’s Bonds For the Long Run

Even though TIPS haven't done too well lately, they may have fundamentally changed the landscape in favor of bonds. What has historically hurt bondholders so often, and in so many countries, is unexpected inflation. That accounts for bonds under performance compared to stocks over many long periods....
by gmaynardkrebs
Tue Oct 30, 2018 2:39 pm
Forum: Investing - Theory, News & General
Topic: Second thoughts about munis (wsj article)
Replies: 47
Views: 3964

Re: Second thoughts about munis (wsj article)

Are you saying cash flows/contributions from current workers and gov. into pension system > then current payouts to retirees is all that is needed for defaults to not occur? Why even care about invested reserves? What will be the trigger for defaults then? Is the problem the compounding inflation a...
by gmaynardkrebs
Tue Oct 30, 2018 2:30 pm
Forum: Investing - Theory, News & General
Topic: Second thoughts about munis (wsj article)
Replies: 47
Views: 3964

Re: Second thoughts about munis (wsj article)

This did give me pause. I don't even own any bonds at this time but if I ever did I think I would try to go with the very safest choice which might be to own outright treasuries in the range of 2-5 years. no credit risk. no default risk. no risk to rising rates if you own the individual bonds. Bond...
by gmaynardkrebs
Tue Oct 30, 2018 9:59 am
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 8814
Views: 1693210

Re: U.S. stocks in freefall

lostdog wrote:
Tue Oct 30, 2018 9:49 am
GoldenFinch wrote:
Mon Oct 29, 2018 8:54 pm
Bulls make money...

Bears make money...

Bogleheads stay the course and hang out on the U.S stocks in freefall thread (very comforting).
It's a win win either way for accumulators.
If prices stay down? How's that?
by gmaynardkrebs
Tue Oct 30, 2018 9:32 am
Forum: Investing - Theory, News & General
Topic: Second thoughts about munis (wsj article)
Replies: 47
Views: 3964

Re: Second thoughts about munis (wsj article)

Are you saying cash flows/contributions from current workers and gov. into pension system > then current payouts to retirees is all that is needed for defaults to not occur? Why even care about invested reserves? What will be the trigger for defaults then? Is the problem the compounding inflation a...
by gmaynardkrebs
Mon Oct 29, 2018 6:13 pm
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 8814
Views: 1693210

Re: U.S. stocks in freefall

You appear confused. I don't think so, but I might be. Pls explain or expand on where you feel I am confused. Most passive investors are indexers. The indexes track exactly what the active investors do. I understand that the motives are different, but what they do is the same. So someone who since ...
by gmaynardkrebs
Mon Oct 29, 2018 1:45 pm
Forum: Investing - Theory, News & General
Topic: Second thoughts about munis (wsj article)
Replies: 47
Views: 3964

Re: Second thoughts about munis (wsj article)

@ JackoC: I think it would be not worth my time and probably impossible in any event to for me to second guess Vanguard on their muni funds by doing my own research. At some point, you either trust your mutual fund company to do the work for you, or you don't; if you don't, find another company. Per...
by gmaynardkrebs
Mon Oct 29, 2018 7:39 am
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 8814
Views: 1693210

Re: U.S. stocks in freefall

No. The passive investors hold the same set of stocks. The active investors trade back and forth between each other. The passive investors merely accept the results of all the trading done by the active investors, the computers, hedge funds, institutions, etc. Also most individual investors are not...
by gmaynardkrebs
Sun Oct 28, 2018 1:02 pm
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 8814
Views: 1693210

Re: U.S. stocks in freefall

This back and forth in the stock market will probably go on for a while. See-saw, up and down. Individual investors are not causing this. Probably profit taking, probably computers going crazy, probably hedge funds unwinding heaven knows what. The next time I hear about how the retail investors are...
by gmaynardkrebs
Sun Oct 28, 2018 10:36 am
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 8814
Views: 1693210

Re: U.S. stocks in freefall

This back and forth in the stock market will probably go on for a while. See-saw, up and down. Individual investors are not causing this. Probably profit taking, probably computers going crazy, probably hedge funds unwinding heaven knows what. The next time I hear about how the retail investors are...
by gmaynardkrebs
Sun Oct 28, 2018 10:16 am
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 8814
Views: 1693210

Re: U.S. stocks in freefall

This back and forth in the stock market will probably go on for a while. See-saw, up and down. Individual investors are not causing this. Probably profit taking, probably computers going crazy, probably hedge funds unwinding heaven knows what. The next time I hear about how the retail investors are...
by gmaynardkrebs
Sat Oct 27, 2018 9:38 pm
Forum: Investing - Theory, News & General
Topic: Second thoughts about munis (wsj article)
Replies: 47
Views: 3964

Re: Second thoughts about munis (wsj article)

https://www.wsj.com/articles/prophet-of-muni-market-doom-wasnt-wrongjust-early-1540554098 Read through this and thinking of keeping my taxable fixed income in cds and high yield savings instead of munis. I feel like the risk may not be worth it even at my higher bracket. Thoughts? The only no risk ...
by gmaynardkrebs
Fri Oct 26, 2018 9:24 pm
Forum: Investing - Theory, News & General
Topic: Cash Parking Lot: Prime MM or limited term tax exempt?
Replies: 19
Views: 2496

Re: Cash Parking Lot: Prime MM or limited term tax exempt?

Hey all, For cash that you may or may not need in short term, would you put it in MM (VMMXX) or limited term tax-exempt index (VMLUX)? It seems VMMXX a more "promising" looking that no need to worry about return of principle. VMLUX definitely has higher yield after tax but the NAV seems fluctuates ...
by gmaynardkrebs
Fri Oct 26, 2018 9:16 am
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 8814
Views: 1693210

Re: U.S. stocks in freefall

willthrill81 wrote:
Fri Oct 26, 2018 9:11 am
oldcomputerguy wrote:
Fri Oct 26, 2018 8:36 am
And the beat goes on .... five minutes in, S&P 500 down 1.75%

Hang on for the bumps.
More good news for us accumulators! 8-)
I agree, but can't decide whether to increase my equity allocation now. The falling knife....
by gmaynardkrebs
Fri Oct 26, 2018 8:39 am
Forum: Investing - Theory, News & General
Topic: US T bills - first time user
Replies: 138
Views: 13482

Re: US T bills - first time user

I no longer hold premium bonds in taxable accounts. I really don't know or want to learn how to do the amortization myself, and my experience with Vanguard is that their calculations are not reliable, I may ultimately decide not to have bonds in taxable at all. We don't have much of a taxable accou...
by gmaynardkrebs
Fri Oct 26, 2018 8:25 am
Forum: Investing - Theory, News & General
Topic: US T bills - first time user
Replies: 138
Views: 13482

Re: US T bills - first time user

Doc wrote:
Fri Oct 26, 2018 8:13 am
If you are in the Social Security phase in situation your cap gains rate is not zero.
Ok, I tried to figure this out via google before bothering you, but I failed. Can you explain a little? Thanks! :happy
by gmaynardkrebs
Thu Oct 25, 2018 10:16 pm
Forum: Investing - Theory, News & General
Topic: US T bills - first time user
Replies: 138
Views: 13482

Re: US T bills - first time user

I no longer hold premium bonds in taxable accounts. I really don't know or want to learn how to do the amortization myself, and my experience with Vanguard is that their calculations are not reliable,
by gmaynardkrebs
Wed Oct 24, 2018 3:10 pm
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 8814
Views: 1693210

Re: U.S. stocks in freefall

If not, back up the truck, everything's on sale! So right now we are down about 6%-7% from the peak, suppose it goes down another 6%-to7%? Is that really a sale? I can't remember the last time I backed up the truck for a 15% off sale. Would a 40%-off sale do it? probably, but I suspect it will not ...
by gmaynardkrebs
Wed Oct 24, 2018 12:56 pm
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 8814
Views: 1693210

Re: U.S. stocks in freefall

If not, back up the truck, everything's on sale! So right now we are down about 6%-7% from the peak, suppose it goes down another 6%-to7%? Is that really a sale? I can't remember the last time I backed up the truck for a 15% off sale. Would a 40%-off sale do it? probably, but I suspect it will not ...
by gmaynardkrebs
Tue Oct 23, 2018 11:13 am
Forum: Investing - Theory, News & General
Topic: U.S. stocks in free fall
Replies: 8814
Views: 1693210

Re: U.S. stocks in freefall

I can't contribute theory, just my own buying process. I "comparison shop" stocks vs bonds. I hold stocks now because the returns on safe assets are too low. When interest rates go enough higher than they are now, I'm going to shift away somewhat from stocks to bonds. But, we're not there yet. So wh...
by gmaynardkrebs
Fri Oct 19, 2018 7:38 am
Forum: Investing - Theory, News & General
Topic: 30 yr TIPs auction: Oct. 18: 1.2% real yield?
Replies: 44
Views: 4020

Re: 30 yr TIPs auction: Oct. 18: 1.2% real yield?

... if one is building a LMP [Liability Matching Portfolio], which is what I am doing, I think the ideal coupon is "0%", ... the bottom line is that I want my present day purchase to at least be equaled in real value at maturity. Additional coupons paid out every year complicate things. Indeed! Acc...
by gmaynardkrebs
Thu Oct 18, 2018 9:29 pm
Forum: Investing - Theory, News & General
Topic: 30 yr TIPs auction: Oct. 18: 1.2% real yield?
Replies: 44
Views: 4020

Re: 30 yr TIPs auction: Oct. 18: 1.2% real yield?

Auction yield was 1.235% which I think is about 2.5 bps higher than where the secondary was trading just before auction. I.e. the auction”tailed” massively I.e. the market hates long term tips right now. I deployed all the spare cash I could. Wish I had bought more. grok, always interested to read ...