"Bond wipeout has just begun"???

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nbseer
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"Bond wipeout has just begun"???

Post by nbseer »

So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do? Sit it out in a money market fund making nothing (and actually losing money to inflation)?

https://www.bloomberg.com/news/articles ... r-the-exit
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Mel Lindauer
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Re: "Bond wipeout has just begun"???

Post by Mel Lindauer »

nbseer wrote:So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do? Sit it out in a money market fund making nothing (and actually losing money to inflation)?

https://www.bloomberg.com/news/articles ... r-the-exit
Match your bond holdings to the bond fund's duration and then ride it out.
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Ged
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Re: "Bond wipeout has just begun"???

Post by Ged »

nbseer wrote:So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do? Sit it out in a money market fund making nothing (and actually losing money to inflation)?

https://www.bloomberg.com/news/articles ... r-the-exit
Declining prices mean increasing yields. Not necessarily a bad thing so long as your holding period is appropriately matched to your bond duration.

The article you cited referred to long term bonds, which would maybe not where you would want to be in a rising rate environment.
coincollector
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Re: "Bond wipeout has just begun"???

Post by coincollector »

Ged wrote:
nbseer wrote:So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do? Sit it out in a money market fund making nothing (and actually losing money to inflation)?

https://www.bloomberg.com/news/articles ... r-the-exit
Declining prices mean increasing yields. Not necessarily a bad thing so long as your holding period is appropriately matched to your bond duration.

The article you cited referred to long term bonds, which would maybe not where you would want to be in a rising rate environment.
I know that prices will go down, especially for long term bonds, but man it will be nice to finally get a decent interest rate again. The interest rates have been nothing short of pathetic over recent years.
dharrythomas
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Re: "Bond wipeout has just begun"???

Post by dharrythomas »

Stay the course!!

Do not deviate from you long term plan. The only adjustments you should consider to your asset allocation are rebalancing and reducing risk (buying additional bonds) as your risk tolerance changes.

The key thing to remember is that "nobody knows nothing"
dbr
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Re: "Bond wipeout has just begun"???

Post by dbr »

The best thing that could happen to long term investors, especially retirees, would be a return to more "normal" interest rates, at least in real rates without inflation.

As mentioned, disaster speculating in long bonds doesn't concern the personal investor holding diversified intermediate term bond funds as a long term plan.
Vanguard Fan 1367
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Re: "Bond wipeout has just begun"???

Post by Vanguard Fan 1367 »

I have read Jack say: "If you are a bond investor you should rejoice when the yields increase." I see his point. Bond yields have been ridiculously low for too long.
Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on his not understanding it."
43andcounting
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Re: "Bond wipeout has just begun"???

Post by 43andcounting »

I guess anything that is certain is already priced into bond prices, i.e. anything that is not already priced in is not that certain.
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arcticpineapplecorp.
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Re: "Bond wipeout has just begun"???

Post by arcticpineapplecorp. »

nbseer wrote:So is this "really" the end of the multi-year bond rally?
multi year rally? More like a multi decade rally. You do realize that we've had a 30 year bond bull market starting in 1980 (or possibly end of 70s) because interest rates were in the double digits then and came down to essentially 0% during/after the Great Recession? interest rates fall, bond prices rise (new bonds anyway).

see the chart below to see that shows while stocks went up since 1980...so did bonds. I'm using the fbndx (fidelity investment grade bond) for the bond fund because it's the only one that goes back to 1980 (thanks nisi)...viewtopic.php?t=85803
Vanguard's total bond market only goes back to 1986. And used S&P500 instead of total market for similar reason

(S&P 500 in blue below, fidelity investment grade bond in green):

Image

source:
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D

Otherwise, the article's basically clickbait with a bunch of gobbledygook. Like this:
Curve positioning may also fuel liquidation in the long end as traders start to unwind overcrowded flattener trades.
If anybody cares to explain what that sentence means in English, I'd be much obliged.
It's "Stay" the course, not Stray the Course. Buy and Hold works. You should really try it sometime. Get a plan: www.bogleheads.org/wiki/Investment_policy_statement
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TD2626
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Re: "Bond wipeout has just begun"???

Post by TD2626 »

In the past few days, there have been threads saying that "bonds are about to tank" and "stocks are about to tank".

If that's somehow the case, what is there to invest in?

If stocks tank, wouldn't there mabye be a "flight to saftey" pushing bonds up? If bonds tank, wouldn't there be a decent chance stocks would be up?

Stay the course with a reasonable allocation. Investing involves risk. One must take risk to get returns above the risk-free rate. Stocks and bonds could always tank. They could both do poorly at once, as well.

Also, for those heavily in equities, the notion of a "wipeout" in bonds needs to have an asterisk behind it. Most Bond funds don't "tank"
in the way stock funds easily can (with the exception of the longest-term or lowest credit quality bonds and/or junk bonds). Maybe Total Bond would be down 10% or 20%, but it likely wouldn't be down 50% like a stock fund.

According to https://personal.vanguard.com/us/insigh ... llocations, the worst year for bond returns since 1926 was -8.1%. (Historical performance is no guarantee, the future could be worse than the past). For a older investor with a portfolio heavily in fixed income, yes, bonds can tank for them. But for someone that is, say, 70-90% equities, bonds "tanking" would probably be nowhere near what they could experience in the stock market routinely.
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Re: "Bond wipeout has just begun"???

Post by Dottie57 »

TD2626 wrote:In the past few days, there have been threads saying that "bonds are about to tank" and "stocks are about to tank".

If that's somehow the case, what is there to invest in?

If stocks tank, wouldn't there mabye be a "flight to saftey" pushing bonds up? If bonds tank, wouldn't there be a decent chance stocks would be up?

Stay the course with a reasonable allocation. Investing involves risk. One must take risk to get returns above the risk-free rate. Stocks and bonds could always tank. They could both do poorly at once, as well.

Also, for those heavily in equities, the notion of a "wipeout" in bonds needs to have an asterisk behind it. Most Bond funds don't "tank"
in the way stock funds easily can (with the exception of the longest-term or lowest credit quality bonds and/or junk bonds). Maybe Total Bond would be down 10% or 20%, but it likely wouldn't be down 50% like a stock fund.

According to https://personal.vanguard.com/us/insigh ... llocations, the worst year for bond returns since 1926 was -8.1%. (Historical performance is no guarantee, the future could be worse than the past). For a older investor with a portfolio heavily in fixed income, yes, bonds can tank for them. But for someone that is, say, 70-90% equities, bonds "tanking" would probably be nowhere near what they could experience in the stock market routinely.
In 2008-2009, I don't think my bonds went down more than 8%. They were the only ray of sunshine for my portfolio.
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Re: "Bond wipeout has just begun"???

Post by TropikThunder »

nbseer wrote:So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do? Sit it out in a money market fund making nothing (and actually losing money to inflation)?

https://www.bloomberg.com/news/articles ... r-the-exit
“People this year had been buying long-dated Treasuries and other sovereigns as the hedge to their equity portfolios and that’s why this unwind is so ugly,” said Peter Tchir, head of macro strategy at Brean Capital LLC. “They are losing money on both the equity and debt side now, and are bailing out of their long-dated Treasuries.”
Well who's bright idea was it to buy LT Treasuries when the Fed has been telegraphing four FFR increases between Dec 2016 and Dec 2017? :shock:
Ged wrote: Declining prices mean increasing yields. Not necessarily a bad thing so long as your holding period is appropriately matched to your bond duration.
The article you cited referred to long term bonds, which would maybe not where you would want to be in a rising rate environment.
Like I said, who's bright idea was it to buy LT Treasuries when the Fed has been telegraphing four FFR increases between Dec 2016 and Dec 2017? :twisted:
stlutz
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Re: "Bond wipeout has just begun"???

Post by stlutz »

Well who's bright idea was it to buy LT Treasuries when the Fed has been telegraphing four FFR increases between Dec 2016 and Dec 2017?
Year-to-Date, TLT (long-term treasury ETF) is up 4.51%. So you you'd be pretty smart if you had!
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Re: "Bond wipeout has just begun"???

Post by itstoomuch »

Dottie57 wrote:
In 2008-2009, I don't think my bonds went down more than 8%. They were the only ray of sunshine for my portfolio.
you weren't watching "government sponsored enterprises," agency, and bonds of the major Dow 30
Many bonds were ringfenced, and when the gov took over GSE's, they bought up the existing bonds and issued new bonds with implied guarantee of the taxing power of the Gov.
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Re: "Bond wipeout has just begun"???

Post by chinto »

This is why I am luving on my stable value fund...
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Re: "Bond wipeout has just begun"???

Post by Eric76 »

Maybe. Then again, maybe not.
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Re: "Bond wipeout has just begun"???

Post by oldcomputerguy »

nbseer wrote:So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do?
Rebalance.
"I’ve come around to this: If you’re dumb, surround yourself with smart people; and if you’re smart, surround yourself with smart people who disagree with you." (Aaron Sorkin)
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Re: "Bond wipeout has just begun"???

Post by zuma »

oldcomputerguy wrote:
nbseer wrote:So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do?
Rebalance.
This is the correct answer. :)
TBillT
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Re: "Bond wipeout has just begun"???

Post by TBillT »

If you are a market timer (perish the thought!) I follow Gary Shilling who still feels the bond rally is alive and bond values will increase.
However, Shilling is also a money manager, so he "get's out of the way" of freight trains (sentiment). So right now we have a sentiment shift, yet again somebody said we should all sell our bonds, and that is the latest flavor of the day last couple weeks. They've been saying that for 30 years though, and they have been wrong on the overall direction.
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Re: "Bond wipeout has just begun"???

Post by Phineas J. Whoopee »

arcticpineapplecorp. wrote:
nbseer wrote:So is this "really" the end of the multi-year bond rally?
multi year rally? More like a multi decade rally. You do realize that we've had a 30 year bond bull market starting in 1980 (or possibly end of 70s) because interest rates were in the double digits then and came down to essentially 0% during/after the Great Recession? interest rates fall, bond prices rise (new bonds anyway).
...
How can there have been a bull market since 1980 in securities which mature in no more than 30 years? All of the pre-1988 prices which went up went back down as the bonds matured, most bonds don't last 30 years, and the dynamic continues today. It's inherent in bond math. The asserted bull market was in issues which, most of them, no longer exist, and the remainder are approaching face value now.
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Re: "Bond wipeout has just begun"???

Post by Boglegrappler »

multi year rally? More like a multi decade rally. You do realize that we've had a 30 year bond bull market starting in 1980 (or possibly end of 70s) because interest rates were in the double digits then and came down to essentially 0% during/after the Great Recession? interest rates fall, bond prices rise (new bonds anyway).
The bond rally started the first week of August in 1982. Anyone who was in the investment/finance business during that time remembers it vividly. The Fed made two unexpected moves, and the stock markets took off like rockets.

It's continued to the present.
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Re: "Bond wipeout has just begun"???

Post by Artsdoctor »

Mel Lindauer wrote:
nbseer wrote:So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do? Sit it out in a money market fund making nothing (and actually losing money to inflation)?

https://www.bloomberg.com/news/articles ... r-the-exit
Match your bond holdings to the bond fund's duration and then ride it out.
This is the key.

At any rate, individual investors have no business buying 30-year nominals anyway so when you're reading an article like this, you need to also understand who's buying what.
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nedsaid
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Re: "Bond wipeout has just begun"???

Post by nedsaid »

There is no "Bond wipeout" that I have seen. I also see that inflation is still benign. Despite short term interest rate hikes by the Fed, the Intermediate and Long parts of the yield curve have hardly budged. The US Treasury 30 year bond still yields under 3%.
A fool and his money are good for business.
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Re: "Bond wipeout has just begun"???

Post by RRAAYY3 »

is there any bond worth holding in a taxable account for a 32 year old?
TBillT
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Re: "Bond wipeout has just begun"???

Post by TBillT »

RRAAYY3 wrote:is there any bond worth holding in a taxable account for a 32 year old?
This is not for the faint of heart, nor is it a Bogle method. This is a Gary Shilling method.
But if you follow economist A. Gary Shilling, you would put money into a 30-year Treasury STRIP (zero coupon bond) maturing way out there 25-30 years. Let's say you do this at 3% now. At some point in the next few years, Shilling expects the long bond to go down to 2% interest rate, He assumes the bond rally is still alive, and this is how he has invested people's money since 1980. Now if/when we hit 2% on the long bond, you will have a very large capital gain.

PS- I would follow Shilling's newsletter closely to make sure he thought the timing was right to make the move, but basically you'd be hoping to buy low point (we have a mini-dip right now).

A less aggressive version of this would be buy long term bonds or bond fund.
Last edited by TBillT on Sat Jul 08, 2017 9:10 am, edited 4 times in total.
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Re: "Bond wipeout has just begun"???

Post by TheTimeLord »

nedsaid wrote:There is no "Bond wipeout" that I have seen. I also see that inflation is still benign. Despite short term interest rate hikes by the Fed, the Intermediate and Long parts of the yield curve have hardly budged. The US Treasury 30 year bond still yields under 3%.
I am seeing an approximate 1% drop in both my Total Bond and Intermediate Bond funds since my weekly asset allocation check on 6/24. This performance displeases me. As of 6/30/17, Vanguard lists the 1 year performance of BND as negative, although YTD is positive which makes sense because I think we started the year with the 10 year at approximately 2.4%. Fed interest rate hikes aren't really the issue here anyway, imho, it is what they do with their balance sheet that will effect intermediate and long term rates. Fortunately, I have been CD heavy/Bond light in anticipation of some tumult in the bond market.

https://personal.vanguard.com/us/funds/ ... =INT#tab=1
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nedsaid
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Re: "Bond wipeout has just begun"???

Post by nedsaid »

TheTimeLord wrote:
nedsaid wrote:There is no "Bond wipeout" that I have seen. I also see that inflation is still benign. Despite short term interest rate hikes by the Fed, the Intermediate and Long parts of the yield curve have hardly budged. The US Treasury 30 year bond still yields under 3%.
I am seeing an approximate 1% drop in both my Total Bond and Intermediate Bond funds since my weekly asset allocation check on 6/24. This performance displeases me. As of 6/30/17, Vanguard lists the 1 year performance of BND as negative, although YTD is positive which makes sense because I think we started the year with the 10 year at approximately 2.4%. Fed interest rate hikes aren't really the issue here anyway, imho, it is what they do with their balance sheet that will effect intermediate and long term rates. Fortunately, I have been CD heavy/Bond light in anticipation of some tumult in the bond market.

https://personal.vanguard.com/us/funds/ ... =INT#tab=1
Just checked my portfolio at Vanguard, Vanguard Total Bond Index up 2.08% year to date. Hardly a disaster.

The idea of substituting FDIC Insured CDs for Bonds is a good idea. The thing is, the value of these fluctuate just like bonds but this is not apparent to the CD owner. There is a secondary market for CDs and it appears the bid/ask spread on these is about 3%. Just going to a bank and buying a CD ladder is a good proxy for a bond fund, hold CDs to maturity and buy a new CD each time one matures.

We really don't know how much of an effect the Fed balance sheet has on interest rates. My suspicion that as they let bonds mature and don't reinvest that the effects on bond yields will be quite modest. There seems to be a huge demand for quality bonds now.
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TheTimeLord
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Re: "Bond wipeout has just begun"???

Post by TheTimeLord »

nedsaid wrote:
TheTimeLord wrote:
nedsaid wrote:There is no "Bond wipeout" that I have seen. I also see that inflation is still benign. Despite short term interest rate hikes by the Fed, the Intermediate and Long parts of the yield curve have hardly budged. The US Treasury 30 year bond still yields under 3%.
I am seeing an approximate 1% drop in both my Total Bond and Intermediate Bond funds since my weekly asset allocation check on 6/24. This performance displeases me. As of 6/30/17, Vanguard lists the 1 year performance of BND as negative, although YTD is positive which makes sense because I think we started the year with the 10 year at approximately 2.4%. Fed interest rate hikes aren't really the issue here anyway, imho, it is what they do with their balance sheet that will effect intermediate and long term rates. Fortunately, I have been CD heavy/Bond light in anticipation of some tumult in the bond market.

https://personal.vanguard.com/us/funds/ ... =INT#tab=1
Just checked my portfolio at Vanguard, Vanguard Total Bond Index up 2.08% year to date. Hardly a disaster.

The idea of substituting FDIC Insured CDs for Bonds is a good idea. The thing is, the value of these fluctuate just like bonds but this is not apparent to the CD owner. There is a secondary market for CDs and it appears the bid/ask spread on these is about 3%. Just going to a bank and buying a CD ladder is a good proxy for a bond fund, hold CDs to maturity and buy a new CD each time one matures.

We really don't know how much of an effect the Fed balance sheet has on interest rates. My suspicion that as they let bonds mature and don't reinvest that the effects on bond yields will be quite modest. There seems to be a huge demand for quality bonds now.
I year for Total Bond negative by about 0.5%, yes YTD positive, but the past 2 weeks have been pretty fast moving for something like Bonds. I think if the Fed just let things mature it would be the best outcome but from what I have understood they seem determined to do something different and quickier which will increase supply and in theory raise rates and lower price. Apparently the 10 year keep running up to 2.42% and then reversing (according to CNBC). But this time the German Bund is also participating which may mean this time is for real.
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nedsaid
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Re: "Bond wipeout has just begun"???

Post by nedsaid »

My belief is that the great bond bear market ended in 2013 since the "taper tantrum." It seems like bond prices have been fluctuating around a mean since. Every time I think the Intermediate and Long Term interest rates are moving up, they start heading down again. Pretty much noise.
A fool and his money are good for business.
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TheTimeLord
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Re: "Bond wipeout has just begun"???

Post by TheTimeLord »

nedsaid wrote:My belief is that the great bond bear market ended in 2013 since the "taper tantrum." It seems like bond prices have been fluctuating around a mean since. Every time I think the Intermediate and Long Term interest rates are moving up, they start heading down again. Pretty much noise.
We will see if demand can remain steady when Fed purchases dissipate.
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Re: "Bond wipeout has just begun"???

Post by jebmke »

The main drag on the one-year return seems to be treasuries. But equity has done very well in the same period. I rarely look at individual holdings except to the extent I need to in order to re-balance. I would guess that in the 10 years since I retired that our bonds (excluding Tips) have averaged around 5% return +/- . Cash would have probably been ~1% had I stayed in cash -- ie. cash would have been a significant drag. I haven't looked at the returns on Tips. We bought them with a real yield of 3%. I sold some for a large gain. The rest are yielding around .5% real now I think.
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nedsaid
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Re: "Bond wipeout has just begun"???

Post by nedsaid »

The reason I started my "mild rebalancing" program in July 2013 from stocks to bonds was the effect of the "taper tantrum." What I witnessed was rebalancing nirvana, bonds were going down in price while stocks were still advancing. Problem was that interest rates started going down again but I have continued my rebalancing program. I am now four years into it.
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Re: "Bond wipeout has just begun"???

Post by midareff »

I think with bonds you have to look at things other than the yield or dividend. A close look at the year over year change in the NAV and the year over year CPI change is useful in determining just what your bonds have done for you in any period. When you throw those into the equation it's a rare bond fund that has produced a positive REAL return over the last year when NAV changes are considered.
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GKSD
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Re: "Bond wipeout has just begun"???

Post by GKSD »

Mel Lindauer wrote:
Match your bond holdings to the bond fund's duration and then ride it out.
Not able to fully understand this comment - could you please provide some more info on how can this be actionable?
Are you suggesting to make individual bond fund holding as %-age of overall portfolio to be same as the duration of the particular bond holding?
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Re: "Bond wipeout has just begun"???

Post by indexonlyplease »

chinto wrote:This is why I am luving on my stable value fund...

Yes me too paying 3.5%. I use the stable value instead of bonds for my fixed asset. I will everyone had the same opportunity
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Re: "Bond wipeout has just begun"???

Post by midareff »

Hmmmm... Ally is offering 1.5% interest on an 11 month CD that can be broken after the first six days penalty free, and you keep earned interest. Savings is also up to 1.15%
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Re: "Bond wipeout has just begun"???

Post by dbr »

Mel Lindauer wrote:
nbseer wrote:So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do? Sit it out in a money market fund making nothing (and actually losing money to inflation)?

https://www.bloomberg.com/news/articles ... r-the-exit
Match your bond holdings to the bond fund's duration and then ride it out.
Mel, with all due respect, can you explain what that means? I don't think what you wrote just there even makes any sense.
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TheTimeLord
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Re: "Bond wipeout has just begun"???

Post by TheTimeLord »

midareff wrote:Hmmmm... Ally is offering 1.5% interest on an 11 month CD that can be broken after the first six days penalty free, and you keep earned interest. Savings is also up to 1.15%
I have taken advantage of this offer.
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zuma
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Re: "Bond wipeout has just begun"???

Post by zuma »

dbr wrote:
Mel Lindauer wrote:
nbseer wrote:So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do? Sit it out in a money market fund making nothing (and actually losing money to inflation)?

https://www.bloomberg.com/news/articles ... r-the-exit
Match your bond holdings to the bond fund's duration and then ride it out.
Mel, with all due respect, can you explain what that means? I don't think what you wrote just there even makes any sense.
I assumed he meant: hold each bond fund for at least as long as the average duration of the fund. But I could be wrong.
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Re: "Bond wipeout has just begun"???

Post by mickeyd »

1. Select an AA that fits your needs.
2. Stay the course.

Any questions? Refer them to Jack Bogle.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
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midareff
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Re: "Bond wipeout has just begun"???

Post by midareff »

TheTimeLord wrote:
midareff wrote:Hmmmm... Ally is offering 1.5% interest on an 11 month CD that can be broken after the first six days penalty free, and you keep earned interest. Savings is also up to 1.15%
I have taken advantage of this offer.

Same here.....
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Munir
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Re: "Bond wipeout has just begun"???

Post by Munir »

zuma wrote:
dbr wrote:
Mel Lindauer wrote:
nbseer wrote:So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do? Sit it out in a money market fund making nothing (and actually losing money to inflation)?

https://www.bloomberg.com/news/articles ... r-the-exit
Match your bond holdings to the bond fund's duration and then ride it out.
Mel, with all due respect, can you explain what that means? I don't think what you wrote just there even makes any sense.
I assumed he meant: hold each bond fund for at least as long as the average duration of the fund. But I could be wrong.
Correct. Mel is stating the conventional wisdom that applies to any bond fund holder.
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LadyGeek
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Re: "Bond wipeout has just begun"???

Post by LadyGeek »

This thread is now in the Investing - Theory, News & General forum (general investing).
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Doc
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Re: "Bond wipeout has just begun"???

Post by Doc »

TropikThunder wrote:Well who's bright idea was it to buy LT Treasuries when the Fed has been telegraphing four FFR increases between Dec 2016 and Dec 2017?
Mario Draghi in a perverse sort of way.

It's a liquidity thing.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
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Toons
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Re: "Bond wipeout has just begun"???

Post by Toons »

Ignore the noise.
Stick to Asset Allocation
:happy
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hoops777
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Re: "Bond wipeout has just begun"???

Post by hoops777 »

Buy CDs if you are worried about bonds.
K.I.S.S........so easy to say so difficult to do.
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randomizer
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Re: "Bond wipeout has just begun"???

Post by randomizer »

Mel Lindauer wrote:Match your bond holdings to the bond fund's duration and then ride it out.
In practice, how does one actually do this? I understand in a vague way that if a bond has a duration of N years, you should hold it N years?
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Doc
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Re: "Bond wipeout has just begun"???

Post by Doc »

:wink:
randomizer wrote:
Mel Lindauer wrote:Match your bond holdings to the bond fund's duration and then ride it out.
In practice, how does one actually do this? I understand in a vague way that if a bond has a duration of N years, you should hold it N years?
If you hold it for N years you get the ~exact return you thought you would get when you bought it. To get rid of the ~ you would have to buy actual bonds not finds which you could do with Treasuries easily but with corporates not so easily. But in practical terms Mel is on target.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
pascalwager
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Re: "Bond wipeout has just begun"???

Post by pascalwager »

This is just one of the risks of holding bonds and there's really nothing to talk about.

If you follow a set AA ratio, then you rebalance–selling stocks and buying more bonds to restore your AA. Or, if you hold a bond/stock market capitalization-weighted portfolio, then you do nothing at all as the market simply reduces your bond AA. Of course, both cases still result in a smaller portfolio.

There's no opportunity to "ride out" unless you're still in the accumulation stage and don't need to make withdrawals over maybe the next five to eight years.

What I like about a capitalization-weighted portfolio is that you don't need to take any action at all and you just get used to the smaller portfolio total and maybe reduce spending.

Bonds are portfolio ballast and nothing more, tending to minimize large losses.
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GKSD
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Re: "Bond wipeout has just begun"???

Post by GKSD »

Munir wrote:
zuma wrote:
dbr wrote:
Mel Lindauer wrote:
nbseer wrote:So is this "really" the end of the multi-year bond rally? And if bonds/bond funds are in for a long period of declining prices, and stocks are pricey, what do you do? Sit it out in a money market fund making nothing (and actually losing money to inflation)?

https://www.bloomberg.com/news/articles ... r-the-exit
Match your bond holdings to the bond fund's duration and then ride it out.
Mel, with all due respect, can you explain what that means? I don't think what you wrote just there even makes any sense.
I assumed he meant: hold each bond fund for at least as long as the average duration of the fund. But I could be wrong.
Correct. Mel is stating the conventional wisdom that applies to any bond fund holder.
Umm, not sure if this apply to Bond Funds - may be only for individual bonds.
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