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@stillers, you seem to have quite an anger problem. Bottom line is I never once said a CD ladder wasn't a good idea. I tried to covey that bond funds also may be turning the corner and starting to give decent returns - for anyone who chooses that investment path. Even at your dismay and scorn.
Ah, c'mon man!
If I really had an anger problem and dealt in scorn, I'd ask you if you think the Bills will EVER win a Super Bowl! Or even ever get there again and, well, lose again!
And I'd be sure to give you 0:13 to reply, make sure all your players have their helmets, and warn you about drifting too far to the right!
My only purpose on this thread was to point up that bond fund investors generally seek 4%-5% TRs. And that those rates of return are currently available in non-callable CDs, with higher rates having been available at the peak.
Also, many investors don't seem to understand that those incredibly unsexy CDs are there for the taking, if they could only get out of their own way.
So while bond fund investors over the next 5 years will be putting in time and effort trying to get their 4%-5% TRs, I'll be putting on a slew of golf courses, knowing that we have a 5+-yr CD ladder in place of those bond funds that is paying in excess of 5%.
No need for anyone to read that again s-l-o-w-l-y, unless of course you still don't get it.
BTW, I NEVER stated that CDs were the only option. But hey, it's the internet, so feel free to parrot it over-and-over-and-over again and it will become a fact (to some/most).
Junk I own: PRCPX. +3.33%. YTD TUHYX. +4.52% HYDB. +1.14% **************** YTD is a long way from 5 years. But there are the dividends in the meantime. If rates stand still or come down, junk will do OK at the very least, along with a stock recovery. I'm always fully invested. The cash I hold is held in the funds I own. I'm aware of 5% CD rates. The mechanics of initiating such accounts is the bugga-boo for me. ...And of course, my own mileage certainly HAS varied---- by a huge amount--- to the downside in TUHYX. At least I'm "in the black" with the other two.
No one size fits all. If we get back to 15% on CDs like under Volker I’ll take a look. Generally, I’d rather invest in things than in cash. That’s just a personal prejudice born of 50+ years watching markets. Now the problem for me with locking up money in a CD is that it limits my ability to move in and out of what I believe are more profitable investments while that money is tied up. I’ll take the 4+% on cash Fido currently pays in return for being able to pick up equities anytime I want. While you’re tied up in a 3 year or 5 year C/D some hard assets or equities you watch could fall by 25%, making them an attractive buy. Do the math and you’ve actually lost money if you buy those assets a few years later after the prices have rebounded, even considering your “profit” from the C/D. When you lock up cash for any length of time you pay an opportunity cost.
Let’s not put all bond funds in one basket / trash bin. There are, by many accounts, some good opportunities in EM bond funds for folks willing to take on some added risk. If you like to “play” the fixed income market, buy and sell something like a GNMA bond fund as the 10 year fluctuates up and down in yield. Mostly, that’s govt. backed paper. High yield and convertible bond funds allow a good manager to profit from his/her research and analytical skills in markets that skirt the line between equity and traditional bond. I would not simply write those types of investments off as “just another bond fund.” And some international bond funds profit from playing the FX markets - making better returns possible beyond the coupon rates on those bonds. I used to have an anger problem too. Got better after Ted departed - although I miss him greatly.
[snip] Now the problem for me with locking up money in a CD is that it limits my ability to move in and out of what I believe are more profitable investments while that money is tied up. I’ll take the 4+% on cash Fido currently pays in return for being able to pick up equities anytime I want. While you’re tied up in a 3 year or 5 year C/D some hard assets or equities you watch could fall by 25%, making them an attractive buy. Do the math and you’ve actually lost money if you buy those assets a few years later after the prices have rebounded, even considering your “profit” from the C/D. When you lock up cash for any length of time you pay an opportunity cost. [snip]
I sold all of my bond funds in March of 2022. I have not bought any new bond funds since then, preferring Brokerage noncallable CDs and MMs. I have no plans on buying any new bond funds in the near future. For now, I prefer to reinvest CDs that are maturing, into new CDs at higher interest rates. I continue to hold a large number of watchlists of bond oefs, to see if there is an emerging performance pattern that interests me, but nothing I trust has emerged in 2023 so far. I continue to have interest in Bank Loans, Municipal Funds, and some HY, Multisector and Nontraditional funds, so I watch those most closely. With MMs and CDs paying aroung 5% or more, I have no sense of urgency to rush back into bond oefs.
USFR, floating rate treasury bills. Lots of it. Lots of VMFXX.
I don't usually care for bonds, but, as Devesh Shah paraphrases Buffet in his June commentary:
When asked why he doesn’t hold longer-duration bonds, he replied that he is not good at predicting the future path of long-term interest rates, and he doesn’t know anyone who is good at it either. Take those words seriously.
@Sven. I have learned that I don't have the appetite to trade individual securities. So I haven't looked into buying from the Treasury.
USFR and TFLO are the two etf's I know of that only deal in floating rate T-Bills. They both charge the same. There does seem to be some minor differences in SEC yield and total return over time. Anyway, both at about 5.2 SEC yield per M* this afternoon.
BTW, aside from my aversion to bonds in general, I have held on to FFRHX in the IRA. I'll take a look to see if FLOT is similar, or better. Thanks.
I remember someone mentioning that online orders for FRN auctions are not possible, so one may have to call the trading desk.
FR/BL are the best for rising or steady rate environment, so they should be good for a while. But get out of them once the rates start to fall, as they will sometime in 2024-25; then, FR/BL will act just like ST-HY.
USFR and TFLO are the two etf's I know of that only deal in floating rate T-Bills. They both charge the same. There does seem to be some minor differences in SEC yield and total return over time. Anyway, both at about 5.2 SEC yield per M* this afternoon.
I have not traded FRN at auction so I ask. BTW, buying T bills is really easy at your brokerages, and they are very liquid if you decide to sell before maturity.
I will remember to get out of FR/BL when the rate started to fall. This may affect Giruox’s PRWCX since it holds over 30% FR/BL bonds.
Will check out the daily trading volume. Other treasury ETFs are traded in high volume daily.
Good idea on FLOT, @Sven. I didn't realize it's investment grade, primarily corporate, per M* ... a completely different animal from junk loans, a la BKLN, SRLN, and equivalent OEFs (what Yogi was warning about above).
The iShares Floating Rate Bond ETF seeks to track the investment results of an index composed of U.S. dollar-denominated, investment-grade floating rate bonds with remaining maturities between one month and five years.
I am still not ready to re-enter the traditional bond oef market. Rising rates seem to still be a strong possibility in bond market considerations. Even FR/BLs are not doing as well as I expected in a rising rate market. I look at MMs paying around 5%, CDs paying around 5.3%, and there is little to no risk there. As a retired person, I am fine with collecting 5+% for now.
Purchased a 6 month CD through Schwab brokerage yesterday, paying 5.3%. CD rates above 5% are commonplace from 3 months to 18 months. Anything longer, falls below 5%. If longer term CDs inch above 5%, I would be tempted to consider them, to replace some maturing CDs coming up over the next couple of months.
DT: Good on ya. Can't tie up my $$$ for very long like that. Of course, I'm investing, and that's long-term. What you're doing with CDs, I'n doing with bond OEFs.
DT: Good on ya. Can't tie up my $$$ for very long like that. Of course, I'm investing, and that's long-term. What you're doing with CDs, I'n doing with bond OEFs.
Crash, I understand. I am retired and focused on preserving principal, while making a decent TR with CD interest payments. After I retired, I focused on making 4 to 6% TR, but CDs paid nothing, and so I chose to focus on low risk bond oefs. Loved those years with PIMIX from which I collected monthly income payments that were very predictable and dependable. I had several other bond oefs that I did well with--SEMMX, VCFIX, NVHAX, etc. When the FEDs got serious about raising interest rates, bond oefs got less appealing to me, but CDs became attractive alternatives. I have no idea how long I can ride the CD gravy train, but for now, I will enjoy the stress free 5% returns during my "golden years". I keep watching Floating Rate Bank Loan funds, which I played with for a few years, and keep wondering when they will start benefiting from the rising interest rate period.
Read the YBB thread above. Doesn't bode well for bonds if Treasuries higher yield flood the market.
As I said in a post on the Treasury thread, I don't agree with the terminology of Treasuries flooding the market. I read the Treasury article as a slow, gradual, introduction of shorter term securities, likely trying to avoid spooking the market. That could be good for slightly higher interest rate CDs, but also a trend of bonds gaining some traction. I keep expecting FR/BLs to become more "interesting".
Lots of negativity on bonds here. I can understand the allure of cash when you can get 5.08% at firms like Schwab. Yet many bond funds are on pace for double digit returns in 2023. Albeit much of those gains were front loaded in January/February. There is even more negativity on commercial real estate. Yet one of the few pure plays on commercial real estate in the open end bond universe is doing just fine YTD and far outperforming cash.
Lots of negativity on bonds here. I can understand the allure of cash when you can get 5.08% at firms like Schwab. Yet many bond funds are on pace for double digit returns in 2023. Albeit much of those gains were front loaded in January/February. There is even more negativity on commercial real estate. Yet one of the few pure plays on commercial real estate in the open end bond universe is doing just fine YTD and far outperforming cash.
Your comment sounds like a pitch to be a buy and hold investor now. That seems a bit out of character for a well known trader.
Junkster: "Yet one of the few pure plays on commercial real estate in the open end bond universe is doing just fine YTD and far outperforming cash."
Yep, allocation and security selection matters. Pimco's outlook webcast yesterday cited a mixed bag in CRE: retail and office space bad, but a decent outlook for residential, student housing, industrial, and data centers.
Comments
Thanks for inspiring msf to do one of his remarkably helpful commentaries.
Take care- OJ
If I really had an anger problem and dealt in scorn, I'd ask you if you think the Bills will EVER win a Super Bowl! Or even ever get there again and, well, lose again!
And I'd be sure to give you 0:13 to reply, make sure all your players have their helmets, and warn you about drifting too far to the right!
My only purpose on this thread was to point up that bond fund investors generally seek 4%-5% TRs. And that those rates of return are currently available in non-callable CDs, with higher rates having been available at the peak.
Also, many investors don't seem to understand that those incredibly unsexy CDs are there for the taking, if they could only get out of their own way.
So while bond fund investors over the next 5 years will be putting in time and effort trying to get their 4%-5% TRs, I'll be putting on a slew of golf courses, knowing that we have a 5+-yr CD ladder in place of those bond funds that is paying in excess of 5%.
No need for anyone to read that again s-l-o-w-l-y, unless of course you still don't get it.
BTW, I NEVER stated that CDs were the only option. But hey, it's the internet, so feel free to parrot it over-and-over-and-over again and it will become a fact (to some/most).
PRCPX. +3.33%. YTD
TUHYX. +4.52%
HYDB. +1.14%
****************
YTD is a long way from 5 years. But there are the dividends in the meantime. If rates stand still or come down, junk will do OK at the very least, along with a stock recovery. I'm always fully invested. The cash I hold is held in the funds I own. I'm aware of 5% CD rates. The mechanics of initiating such accounts is the bugga-boo for me.
...And of course, my own mileage certainly HAS varied---- by a huge amount--- to the downside in TUHYX. At least I'm "in the black" with the other two.
Let’s not put all bond funds in one basket / trash bin. There are, by many accounts, some good opportunities in EM bond funds for folks willing to take on some added risk. If you like to “play” the fixed income market, buy and sell something like a GNMA bond fund as the 10 year fluctuates up and down in yield. Mostly, that’s govt. backed paper. High yield and convertible bond funds allow a good manager to profit from his/her research and analytical skills in markets that skirt the line between equity and traditional bond. I would not simply write those types of investments off as “just another bond fund.” And some international bond funds profit from playing the FX markets - making better returns possible beyond the coupon rates on those bonds. I used to have an anger problem too. Got better after Ted departed - although I miss him greatly.
https://messaging-custom-newsletters.nytimes.com/template/oakv2?campaign_id=116&emc=edit_pk_20230526&instance_id=93572&nl=paul-krugman&productCode=PK&regi_id=22268089&segment_id=134011&te=1&uri=nyt://newsletter/e5fb7e76-bcbf-5c61-be18-2fdaaa5dc431&user_id=83d45440ead1d14c2a89a1e7221337d1
I don't usually care for bonds, but, as Devesh Shah paraphrases Buffet in his June commentary: I do. I do. I do.
2 yrs FR bills are auction only 4 times a year. iShares floating rate bond ETF, FLOT, has a 0.15% ER with a 30 days SEC yield, 5.75%.
https://digital.fidelity.com/prgw/digital/research/quote/dashboard/summary?symbol=FLOT
The 1, 3 and 5 years total returns are ~2.5% due to the low interest rate.
I tend to invest in T bills (less than one year), and ST- and IT-treasury bond funds.
USFR and TFLO are the two etf's I know of that only deal in floating rate T-Bills. They both charge the same. There does seem to be some minor differences in SEC yield and total return over time. Anyway, both at about 5.2 SEC yield per M* this afternoon.
BTW, aside from my aversion to bonds in general, I have held on to FFRHX in the IRA. I'll take a look to see if FLOT is similar, or better. Thanks.
FR/BL are the best for rising or steady rate environment, so they should be good for a while. But get out of them once the rates start to fall, as they will sometime in 2024-25; then, FR/BL will act just like ST-HY.
Feels like last week was the first time it was in the black since I purchased on 12/7/2018.
I will remember to get out of FR/BL when the rate started to fall. This may affect Giruox’s PRWCX since it holds over 30% FR/BL bonds.
Will check out the daily trading volume. Other treasury ETFs are traded in high volume daily.
FLOT's objective, from the ishares site:
Yep, allocation and security selection matters. Pimco's outlook webcast yesterday cited a mixed bag in CRE: retail and office space bad, but a decent outlook for residential, student housing, industrial, and data centers.