Distressing news -> Flight to Safety ?

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Doc
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Distressing news -> Flight to Safety ?

Post by Doc » Fri Sep 15, 2017 4:09 pm

Hurricanes, North Korea, Washington dysfunction, maybe a DOW bubble, so is it time for some protection?

OK selling equities and buying bonds is not staying the course. But what about selling some of that total bond market fund and buying say five year Treasuries. Is anyone willing to accept a loss in income of some 50 bps per year for three to six months maybe to establish a nice keg of dry powder.

Any thoughts?
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Re: Distressing news -> Flight to Safety ?

Post by new2bogle » Fri Sep 15, 2017 4:19 pm

Doc wrote:
Fri Sep 15, 2017 4:09 pm
Hurricanes, North Korea, Washington dysfunction, maybe a DOW bubble, so is it time for some protection?

OK selling equities and buying bonds is not staying the course. But what about selling some of that total bond market fund and buying say five year Treasuries. Is anyone willing to accept a loss in income of some 50 bps per year for three to six months maybe to establish a nice keg of dry powder.

Any thoughts?
I would think that the first three (Hurricanes, N.K., gov't dysfunction) is already built into the market by this time.

Stay the course!

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Chan_va
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Re: Distressing news -> Flight to Safety ?

Post by Chan_va » Fri Sep 15, 2017 4:23 pm

If you truly believe a storm is coming, exchanging out of TBM into treasuries is a bit like adding plywood cladding to your underground bunker, while leaving your glass windows open.

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Re: Distressing news -> Flight to Safety ?

Post by limeyx » Fri Sep 15, 2017 4:31 pm

Chan_va wrote:
Fri Sep 15, 2017 4:23 pm
If you truly believe a storm is coming, exchanging out of TBM into treasuries is a bit like adding plywood cladding to your underground bunker, while leaving your glass windows open.
Maybe we should move the money to the newly-opened Vanugard "Total North Korea" index fund guaranteed low ER but you have to work in the salt mines if the index drops?

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Re: Distressing news -> Flight to Safety ?

Post by hawkfan55 » Fri Sep 15, 2017 4:33 pm

Is anyone willing to accept a loss in income of some 50 bps per year for three to six months maybe to establish a nice keg of dry powder.
I thought about doing this for a few days... then realized that I would be trying to time the market. Your AA is the only thing you have control of so just make sure it is correct, and then, don't do anything. :beer

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Re: Distressing news -> Flight to Safety ?

Post by JBTX » Fri Sep 15, 2017 4:34 pm

Sell everything and buy this.

http://www.proshares.com/funds/sds.html

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Re: Distressing news -> Flight to Safety ?

Post by DaftInvestor » Fri Sep 15, 2017 4:34 pm

We've always had hurricanes, Washington dysfunction, and tension with other global powers.
Stay the course.

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Re: Distressing news -> Flight to Safety ?

Post by Doc » Fri Sep 15, 2017 4:35 pm

Chan_va wrote:
Fri Sep 15, 2017 4:23 pm
If you truly believe a storm is coming, exchanging out of TBM into treasuries is a bit like adding plywood cladding to your underground bunker, while leaving your glass windows open.
I like that comment but I don't agree. In times that stock markets crash, Treasury prices generally rise steeply while corporate bonds tank with TBM of course in between.

(FWIT I personally don't use a TBM fund but have a mix of Treasuries and corporate bond funds to wind up with a an average duaration of ~4.3 compared to the BBgBarc Agg of about 6.1.)
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Re: Distressing news -> Flight to Safety ?

Post by Doc » Fri Sep 15, 2017 4:36 pm

DaftInvestor wrote:
Fri Sep 15, 2017 4:34 pm
We've always had hurricanes, Washington dysfunction, and tension with other global powers.
Stay the course.
Did you buy equities during the Lehman crisis in '08?)
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Re: Distressing news -> Flight to Safety ?

Post by garlandwhizzer » Fri Sep 15, 2017 4:44 pm

After stocks long run I rebalanced today from stocks to bonds. This is not market timing but merely rebalancing. A great deal of good news is currently baked into US market prices and, as Doc points out, there is plenty of potential risk in the world. I do not believe, however, that it is time to make wholesale changes in asset allocation based on fear of an imminent market collapse. Those events are very hard/impossible to predict in a timely manner. I've been investing for 30 years and it seems to me that risk was always present, especially when investors saw none around.

Usually market collapses are associated with recessions, and the warning signals of a recession are not present currently. There appears to be sluggish but increasing real economic growth in all DM, and substantial growth in EM. Global synchronized economic growth for the first time in a decade. The most I'll do under these circumstances is rebalance from risky assets that have been on quite a nice ride into safer assets according to my asset allocation plan.

I am not a fan of selling TBM and moving to Treasuries either. Treasuries are expected to perform better in crisis, but they would be expected to underperform TBM in the absence of crisis. I don't see crisis coming unless it's a black swan and those are totally unpredictable. There's plenty of skepticism among investors about this particular bull market which has been the most mistrusted long term bull of all time. Stocks have kept going up for 10 years now while many economies struggle and many many analysts counsel fear. Doomsayers have been calling for a market collapse for years and suggest moving from stocks into safe assets. Stocks have continued to do nothing but go up more. At minimum that's an opportunity cost. I confess I have market concerns, too, but not enough for wholesale changes in asset allocation. At some point this bull will die, but I don't believe anyone can predict exactly when in advance.

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Re: Distressing news -> Flight to Safety ?

Post by livesoft » Fri Sep 15, 2017 4:53 pm

I'm glad I upped my allocation to equities a few weeks ago and captured the recent gains during the uncertainty. Now I can just rebalance back to my normal range now that there is no uncertainty for awhile. After all, even the debt limit was raised well before the end of September. And does anyone think the FOMC will raise rates next week? I think everybody forgot they were even meeting.
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Re: Distressing news -> Flight to Safety ?

Post by Doc » Fri Sep 15, 2017 4:55 pm

garlandwhizzer wrote:
Fri Sep 15, 2017 4:44 pm
I do not believe, however, that it is time to make wholesale changes in asset allocation based on fear of an imminent market collapse.
I am not suggesting making any change in the overall AA just changing the makeup of the bond portion.
garlandwhizzer wrote:
Fri Sep 15, 2017 4:44 pm
I am not a fan of selling TBM and moving to Treasuries either.
I just did a quick calculation and for a 50/50 AA you would need to move only 20% of your TBM to Treasuries to rebalance a 40% stock market drop.
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Re: Distressing news -> Flight to Safety ?

Post by Alexa9 » Fri Sep 15, 2017 5:03 pm

Market timing? Only time will tell :wink:

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Re: Distressing news -> Flight to Safety ?

Post by BolderBoy » Fri Sep 15, 2017 5:22 pm

Doc wrote:
Fri Sep 15, 2017 4:09 pm
But what about selling some of that total bond market fund and buying say five year Treasuries.
We talk about stocks and bonds when what we mean is stocks and fixed-income, right? In that case wiggling around inside fixed-income would seem okay, as long as you keep your wide, fixed-income diversification.

You'd be violating that tenet, I would think.
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Re: Distressing news -> Flight to Safety ?

Post by Doc » Fri Sep 15, 2017 5:33 pm

BolderBoy wrote:
Fri Sep 15, 2017 5:22 pm
Doc wrote:
Fri Sep 15, 2017 4:09 pm
But what about selling some of that total bond market fund and buying say five year Treasuries.
We talk about stocks and bonds when what we mean is stocks and fixed-income, right? In that case wiggling around inside fixed-income would seem okay, as long as you keep your wide, fixed-income diversification.

You'd be violating that tenet, I would think.
If I understand you correctly you would be changing the FI diversification some but not to a very large extent. In the case I illustrated you would be increasing the Treasury component from maybe from ~40% to ~50% if you started with TBM.
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Re: Distressing news -> Flight to Safety ?

Post by triceratop » Fri Sep 15, 2017 5:48 pm

I already own only US treasuries, through Vanguard Intermediate-Term government ETF. If I had more tax advantaged space I might use the corresponding corporate fund and have to worry about your question. I have agreed with you in the past about the advantages of eschewing unified funds which force you to sell corporate bonds in a crisis.

(By the way, it's been well discussed elsewhere that certain risks are not really priced into the market. If there is a risk of the world ending due to global thermonuclear war there is no incentive for anyone to price that into the market.)

I did buy 1 share of VGIT yesterday though, so I guess that means "yes".
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Re: Distressing news -> Flight to Safety ?

Post by dbr » Fri Sep 15, 2017 5:52 pm

Doc wrote:
Fri Sep 15, 2017 4:09 pm
Hurricanes, North Korea, Washington dysfunction, maybe a DOW bubble, so is it time for some protection?

OK selling equities and buying bonds is not staying the course. But what about selling some of that total bond market fund and buying say five year Treasuries. Is anyone willing to accept a loss in income of some 50 bps per year for three to six months maybe to establish a nice keg of dry powder.

Any thoughts?
Coming from you that sounds like some sort of troll. When are you going to let us in on whatever it is you are trying to sucker us with?

I myself pretty much only use Treasuries for bonds so I guess I got there ahead of you, but this dry powder idea completely escapes me.

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Re: Distressing news -> Flight to Safety ?

Post by KlangFool » Fri Sep 15, 2017 5:58 pm

OP,

I have a mini Larry portfolio: 10% SCV and 10% Intermediate-term treasury. I just add money to whatever low in the allocation. It had been doing well in the current volatile environment. They tend to move opposite of each other.

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Re: Distressing news -> Flight to Safety ?

Post by Fallible » Fri Sep 15, 2017 6:11 pm

Doc wrote:
Fri Sep 15, 2017 4:09 pm
Hurricanes, North Korea, Washington dysfunction, maybe a DOW bubble, so is it time for some protection?

OK selling equities and buying bonds is not staying the course. But what about selling some of that total bond market fund and buying say five year Treasuries. Is anyone willing to accept a loss in income of some 50 bps per year for three to six months maybe to establish a nice keg of dry powder.
Any thoughts?
My thought is that you seem to be making a course correction more in line with the level of risk you're willing to take. This is not market timing as there are legitimate reasons for changing course and correcting for risk tolerance is one. Not correcting could lead to selling in the next crash. What's most important is first setting the course right for you, then staying it. And also writing or updating an IPS.
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Re: Distressing news -> Flight to Safety ?

Post by DaftInvestor » Fri Sep 15, 2017 6:16 pm

Doc wrote:
Fri Sep 15, 2017 4:36 pm
DaftInvestor wrote:
Fri Sep 15, 2017 4:34 pm
We've always had hurricanes, Washington dysfunction, and tension with other global powers.
Stay the course.
Did you buy equities during the Lehman crisis in '08?)
Of course.

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Re: Distressing news -> Flight to Safety ?

Post by DaftInvestor » Fri Sep 15, 2017 6:19 pm

People have been coming here for 3 years talking about now being the time for "dry powder". I wonder how the folks who converted to dry powder 3 years ago now.

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Re: Distressing news -> Flight to Safety ?

Post by FIREchief » Fri Sep 15, 2017 6:27 pm

DaftInvestor wrote:
Fri Sep 15, 2017 6:16 pm
Doc wrote:
Fri Sep 15, 2017 4:36 pm
DaftInvestor wrote:
Fri Sep 15, 2017 4:34 pm
We've always had hurricanes, Washington dysfunction, and tension with other global powers.
Stay the course.
Did you buy equities during the Lehman crisis in '08?)
Of course.
+1 to both Daft posts. I continued with 100% equities throughout 2008 (and every other accumulation year), including all new investments (i.e. bi-weekly 401k contributions and Jan 1 IRA contributions). How'd that work out?? :beer
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Re: Distressing news -> Flight to Safety ?

Post by dbr » Fri Sep 15, 2017 6:35 pm

Let's get back on topic and see if we can find any reason a person should exchange TBM for Treasuries at the present time because there is distressing news. This is not about stocks.

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Exchange TBM into Treasuries?

Post by livesoft » Fri Sep 15, 2017 6:38 pm

dbr wrote:
Fri Sep 15, 2017 6:35 pm
Let's get back on topic and see if we can find any reason a person should exchange TBM for Treasuries at the present time because there is distressing news. This is not about stocks.
Then the thread should be changed.
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Re: Distressing news -> Flight to Safety ?

Post by G12 » Fri Sep 15, 2017 6:39 pm

I added some small cap foreign value today as I am swimming in cash. Maybe I'm am idiot.....but it is a toe hold to be added to later.

ETA: I was much more distressed Monday with Irma bearing down on our home in ATL.

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Re: Exchange TBM into Treasuries?

Post by dbr » Fri Sep 15, 2017 6:41 pm

livesoft wrote:
Fri Sep 15, 2017 6:38 pm
dbr wrote:
Fri Sep 15, 2017 6:35 pm
Let's get back on topic and see if we can find any reason a person should exchange TBM for Treasuries at the present time because there is distressing news. This is not about stocks.
Then the thread should be changed.
Yes, the title does not describe the OP.

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Re: Distressing news -> Flight to Safety ?

Post by DaftInvestor » Fri Sep 15, 2017 6:46 pm

dbr wrote:
Fri Sep 15, 2017 6:35 pm
Let's get back on topic and see if we can find any reason a person should exchange TBM for Treasuries at the present time because there is distressing news. This is not about stocks.
It was fhe OP that asked me about equities.

If you believe Washington dysfunctional why would you want US Treasuries? Shouldn't the answer be to invest outside the US (whether stocks or bonds) if you really believe that.
Personally- I don't see how the recent news is more "distressing" than other news we get periodically.

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Re: Distressing news -> Flight to Safety ?

Post by dbr » Fri Sep 15, 2017 6:54 pm

DaftInvestor wrote:
Fri Sep 15, 2017 6:46 pm
dbr wrote:
Fri Sep 15, 2017 6:35 pm
Let's get back on topic and see if we can find any reason a person should exchange TBM for Treasuries at the present time because there is distressing news. This is not about stocks.
It was fhe OP that asked me about equities.

If you believe Washington dysfunctional why would you want US Treasuries? Shouldn't the answer be to invest outside the US (whether stocks or bonds) if you really believe that.
Personally- I don't see how the recent news is more "distressing" than other news we get periodically.
As far as the bond question, the same thing occurred to me. If the question were should a person put everything in gold or in Swiss bank accounts I could see the point.

As to stocks, I took his reference to staying the course as an intent to have the topic not be about stocks. The usual flight to safety is from stocks to Treasuries, but the direct question was TBM to Treasuries. My answer to that question is that I have always held Treasuries including a good dose of TIPS, and not TBM, so I don't really know what to say. I continue to wonder if the only bond investment that really is recommended for the personal investor is TIPS. Larry Swedroe has been known to say the same thing if I am not mistaken (though his opinion may have been conditioned by yields).

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Re: Distressing news -> Flight to Safety ?

Post by JBTX » Fri Sep 15, 2017 7:28 pm

DaftInvestor wrote:
Fri Sep 15, 2017 6:46 pm
dbr wrote:
Fri Sep 15, 2017 6:35 pm
Let's get back on topic and see if we can find any reason a person should exchange TBM for Treasuries at the present time because there is distressing news. This is not about stocks.
It was fhe OP that asked me about equities.

If you believe Washington dysfunctional why would you want US Treasuries? Shouldn't the answer be to invest outside the US (whether stocks or bonds) if you really believe that.
Personally- I don't see how the recent news is more "distressing" than other news we get periodically.
It's kind of a paradox. Last time around there was talk of debt ceiling default and not being able to pay obligations people got spooked and fled to safety, which paradoxically is US treasuries.

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Re: Distressing news -> Flight to Safety ?

Post by Nate79 » Fri Sep 15, 2017 8:04 pm

SELL SELL SELL. Buy bitcoin.

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Re: Distressing news -> Flight to Safety ?

Post by BolderBoy » Fri Sep 15, 2017 8:43 pm

Doc wrote:
Fri Sep 15, 2017 5:33 pm
BolderBoy wrote:
Fri Sep 15, 2017 5:22 pm
Doc wrote:
Fri Sep 15, 2017 4:09 pm
But what about selling some of that total bond market fund and buying say five year Treasuries.
We talk about stocks and bonds when what we mean is stocks and fixed-income, right? In that case wiggling around inside fixed-income would seem okay, as long as you keep your wide, fixed-income diversification.

You'd be violating that tenet, I would think.
If I understand you correctly you would be changing the FI diversification some but not to a very large extent. In the case I illustrated you would be increasing the Treasury component from maybe from ~40% to ~50% if you started with TBM.
Then I don't see the problem. Your overall fixed-income part of your AA will not have changed all that much, really.
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Re: Distressing news -> Flight to Safety ?

Post by Slothmeister » Fri Sep 15, 2017 8:50 pm

Regarding treasury bonds, does anyone own Fidelity Long-Term Treasury Bond Index Fund - Premium Class? Would this be a decent bond fund during an equity drop?

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Re: Distressing news -> Flight to Safety ?

Post by renue74 » Fri Sep 15, 2017 8:53 pm

I thought hurricanes were actually good for growth. From the recent news reports I've heard, the rebuilding period, commercial, residential and infrastructure actually increases productivity/GDP...whatever.

Years of rebuilding. Land owners selling properties, new housing starts.

Now the other stuff you mention...N. Korea. Well South Korea has been dealing with these threats since 1945. Kim Jong-Un leads a life of deceit that he must keep up. The kid went to school in Switzerland. He and his family have kept N. Korea in a veil of secrecy from the outside world...convincing everybody internally that N. Korea is a super power. He must keep that veil. The very last thing he wants is to ruin the secret his people believe.

Washington....I'm not going to discuss this.

Moving $ around because of the geo-political-weather related news items seems to go against the grain of staying the course.

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Re: Distressing news -> Flight to Safety ?

Post by Lieutenant.Columbo » Fri Sep 15, 2017 10:06 pm

Doc wrote:
Fri Sep 15, 2017 4:35 pm
In times that stock markets crash, Treasury prices generally rise steeply
tremendous amount of recency bias? :wink:
AlohaJoe wrote:
Thu Sep 14, 2017 11:28 am
Since 1929 there have been 14 recessions in the US. In 7 of them Treasuries had a positive correlation with stocks. In 7 of them Treasuries had a negative correlation with stocks.

It just happens that the last 3 recession (2008, 2000, 1990) all had (fairly large) negative correlations. Those 3 make up nearly 50% of the recessions with a negative correlation. But the recession of 1981-82 had a correlation of 0.18. And even more concerning, both parts of the Great Depression (the 1929 recession and the 1937 recession) saw positive correlations. In 1937 the correlation was as high as 0.32, which is not what you want to see.

And there's all the panics before 1929, where correlations were generally positive. Though that was a long time ago and the financial system has changed substantially since then, so their applicability is dubious. In the 1890 recession correlations were 0.70! So much for flight to safety!

Nevertheless, when only 50% of modern recessions have featured negative correlations, I think people are often overstating the case. Unless the argument is that in the mid-1980s we underwent a regime shift and negative correlations in recessions are no longer likely. I think it is just that most people don't remember that far back :happy
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Re: Distressing news -> Flight to Safety ?

Post by El Greco » Fri Sep 15, 2017 10:36 pm

by DaftInvestor » Fri Sep 15, 2017 6:16 pm

Doc wrote: ↑Fri Sep 15, 2017 4:36 pm
DaftInvestor wrote: ↑Fri Sep 15, 2017 4:34 pm
We've always had hurricanes, Washington dysfunction, and tension with other global powers.
Stay the course.
Did you buy equities during the Lehman crisis in '08?)
Of course.
^^^Ditto

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Re: Distressing news -> Flight to Safety ?

Post by welderwannabe » Sat Sep 16, 2017 7:12 am

Slothmeister wrote:
Fri Sep 15, 2017 8:50 pm
Regarding treasury bonds, does anyone own Fidelity Long-Term Treasury Bond Index Fund - Premium Class? Would this be a decent bond fund during an equity drop?
Depends on the reason for the drop. No one knows the answer to your question.

What I am sure of, is that there are far worse places to have your bond allocation in than LT Treasuries when the market drops.

The Fidelity indexed Treasury funds are fine. I hold their Intermediate-Term fund myself. Expenses are reasonable.
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Re: Distressing news -> Flight to Safety ?

Post by TheTimeLord » Sat Sep 16, 2017 8:23 am

Doc wrote:
Fri Sep 15, 2017 4:09 pm
Hurricanes, North Korea, Washington dysfunction, maybe a DOW bubble, so is it time for some protection?

OK selling equities and buying bonds is not staying the course. But what about selling some of that total bond market fund and buying say five year Treasuries. Is anyone willing to accept a loss in income of some 50 bps per year for three to six months maybe to establish a nice keg of dry powder.

Any thoughts?
The worse time to invest is when everything looks rosy like say I don't know maybe late 1999, early 2000 because things are getting priced to perfection so there are no positive surprises only negative ones. For dry powder to work you have to light it in the darkest days but that is when most people cling to it the tightest fearing the night will get even darker. People always find something to worry about, only in retrospect can you tell if it was actually good time to invest or the beginning of something worse. But to answer your question directly, giving up 50 bps for 3-6 months on a small portion of your portfolio should be a meaningless blip so if you feel it is prudent I can't see how it would cause any long term harm as long as you stick to just 3-6 months.


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Re: Distressing news -> Flight to Safety ?

Post by TheTimeLord » Sat Sep 16, 2017 8:32 am

new2bogle wrote:
Fri Sep 15, 2017 4:19 pm
Doc wrote:
Fri Sep 15, 2017 4:09 pm
Hurricanes, North Korea, Washington dysfunction, maybe a DOW bubble, so is it time for some protection?

OK selling equities and buying bonds is not staying the course. But what about selling some of that total bond market fund and buying say five year Treasuries. Is anyone willing to accept a loss in income of some 50 bps per year for three to six months maybe to establish a nice keg of dry powder.

Any thoughts?
I would think that the first three (Hurricanes, N.K., gov't dysfunction) is already built into the market by this time.

Stay the course!
There is no way to build North Korea into the market period. The market reflects the percentage of investors who believe this is saber rattling versus those who believe there is a real possibly of either war on the Korean peninsula or that there will be an an offensive detonation of a nuclear weapon. If either of these were to actually occur I guarantee you would have a meaningful repricing of the market.

As for hurricanes and government dysfunction, as long as they stay within certain limits those are not necessarily negative events from the market's perspective.
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Re: Distressing news -> Flight to Safety ?

Post by Doc » Sat Sep 16, 2017 9:30 am

TheTimeLord wrote:
Sat Sep 16, 2017 8:32 am
As for hurricanes and government dysfunction, as long as they stay within certain limits those are not necessarily negative events from the market's perspective.
I've been looking at a price chart of iShares 3-7 Year Treasury Bond ETF (IEI) as a quick indicator of what the price of a seven year treasury note might be because I wanted to buy a seven at slightly under par to avoid ABP hassles. In doing so I had a ready indicator of what the Treasury bond market was doing in the last few weeks as the hurricanes came and went. The price went mostly up and occasionally down with the latest news. "Flight to quality" was mentioned in some business news items. The most striking and unexpected thing I saw was not the drop in price when Irma didn't destroy Miami but with the increased trading volume to 4.47M on September 11. The average trading volume for this ETF is only 473K. There was a tenfold increase in trading. The hurricanes may have been within certain limits but the bond market certainly reacted.

(The equity markets might not show this type of movement because some sectors were negatively impacted (insurers) and others may be positively impacted (home builders) by such events.)
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Re: Distressing news -> Flight to Safety ?

Post by TheTimeLord » Sat Sep 16, 2017 10:14 am

Doc wrote:
Sat Sep 16, 2017 9:30 am
TheTimeLord wrote:
Sat Sep 16, 2017 8:32 am
As for hurricanes and government dysfunction, as long as they stay within certain limits those are not necessarily negative events from the market's perspective.
I've been looking at a price chart of iShares 3-7 Year Treasury Bond ETF (IEI) as a quick indicator of what the price of a seven year treasury note might be because I wanted to buy a seven at slightly under par to avoid ABP hassles. In doing so I had a ready indicator of what the Treasury bond market was doing in the last few weeks as the hurricanes came and went. The price went mostly up and occasionally down with the latest news. "Flight to quality" was mentioned in some business news items. The most striking and unexpected thing I saw was not the drop in price when Irma didn't destroy Miami but with the increased trading volume to 4.47M on September 11. The average trading volume for this ETF is only 473K. There was a tenfold increase in trading. The hurricanes may have been within certain limits but the bond market certainly reacted.

(The equity markets might not show this type of movement because some sectors were negatively impacted (insurers) and others may be positively impacted (home builders) by such events.)
In the short term they will certainly react to the unknown, my point is soon (even now) you will hear people talk about the stimulative effect of the government and insurance money being spent on rebuilding and replacing items. How many people do you think will be getting insurance checks and going out and buying new car and appliances? Obviously there will be tons of road construction, dam repairs and drainage projects. You we speaking as though the effect would be an unknown for 3-6 months, I would see it is more like a 1 month period at most, starting a week before landfall. But I am looking at this different than you, for me bonds are ballast, a safety net not something I plan to really profit from meaningfully over time, I buy them so I can sleep not to make quick money. Having said that some of the smartest people in the world spend far more time looking for bargains in the credit market than the stock market. I am just not that guy.
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dbr
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Re: Distressing news -> Flight to Safety ?

Post by dbr » Sat Sep 16, 2017 10:35 am

Slothmeister wrote:
Fri Sep 15, 2017 8:50 pm
Regarding treasury bonds, does anyone own Fidelity Long-Term Treasury Bond Index Fund - Premium Class? Would this be a decent bond fund during an equity drop?
It is a credible contention that the best bond holding to mix with a high stock allocation is long term bonds. The argument is based in part on negative correlation, in part on higher return such as it is, and on the observation that the risk in long term doesn't amount to large effect in a portfolio dominated by stock risk. Also, (anti)correlation benefits only exist is the assets in question have significant return and significant risk. Protecting against a large drop in equities by zigging when equities zag does not work because even long bonds would not move in price enough to offset stock volatility. Only an option strategy or short selling can offset stock risk.

The opinion on long term bonds in a portfolio more equally balanced is that the return is not worth the risk, but the point can be further analyzed.

MnD
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Re: Distressing news -> Flight to Safety ?

Post by MnD » Sat Sep 16, 2017 10:55 am

And you will then move back into TBM when Washington is functioned like a well-oiled bipartisan machine, international bad guys all throw in the towel and are replaced with enlightened and benevolent democratic leadership and the weather and climate is just perfect coast to coast and will stay that way for as long as any forecaster/scientist can predict.
Good luck with that! :mrgreen:

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Doc
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Re: Distressing news -> Flight to Safety ?

Post by Doc » Sat Sep 16, 2017 11:05 am

TheTimeLord wrote:
Sat Sep 16, 2017 10:14 am
You we speaking as though the effect would be an unknown for 3-6 months, I would see it is more like a 1 month period at most, starting a week before landfall.
My time frame estimate was based on Washington dysfunction but I didn't want to get into forbidden territory so I used the broader "distressing news". I think the market has priced in certain assumptions of what will occur in congress 4th quarter this year. If those assumptions don't come to fruition I think there is a high probability that there will be a stock market correction. If I was to sell stocks now that would certainly be market timing and I might get banned from the forum. Moving 10% or so of our fixed income portfolio to Treasuries from TBM (or corporate mutual funds in our case) seems to me to be a reasonable risk reduction plan since the cost is very low and knowable to a large extent. And I would not be changing our overall AA at all. I was just trying to get other's ideas on the subject. I'm going to do it I just haven't decided on the amount or exactly when I am going to pull the trigger.
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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Doc
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Re: Distressing news -> Flight to Safety ?

Post by Doc » Sat Sep 16, 2017 11:08 am

MnD wrote:
Sat Sep 16, 2017 10:55 am
And you will then move back into TBM when Washington is functioned like a well-oiled bipartisan machine, international bad guys all throw in the towel and are replaced with enlightened and benevolent democratic leadership and the weather and climate is just perfect coast to coast and will stay that way for as long as any forecaster/scientist can predict.
Good luck with that! :mrgreen:
I know exactly when I will move back at least as far as a certain event happens or doesn't happen but I can't say what event or the thread will get locked.
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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Re: Distressing news -> Flight to Safety ?

Post by littlebird » Sat Sep 16, 2017 11:17 am

I have lately been aggressively harvesting equity gains, keeping my equities to the dollar amount (not the percentage) that I feel comfortable with and transferring the gains to my short- and intermediate-term bond funds. This is partly due to my view of the current situation - short term pessimism for the first time in my investing life - and partly due to my situation - spouse in self-pay terminal care.

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Re: Distressing news -> Flight to Safety ?

Post by garlandwhizzer » Sat Sep 16, 2017 11:20 am

Doc, if all we're talking about is moving a portion of TBM into Treasuries and that action makes you feel more secure about future market disruptions, it seems rational to do it. Treasuries offer the ultimate safety in a market collapse. Currently their yields aren't far from TBM's, so switching isn't going to cost you much if the market doesn't collapse.

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TheTimeLord
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Re: Distressing news -> Flight to Safety ?

Post by TheTimeLord » Sat Sep 16, 2017 11:20 am

Doc wrote:
Sat Sep 16, 2017 11:05 am
TheTimeLord wrote:
Sat Sep 16, 2017 10:14 am
You we speaking as though the effect would be an unknown for 3-6 months, I would see it is more like a 1 month period at most, starting a week before landfall.
My time frame estimate was based on Washington dysfunction but I didn't want to get into forbidden territory so I used the broader "distressing news". I think the market has priced in certain assumptions of what will occur in congress 4th quarter this year. If those assumptions don't come to fruition I think there is a high probability that there will be a stock market correction. If I was to sell stocks now that would certainly be market timing and I might get banned from the forum. Moving 10% or so of our fixed income portfolio to Treasuries from TBM (or corporate mutual funds in our case) seems to me to be a reasonable risk reduction plan since the cost is very low and knowable to a large extent. And I would not be changing our overall AA at all. I was just trying to get other's ideas on the subject. I'm going to do it I just haven't decided on the amount or exactly when I am going to pull the trigger.
And if I am reading between the lines correctly, I don't think that expectation is in or supporting the market in a meaningful way so I see the risk to the upside for equities. Having said all this I always hate bonds at 2.20 and below on the 10 year in this environment, and while not as afraid as I once was of a bond disaster, I don't really not a fan of Bond Funds with an essentially fixed duration at this juncture so I personally prefer CDs or Individual Bonds that I would be willing to let mature.
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reriodan
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Re: Distressing news -> Flight to Safety ?

Post by reriodan » Sat Sep 16, 2017 11:21 am

Stay the course sailor. :sharebeer

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Re: Distressing news -> Flight to Safety ?

Post by david99 » Sat Sep 16, 2017 11:29 am

garlandwhizzer wrote:
Sat Sep 16, 2017 11:20 am
Doc, if all we're talking about is moving a portion of TBM into Treasuries and that action makes you feel more secure about future market disruptions, it seems rational to do it. Treasuries offer the ultimate safety in a market collapse. Currently their yields aren't far from TBM's, so switching isn't going to cost you much if the market doesn't collapse.

Garland Whizzer
Seeing as this is the second longest bull market in history and you are only talking about moving part of your TBM to treasuries, I think that it's a good idea if it makes you sleep better at night. I plan to do the same with part of my bond portfolio. It's good to have some dry powder for the next recession.

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Doc
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Re: Distressing news -> Flight to Safety ?

Post by Doc » Sat Sep 16, 2017 11:32 am

TheTimeLord wrote:
Sat Sep 16, 2017 11:20 am
Having said all this I always hate bonds at 2.20 and below on the 10 year in this environment, and while not as afraid as I once was of a bond disaster, I don't really not a fan of Bond Funds with an essentially fixed duration at this juncture so I personally prefer CDs or Individual Bonds that I would be willing to let mature.
Yeh, something like that but I don't usually let my individual Treasury notes mature but I certainly would let them mature if the price was not near where I would expect it to be at the time I usually roll them.
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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