A Roadmap For The Upcoming US Treasury Bull Market

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robertmcd
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A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Tue Oct 09, 2018 10:05 am

https://www.advisorperspectives.com/art ... l-market-1

Article on where we currently stand in regards to the Fed funds rate, 2 year and 30 yr treasury rates. Should not matter to the die hard buy and holders, but for any of us who use tactical/variable asset allocation you may find it useful. I have been in equities and zero duration assets since summer of 2016, rotating between high yield savings, no penalty CD's, and prime money market based on yield, and looking at my returns since then it has been a good strategy vs. any maturity US treasuries. Yesterday I bought my first bonds, thru EDV (vanguard extended duration treasury ETF). I am a US treasuries only believer (FDIC and VG prime money market are also good enough for me).

As a young investor (24 yrs), I am willing to take the massive inflation risk in these bonds. The best thing that could happen at my age would be inflation taking off and decimating asset prices, whereas more central bank sovereign bond buying and asset price inflation would be the worst thing for me.

Ron Scott
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by Ron Scott » Tue Oct 09, 2018 10:24 am

My game playing years ago was mostly relegated to equities, attempting to sell high and buy low. A couple times I did sell fairly close to the highs. Unfortunately, I waited too long and did not get in low enough to make it all work out.

This reminds me of Taleb's Fat Tony, who bet $300k that oil prices would drop right after America bombed Iraq in the first invasion. He was right and netted a cool $18m. Of course he was betting against the zeitgeist which held oil prices increase with a middle-east war. He saw the first Bush invasion as a "scheduled war" ("this time is different") and won big.

Good luck!
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

robertmcd
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Tue Oct 09, 2018 10:45 am

I am not advocating an all in or all out approach on any asset classes. I do not think anyone can succeed with that plan. Buy and hold works, and a single bad timing decision resulting in you missing the runup can derail ones retirement. You have to be willing to let one of your asset classes drop by 50% if you want to have long term success. The challenge is to be at the correct level of diversification at any given time so the gains from other assets classes help offset losses after you have already taken some winnings off the table.

For example I will never let my equity % get below 30% no matter what valuations do.

HEDGEFUNDIE
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by HEDGEFUNDIE » Tue Oct 09, 2018 10:47 am

I applaud you! Almost everyone could use a dash of EDV in their portfolio. It’s not gambling, but rather the mean-variance optimal thing to do.

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Sandtrap
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by Sandtrap » Tue Oct 09, 2018 10:51 am

Given the author of the article:
Eric Hickman is president of Kessler Investment Advisors, an advisory firm located in Denver, Colorado specializing in U.S. Treasury bonds.
are the conclusions a given?

hdas
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by hdas » Tue Oct 09, 2018 10:52 am

I was waiting for 3.5% yield in 30yr, or TLT ~ 110. EDV is good too. Maybe the train has sailed, hopefully I can start loading up soon. H

2015
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by 2015 » Tue Oct 09, 2018 11:22 am

Sooner or later, this is a great way to lose money. I flush anything coming out of advisorperpsectives down the same place I put all the rest of "financial" marketing disguised as information.

Investors seeking to fluff their ego by trying to come up with the most clever investing strategy never see the behavior bear trap they are about to step into. A 3 fund portfolio or target date fund will go a long way to keeping you out of this bear trap. In investing, behavior crushes strategy.

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Watty
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by Watty » Tue Oct 09, 2018 12:15 pm

I think that it was in one of Bernsteins books where he made a good point about taking your risks on the stock side of the portfolio and not the bond side. I don't remember the details but it stuck with me.

A quick google search found this.

https://www.morningstar.com/videos/3977 ... bonds.html

HEDGEFUNDIE
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by HEDGEFUNDIE » Tue Oct 09, 2018 12:53 pm

2015 wrote:
Tue Oct 09, 2018 11:22 am
Sooner or later, this is a great way to lose money. I flush anything coming out of advisorperpsectives down the same place I put all the rest of "financial" marketing disguised as information.

Investors seeking to fluff their ego by trying to come up with the most clever investing strategy never see the behavior bear trap they are about to step into. A 3 fund portfolio or target date fund will go a long way to keeping you out of this bear trap. In investing, behavior crushes strategy.
This is a fair criticism.

OP: if and when EDV crashes 20-30%, as has happened in the past, do not forget to STAY THE COURSE. You will be rewarded for it in the long run. This should be easier with EDV as it tracks Treasuries, just remind yourself that you own [a volatile flavor of] the safest asset there is - it will never go to zero.

garlandwhizzer
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by garlandwhizzer » Tue Oct 09, 2018 1:38 pm

I personally fail to see the attraction of long duration especially in the current fixed income environment. Long duration increases risk (rising rates, inflation) and you get paid almost nothing now to take on that risk. As for the upcoming US Treasury bull market, no one can accurately predict whether the future will be a bull, bear, or neutral market as regards long duration Treasuries. Humility seems to me the appropriate attitude when projecting what is going to happen in the markets future. Risk and volatility reduction seem to me the primary goals of bonds in a portfolio and long duration currently increases both risk and volatility of return.

Garland Whizzer

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bottlecap
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by bottlecap » Tue Oct 09, 2018 1:41 pm

Ah, to be so young and so certain again....

I miss those days!

JT

columbia
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by columbia » Tue Oct 09, 2018 1:46 pm

Wouldn’t it make more sense to just hide out in a short term treasury fund and then pounce when the market crashes.

This assumes that the crash prediction is correct, of course.

robertmcd
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Tue Oct 09, 2018 2:12 pm

Well this article is saying to get long 30 yr bonds at first because they will roll over before the Fed stops raising rates (which affects the 2 yr yield more). Then move to leveraged 2 yr treasury futures because they will have a greater drop in yield than the longer term issues, but you need to up their equivalent duration with leverage to get the large gain in NAV. Now acting like one can do this perfectly and easily is ridiculous, but I do believe we will see the exact same scenario pan out as the past 2 recessions. To me there is simply no other option than central banks becoming the lender of last resort when this global debt bubble deflates.

Biggest risk I see with this strategy is the Fed bailing on raising rates earlier than expected, thus continuing the party and causing the long end yields to increase due to inflation concerns and the policy mistake trade disappearing. But the increasing short term rates also cause long term yields to increase due to people requiring a term premium, so that could help repress long term yields. But in this situation you hope your stocks gains offset you bond losses.

robertmcd
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Tue Oct 09, 2018 2:14 pm

columbia wrote:
Tue Oct 09, 2018 1:46 pm
Wouldn’t it make more sense to just hide out in a short term treasury fund and then pounce when the market crashes.

This assumes that the crash prediction is correct, of course.
Haha well ideally you gain 50% in long term treasuries or leveraged 2 yr treasuries, and then buy stocks that have fallen 50%.

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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by willthrill81 » Tue Oct 09, 2018 2:19 pm

Watty wrote:
Tue Oct 09, 2018 12:15 pm
I think that it was in one of Bernsteins books where he made a good point about taking your risks on the stock side of the portfolio and not the bond side. I don't remember the details but it stuck with me.
I think you're confusing him with Larry Swedroe, who is renowned for saying "Take your risk on the equity side."
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

robertmcd
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Tue Oct 09, 2018 2:28 pm

garlandwhizzer wrote:
Tue Oct 09, 2018 1:38 pm
I personally fail to see the attraction of long duration especially in the current fixed income environment. Long duration increases risk (rising rates, inflation) and you get paid almost nothing now to take on that risk. As for the upcoming US Treasury bull market, no one can accurately predict whether the future will be a bull, bear, or neutral market as regards long duration Treasuries. Humility seems to me the appropriate attitude when projecting what is going to happen in the markets future. Risk and volatility reduction seem to me the primary goals of bonds in a portfolio and long duration currently increases both risk and volatility of return.

Garland Whizzer
I agree with these points, but think age and future earnings needs to be viewed along with the portfolio. I would love for 30 yr bonds to go to 6% and crush asset prices so I can buy on the cheap with future earnings. My age group simply didn't have enough money saved up during this bull market, so the worst thing that can happen to me is more low rates, something I want to hedge against.

I fully expect to see negative US treasury interest rates out to a few years or so in the next recession, followed by an even larger Fed balance sheet to GDP, and nothing scares me more than this because it has already happened in Japan. Except it is worse, the Japanese central bank printing money to buy their own stock market.

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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by KlangFool » Tue Oct 09, 2018 2:31 pm

OP,

Before you go further, ask yourself a simple question:

A) How does this compare against a boring 60/40 balanced fund?

B) Even if you are right, how much more money could you make?

C) Is the return high enough to justify the risk?

The whole problem with this approach is you are taking a higher risk with minimal extra return. It is a lose-lose proposition.

Take your risk on the stock side. The long bond is a lousy bet.

KlangFool

bhsince87
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by bhsince87 » Tue Oct 09, 2018 2:45 pm

robertmcd wrote:
Tue Oct 09, 2018 2:28 pm
garlandwhizzer wrote:
Tue Oct 09, 2018 1:38 pm
I personally fail to see the attraction of long duration especially in the current fixed income environment. Long duration increases risk (rising rates, inflation) and you get paid almost nothing now to take on that risk. As for the upcoming US Treasury bull market, no one can accurately predict whether the future will be a bull, bear, or neutral market as regards long duration Treasuries. Humility seems to me the appropriate attitude when projecting what is going to happen in the markets future. Risk and volatility reduction seem to me the primary goals of bonds in a portfolio and long duration currently increases both risk and volatility of return.

Garland Whizzer
I agree with these points, but think age and future earnings needs to be viewed along with the portfolio. I would love for 30 yr bonds to go to 6% and crush asset prices so I can buy on the cheap with future earnings. My age group simply didn't have enough money saved up during this bull market, so the worst thing that can happen to me is more low rates, something I want to hedge against.

I fully expect to see negative US treasury interest rates out to a few years or so in the next recession, followed by an even larger Fed balance sheet to GDP, and nothing scares me more than this because it has already happened in Japan. Except it is worse, the Japanese central bank printing money to buy their own stock market.
Now you're confusing me. You're buying long terms at about 3.2%, and yet you're hoping yields will go to 6%?
Retirement: When you reach a point where you have enough. Or when you've had enough.

columbia
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by columbia » Tue Oct 09, 2018 3:25 pm

Short term treasuries have lost money only twice in the last 40 years:

1994: -0.48%
2013: -0.10%

That’s a pretty powerful point of diversification against the US stock market.

robertmcd
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Tue Oct 09, 2018 3:30 pm

bhsince87 wrote:
Tue Oct 09, 2018 2:45 pm
robertmcd wrote:
Tue Oct 09, 2018 2:28 pm
garlandwhizzer wrote:
Tue Oct 09, 2018 1:38 pm
I personally fail to see the attraction of long duration especially in the current fixed income environment. Long duration increases risk (rising rates, inflation) and you get paid almost nothing now to take on that risk. As for the upcoming US Treasury bull market, no one can accurately predict whether the future will be a bull, bear, or neutral market as regards long duration Treasuries. Humility seems to me the appropriate attitude when projecting what is going to happen in the markets future. Risk and volatility reduction seem to me the primary goals of bonds in a portfolio and long duration currently increases both risk and volatility of return.

Garland Whizzer
I agree with these points, but think age and future earnings needs to be viewed along with the portfolio. I would love for 30 yr bonds to go to 6% and crush asset prices so I can buy on the cheap with future earnings. My age group simply didn't have enough money saved up during this bull market, so the worst thing that can happen to me is more low rates, something I want to hedge against.

I fully expect to see negative US treasury interest rates out to a few years or so in the next recession, followed by an even larger Fed balance sheet to GDP, and nothing scares me more than this because it has already happened in Japan. Except it is worse, the Japanese central bank printing money to buy their own stock market.
Now you're confusing me. You're buying long terms at about 3.2%, and yet you're hoping yields will go to 6%?
Similar to other young posters on here starting out with a 100% stock allocation. A 50% drop could actually be the best thing for their retirement vs a bull market they are having to contribute into. They could have already missed the run up before having enough actual dollars invested, and by the time they get a couple hundred thousand into the market, it tanks 50%. Like sequence of returns risk for a retiree living solely off of investments, but opposite.

KlangFool
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by KlangFool » Tue Oct 09, 2018 3:51 pm

robertmcd wrote:
Tue Oct 09, 2018 3:30 pm
bhsince87 wrote:
Tue Oct 09, 2018 2:45 pm
robertmcd wrote:
Tue Oct 09, 2018 2:28 pm
garlandwhizzer wrote:
Tue Oct 09, 2018 1:38 pm
I personally fail to see the attraction of long duration especially in the current fixed income environment. Long duration increases risk (rising rates, inflation) and you get paid almost nothing now to take on that risk. As for the upcoming US Treasury bull market, no one can accurately predict whether the future will be a bull, bear, or neutral market as regards long duration Treasuries. Humility seems to me the appropriate attitude when projecting what is going to happen in the markets future. Risk and volatility reduction seem to me the primary goals of bonds in a portfolio and long duration currently increases both risk and volatility of return.

Garland Whizzer
I agree with these points, but think age and future earnings needs to be viewed along with the portfolio. I would love for 30 yr bonds to go to 6% and crush asset prices so I can buy on the cheap with future earnings. My age group simply didn't have enough money saved up during this bull market, so the worst thing that can happen to me is more low rates, something I want to hedge against.

I fully expect to see negative US treasury interest rates out to a few years or so in the next recession, followed by an even larger Fed balance sheet to GDP, and nothing scares me more than this because it has already happened in Japan. Except it is worse, the Japanese central bank printing money to buy their own stock market.
Now you're confusing me. You're buying long terms at about 3.2%, and yet you're hoping yields will go to 6%?
Similar to other young posters on here starting out with a 100% stock allocation. A 50% drop could actually be the best thing for their retirement vs a bull market they are having to contribute into. They could have already missed the run up before having enough actual dollars invested, and by the time they get a couple hundred thousand into the market, it tanks 50%. Like sequence of returns risk for a retiree living solely off of investments, but opposite.
robertmcd,

1) While you are waiting for the long-term treasury to go to 6%, what are you investing your cash into?

2) And, why do you thinking your market timing move into the long-term treasury will be much better than buy and hold of a 60/40 portfolio?

3) How much better are you hoping for? Give us a number. And, how does this number compare to the long-term return of 60/40?

KlangFool

vanrico
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by vanrico » Tue Oct 09, 2018 3:58 pm

If I'm reading this article right, there's a big assumption in it:
The next recession will be a cousin of the 1937/38 recession, the first recession following the Great Depression that shocked everyone with its ferocity.

robertmcd
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Tue Oct 09, 2018 4:34 pm

I'm not waiting for the 30 yr treasury to go to 6%. Most of my cash has been going into prime money market. I was about to start buying 2 yr treasuries, but the 30 yr looked oversold to me.

To me it isn't market timing. I didn't just sell all my stock and go all in long term treasuries. I started to purchase long term treasuries because the yields finally looked attractive to me. I look at both possible dollar loss and percentage loss and my dollar amount in equities got too high for my liking in Dec 2017 and my equity % was not dropping even with all my savings going to cash, and I have been slowly raising cash/no-penalty CD's/money market. Not to mention I am saving to buy mineral interests, surface rights, etc.

I have yet to do any planning/forecasting since it is so far out and I am currently saving greater than 1 yr of expenses per year. I mainly look at possible dollar loss in terms of yearly savings. And I would make sure I was comfortable with both stocks and long term treasuries dropping 50% in the event their correlation goes to 1.

Every single person is a market timer in my opinion. If you went 100% nasdaq the day the tech bubble peaked after receiving your inheritance of $10 million dollars because that is what your IPS said to do and you didn't want to market time because changing your IPS is market timing, congratulations you are not a market timer, but you got slaughtered.

robertmcd
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Tue Oct 09, 2018 4:39 pm

KlangFool wrote:
Tue Oct 09, 2018 3:51 pm
robertmcd wrote:
Tue Oct 09, 2018 3:30 pm
bhsince87 wrote:
Tue Oct 09, 2018 2:45 pm
robertmcd wrote:
Tue Oct 09, 2018 2:28 pm
garlandwhizzer wrote:
Tue Oct 09, 2018 1:38 pm
I personally fail to see the attraction of long duration especially in the current fixed income environment. Long duration increases risk (rising rates, inflation) and you get paid almost nothing now to take on that risk. As for the upcoming US Treasury bull market, no one can accurately predict whether the future will be a bull, bear, or neutral market as regards long duration Treasuries. Humility seems to me the appropriate attitude when projecting what is going to happen in the markets future. Risk and volatility reduction seem to me the primary goals of bonds in a portfolio and long duration currently increases both risk and volatility of return.

Garland Whizzer
I agree with these points, but think age and future earnings needs to be viewed along with the portfolio. I would love for 30 yr bonds to go to 6% and crush asset prices so I can buy on the cheap with future earnings. My age group simply didn't have enough money saved up during this bull market, so the worst thing that can happen to me is more low rates, something I want to hedge against.

I fully expect to see negative US treasury interest rates out to a few years or so in the next recession, followed by an even larger Fed balance sheet to GDP, and nothing scares me more than this because it has already happened in Japan. Except it is worse, the Japanese central bank printing money to buy their own stock market.
Now you're confusing me. You're buying long terms at about 3.2%, and yet you're hoping yields will go to 6%?
Similar to other young posters on here starting out with a 100% stock allocation. A 50% drop could actually be the best thing for their retirement vs a bull market they are having to contribute into. They could have already missed the run up before having enough actual dollars invested, and by the time they get a couple hundred thousand into the market, it tanks 50%. Like sequence of returns risk for a retiree living solely off of investments, but opposite.
robertmcd,

1) While you are waiting for the long-term treasury to go to 6%, what are you investing your cash into?

2) And, why do you thinking your market timing move into the long-term treasury will be much better than buy and hold of a 60/40 portfolio?

3) How much better are you hoping for? Give us a number. And, how does this number compare to the long-term return of 60/40?

KlangFool
Klangfool see below in regards to #2. Your post on another thread today. Aren't you advocating market timing here?

Please explain to me why folks are paying off the fixed-rate low-interest mortgage when the interest rate is going up. At the rate of interest rate increases, cash in the money market fund may pay a higher interest rate than their mortgages in the future.

KlangFool

KlangFool
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by KlangFool » Tue Oct 09, 2018 4:44 pm

robertmcd wrote:
Tue Oct 09, 2018 4:39 pm
KlangFool wrote:
Tue Oct 09, 2018 3:51 pm
robertmcd wrote:
Tue Oct 09, 2018 3:30 pm
bhsince87 wrote:
Tue Oct 09, 2018 2:45 pm
robertmcd wrote:
Tue Oct 09, 2018 2:28 pm


I agree with these points, but think age and future earnings needs to be viewed along with the portfolio. I would love for 30 yr bonds to go to 6% and crush asset prices so I can buy on the cheap with future earnings. My age group simply didn't have enough money saved up during this bull market, so the worst thing that can happen to me is more low rates, something I want to hedge against.

I fully expect to see negative US treasury interest rates out to a few years or so in the next recession, followed by an even larger Fed balance sheet to GDP, and nothing scares me more than this because it has already happened in Japan. Except it is worse, the Japanese central bank printing money to buy their own stock market.
Now you're confusing me. You're buying long terms at about 3.2%, and yet you're hoping yields will go to 6%?
Similar to other young posters on here starting out with a 100% stock allocation. A 50% drop could actually be the best thing for their retirement vs a bull market they are having to contribute into. They could have already missed the run up before having enough actual dollars invested, and by the time they get a couple hundred thousand into the market, it tanks 50%. Like sequence of returns risk for a retiree living solely off of investments, but opposite.
robertmcd,

1) While you are waiting for the long-term treasury to go to 6%, what are you investing your cash into?

2) And, why do you thinking your market timing move into the long-term treasury will be much better than buy and hold of a 60/40 portfolio?

3) How much better are you hoping for? Give us a number. And, how does this number compare to the long-term return of 60/40?

KlangFool
Klangfool see below in regards to #2. Your post on another thread today. Aren't you advocating market timing here?

Please explain to me why folks are paying off the fixed-rate low-interest mortgage when the interest rate is going up. At the rate of interest rate increases, cash in the money market fund may pay a higher interest rate than their mortgages in the future.

KlangFool
robertmcd,

You could answer my question on this thread. If you want my answer on the other thread, you could post your question over there.

KlangFool

robertmcd
Posts: 222
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Tue Oct 09, 2018 4:55 pm

I'm sorry I forgot to quote you but I tried to answer your question in my prior post. I meant no offense, and I didn't go searching your posts to dig something up, I actually just stumbled across it right after posting my answer.

Dottie57
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by Dottie57 » Tue Oct 09, 2018 5:01 pm

I am confused. What is the definition f a bull market for bonds? Interest rates are better but not great. The rates don’t have to fall that much to hit 0. Hopefully someone can explain.

KlangFool
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by KlangFool » Tue Oct 09, 2018 6:47 pm

robertmcd wrote:
Tue Oct 09, 2018 4:34 pm

I'm not waiting for the 30 yr treasury to go to 6%. Most of my cash has been going into prime money market. I was about to start buying 2 yr treasuries, but the 30 yr looked oversold to me.

To me it isn't market timing. I didn't just sell all my stock and go all in long term treasuries. I started to purchase long term treasuries because the yields finally looked attractive to me.
robertmcd,

Please help me understand this correctly.

1) The prime money market fund is at around 2%.

2) You believe that if the 30 years treasury goes to 6%, it is a good deal. You would take the money from the prime money market fund and buy 30 years treasury. Is that correct?

KlangFool

robertmcd
Posts: 222
Joined: Tue Aug 09, 2016 9:06 am

Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Wed Oct 10, 2018 9:48 am

KlangFool wrote:
Tue Oct 09, 2018 6:47 pm
robertmcd wrote:
Tue Oct 09, 2018 4:34 pm

I'm not waiting for the 30 yr treasury to go to 6%. Most of my cash has been going into prime money market. I was about to start buying 2 yr treasuries, but the 30 yr looked oversold to me.

To me it isn't market timing. I didn't just sell all my stock and go all in long term treasuries. I started to purchase long term treasuries because the yields finally looked attractive to me.
robertmcd,

Please help me understand this correctly.

1) The prime money market fund is at around 2%.

2) You believe that if the 30 years treasury goes to 6%, it is a good deal. You would take the money from the prime money market fund and buy 30 years treasury. Is that correct?

KlangFool
That is not what I am saying. I am saying that 30 yr treasuries will not get to 6%, and that is what worries me. The worst thing that can happen at my age is more central bank money printing and yield suppression to keep the global debt bubble from collapsing. The only option is more debt at lower rates, eventually negative. Thus I want to hold assets that will benefit in this situation, and I would be happy to lose 50% in long term treasury bonds for a return to reality. This time actually is different, tell me the last time 16 trillion dollars were printed out of thin air to buy global stocks and bonds.

KlangFool
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Joined: Sat Oct 11, 2008 12:35 pm

Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by KlangFool » Wed Oct 10, 2018 10:57 am

robertmcd wrote:
Wed Oct 10, 2018 9:48 am

That is not what I am saying. I am saying that 30 yr treasuries will not get to 6%, and that is what worries me. The worst thing that can happen at my age is more central bank money printing and yield suppression to keep the global debt bubble from collapsing. The only option is more debt at lower rates, eventually negative. Thus I want to hold assets that will benefit in this situation, and I would be happy to lose 50% in long term treasury bonds for a return to reality. This time actually is different, tell me the last time 16 trillion dollars were printed out of thin air to buy global stocks and bonds.
robertmcd,

<< The worst thing that can happen at my age is more central bank money printing and yield suppression to keep the global debt bubble from collapsing. >>

This had been going on for quite a while.

<<The only option is more debt at lower rates, eventually negative.>>

Ditto. This had been going on for quite a while too. The real interest rate had been negative for quite a while.

<<Thus I want to hold assets that will benefit in this situation, >>

30 years fixed rate mortgage looks to be a very good deal. I kept some gold jewelry too.

So, what asset classes that you think will benefit from this?

A) During the bubble?

B) After the bubble bust?

KlangFool

robertmcd
Posts: 222
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Thu Oct 11, 2018 9:04 am

If central banks keep buying bonds and stocks, then the assets that will benefit are the ones that have benefited the past 10 yrs.
-high yield corporate bonds due to pushing everyone out on the risk curve
-long term bonds same as above
- growth stocks (Long duration)
-real estate (low interest mortgages)

Basically the riskier and uglier assets have done great.

If they stop printing money, rates will rise, liquidity will dry up, and everything will get crushed. I believe that we are close to the peak in yields across the board and treasury bonds are a good deal at all maturities. Since I am young, the inflation risk doesn't worry me.

KlangFool
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by KlangFool » Thu Oct 11, 2018 9:50 am

robertmcd wrote:
Thu Oct 11, 2018 9:04 am
If central banks keep buying bonds and stocks, then the assets that will benefit are the ones that have benefited the past 10 yrs.
-high yield corporate bonds due to pushing everyone out on the risk curve
-long term bonds same as above
- growth stocks (Long duration)
-real estate (low interest mortgages)

Basically the riskier and uglier assets have done great.

If they stop printing money, rates will rise, liquidity will dry up, and everything will get crushed. I believe that we are close to the peak in yields across the board and treasury bonds are a good deal at all maturities. Since I am young, the inflation risk doesn't worry me.
robertmcd,

<< everything will get crushed. >>

No. In a hyperinflation, the gold price will go up. Or, we will be in a deflation. Cash is worth a lot more.

KlangFool

robertmcd
Posts: 222
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Thu Oct 11, 2018 10:04 am

I agree that cash and gold would be the only safe havens in the event of asset repricing like that. I would only want to own physical though. In the event gold actually reprices to these fiat currencies, the retail crowd will not get anything for their shares of IAU and GLD.

KlangFool
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Joined: Sat Oct 11, 2008 12:35 pm

Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by KlangFool » Thu Oct 11, 2018 10:06 am

robertmcd wrote:
Thu Oct 11, 2018 10:04 am
I agree that cash and gold would be the only safe havens in the event of asset repricing like that. I would only want to own physical though. In the event gold actually reprices to these fiat currencies, the retail crowd will not get anything for their shares of IAU and GLD.
robertmcd,

I am prepared. So, it won't matter what happened next.

KlangFool

robertmcd
Posts: 222
Joined: Tue Aug 09, 2016 9:06 am

Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Thu Oct 11, 2018 10:17 am

KlangFool wrote:
Thu Oct 11, 2018 10:06 am
robertmcd wrote:
Thu Oct 11, 2018 10:04 am
I agree that cash and gold would be the only safe havens in the event of asset repricing like that. I would only want to own physical though. In the event gold actually reprices to these fiat currencies, the retail crowd will not get anything for their shares of IAU and GLD.
robertmcd,

I am prepared. So, it won't matter what happened next.

KlangFool
What do you mean by that? That you own physical gold?

KlangFool
Posts: 10429
Joined: Sat Oct 11, 2008 12:35 pm

Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by KlangFool » Thu Oct 11, 2018 10:19 am

robertmcd wrote:
Thu Oct 11, 2018 10:17 am
KlangFool wrote:
Thu Oct 11, 2018 10:06 am
robertmcd wrote:
Thu Oct 11, 2018 10:04 am
I agree that cash and gold would be the only safe havens in the event of asset repricing like that. I would only want to own physical though. In the event gold actually reprices to these fiat currencies, the retail crowd will not get anything for their shares of IAU and GLD.
robertmcd,

I am prepared. So, it won't matter what happened next.

KlangFool
What do you mean by that? That you own physical gold?
robertmcd,

Gold jewelry. This is common in my culture.

KlangFool

robertmcd
Posts: 222
Joined: Tue Aug 09, 2016 9:06 am

Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Thu Oct 11, 2018 10:21 am

Interesting, may I ask what culture?

Also what percent of assets does it make up?

KlangFool
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by KlangFool » Thu Oct 11, 2018 10:27 am

robertmcd wrote:
Thu Oct 11, 2018 10:21 am
Interesting, may I ask what culture?

Also what percent of assets does it make up?
robertmcd,

1) Asian.

2) It is not a percent. Good enough to buy plane tickets for my family to fly out of the country.

3) We need to give out some gold jewelry for the newborn baby of our family plus wedding. Hence, it is normal to give and receive some gold jewelry.

4) Please note that this is not your typical American gold jewelry. It has higher purity and it is certified by some mean.

https://medium.com/@roysebag/the-gold-j ... e16fb63522

KlangFool

smectym
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by smectym » Fri Oct 12, 2018 10:29 am

robertmcd wrote:
Tue Oct 09, 2018 10:05 am
https://www.advisorperspectives.com/art ... l-market-1

Article on where we currently stand in regards to the Fed funds rate, 2 year and 30 yr treasury rates. Should not matter to the die hard buy and holders, but for any of us who use tactical/variable asset allocation you may find it useful. I have been in equities and zero duration assets since summer of 2016, rotating between high yield savings, no penalty CD's, and prime money market based on yield, and looking at my returns since then it has been a good strategy vs. any maturity US treasuries. Yesterday I bought my first bonds, thru EDV (vanguard extended duration treasury ETF). I am a US treasuries only believer (FDIC and VG prime money market are also good enough for me).

As a young investor (24 yrs), I am willing to take the massive inflation risk in these bonds. The best thing that could happen at my age would be inflation taking off and decimating asset prices, whereas more central bank sovereign bond buying and asset price inflation would be the worst thing for me.
This interesting dialogue has drifted a bit from RobertMcd’s initial post. In the near term, EDV does looks like a promising hedge against recession risk. And though OP, looking at the bigger picture, fears “more central bank sovereign bond buying” (I’m against it too!) that should drive up the price of EDV.

Smectym

robertmcd
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Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Fri Oct 12, 2018 11:24 am

So far so good. Flight to long term treasuries still taking place with EDV back to green today.

robertmcd
Posts: 222
Joined: Tue Aug 09, 2016 9:06 am

Re: A Roadmap For The Upcoming US Treasury Bull Market

Post by robertmcd » Fri Oct 12, 2018 11:32 am

Another article on this that any contrarians may find interesting because it shows how crowded the short 10 yr trade is. I normally don't like zero hedge because it is mostly doom porn, but I do like to read my fair share of bearish articles to remain grounded in reality.

https://www.zerohedge.com/news/2018-10- ... l-has-legs

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