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Bonds? James Bond?

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  • #16
    Originally posted by Zaphod View Post

    Too small to matter and easier money elsewhere. Shorting bonds has been killing it. Much simpler more obvious trade.
    How did you learn to short a bond?

    I found buying I-bonds pretty easy and POF / WCI has a whole blog post on it. I think the major limitation is the 10k per SS # (EIN) for I-bonds.

    I know I am a simple boring doc who is not really likely to be shorting stuff or trading options etc. but I am curious how you started.

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    • #17
      Originally posted by Dont_know_mind View Post

      Bonds have moved a long way in the last 3 months. I don't own any here, but they're a lot more attractive now.

      I was wondering today, whether bond yields might have seen the peak for the next 2 years. People are hysterical about inflation and talking about the Fed doing 75 or 100bps, and runaway inflation. But nothing has really changed since 3 months ago! I think things have gone from one extreme to the other for interest rate expectations.

      One thing I wonder about is the calls for EPS reductions. I tend to think it would be a major feat for nominal earnings to be revised down, because of higher actual inflation. I guess it's possible.

      I am really tempted to increase risk exposure before the fed meeting, because sentiment is so negative, but will sit it out.
      Take holiday I think from any activity or tinkering.
      I am pretty happy with my exposures; they are planned and manageable with my lifestyle.
      I should not succumb to temptation from market action. But it's really tempting!

      In terms of Tangler's query, TIPS now have a positive yield now. If the yield on 10 year TIPS was +3%, I would own some!
      what are EPS reductions? (sorry for my ignorance).

      I am reading about TIPS, might buy some from treasury direct, or might just stick with short term treasuries + I bonds + CDs in taxable.

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      • #18
        Originally posted by AR View Post

        That seems reasonable. Shorting bonds is not really in my skillset at the moment. Probably should check it out.
        You could get a fixed rate mortgage and would effectively have a short fixed interest position. That is all shorting a bond is. Unfortunately banks make you buy real estate with the other side of that. But actually, both sides of that is an incredible inflation hedge.

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        • #19
          Originally posted by Tangler View Post

          what are EPS reductions? (sorry for my ignorance).

          I am reading about TIPS, might buy some from treasury direct, or might just stick with short term treasuries + I bonds + CDs in taxable.
          Earnings per share

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          • #20
            Originally posted by Zaphod View Post

            Too small to matter and easier money elsewhere. Shorting bonds has been killing it. Much simpler more obvious trade.
            The truly sad thing about this is that I (and probably you and possibly most of this forum) would have been better off with upgrading our house to the most expensive thing we could afford during COVID and getting a large 30 year mortgage in May 2020.

            That in retrospect has done better than everything else I can think of.

            I can’t believe I’ve been spending huge amounts of time thinking about equities in the last 2 years, when my return would have been double that with about 1% of the thinking if I’d just listened to my wife!

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            • #21
              Originally posted by Zaphod View Post
              Think there are never perfect analogues, but after ww2 while not perfect is kind of decent.

              Real issue is we have an asset bubble near 2000 levels combined with coming off of zero rates/inflation. Just bad juju.

              There are ofc similarities to the 70s, which were precipitated by not taking the 60s inflation seriously. This is where I disagree with "not 70s", its more not yet, and depends on what we do.

              For ww2/70s i meant that energy crisis was obvious and near miss right after, and instead of solidifying it for the future they thought dodged bullet nbd, and the next years suffered massively. Both eras had brushes with disaster that were ignored and then hit with reality. Kinda (exactly) like what is happening now.

              The 70s didnt happen overnight, started in 60s and ended in 80s.
              I hadn't thought of the current period as a post WW2, transitioning into 1970's type environment. That's interesting, I'll have to have a look at the post ww2 period a bit more closely.

              Very interesting market action.
              Which alternative ?
              i) the market has gotten ahead of itself in terms of US interest rate hike expectations
              ii) this is indicating that they do a surprise 75bps
              iii) it's all just getting back to fairly priced
              iv) other?

              Maybe iii) for US stocks, but against iii), I tend to think some currencies are just getting a bit overdone (USD-JPY), some of the EM complex is starting to melt and I am starting to see stuff that I like (non-US) that is very attractive valuations again.

              I think I will buy 50% of what I want here and the rest later in the week if things go down further.

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              • #22
                Originally posted by Dont_know_mind View Post

                Earnings per share
                thanks!!! I should have been able to guess that! Head slap.

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                • #23
                  Originally posted by Tangler View Post

                  How did you learn to short a bond?

                  I found buying I-bonds pretty easy and POF / WCI has a whole blog post on it. I think the major limitation is the 10k per SS # (EIN) for I-bonds.

                  I know I am a simple boring doc who is not really likely to be shorting stuff or trading options etc. but I am curious how you started.
                  Just bear bond funds, I like TMV, but that might be a bit much for most people, im sure there are one times.

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                  • #24
                    I-bonds, which I bought a couple of years ago when fixed rate was at 0.5%. Waiting for fixed rate to increase before buying more -- I am NOT cashing them out before the 5 year penalty period, and preferably not cashing them out at all until I find some losses to offset if I need more dry powder for stock purchases at a major down in the market, or more likely at retirement when I am at a lower (or null) income tax rate -- in Puerto Rico or maybe if I turn diplomat.

                    Individual muni bonds, for my own state, in a ladder with maturity dates of 2-7 years, which I plan to carry to maturity.

                    A small 5-7% bond mix which I have tilted toward short term, less rate dependent variety end of 2021-early 2022 (good choice): basically went from intermediate bonds (like ticker BND) 75% to short term bonds (like ticker VUSB) 25% to a ratio of 85-90% short-term to 10-15% intermediate. Though I think it is a fools errand to predict the bottom of interest rates cycles, but there is such a thing as a momentum play with bonds and unlike stocks chances of loss/missed gains are a lot less. If the FED hikes rates at 0.75 I will VERY slowly start transitioning back to intermediate rate bond ETFs.

                    edit: I do not have the guts to short bonds, especially in a 3X inverse ETF.

                    Comment


                    • #25
                      Originally posted by Zaphod View Post
                      No bonds. If anything I've been shorting bonds.

                      Though they may become attractive soon.
                      Precisely.

                      For any asset class, when the commoners start fixating on something (ie, dot com stocks 2000, flipping houses 2005-06, Bitcoin 2021, etc), you've clearly missed the wave.

                      ...Get S&P index and good stocks during this current sale for as long as it lasts. After that, buy it regularly as planned.

                      Bonds are for people who have already won the game (and are in a good interest rate environment). Expecting serious growth from bonds is not wise. Right now, they won't even keep with inflation. Wake me up on bonds if interest rates ever hit double digits, at which point they may have merit again.

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                      • #26
                        Originally posted by Zaphod View Post
                        No bonds. If anything I've been shorting bonds.

                        Though they may become attractive soon.
                        Given the relative and increasing size of the bond market to the stock market, what then happens to the stock market if bonds once again become attractive and money supply continues to contract?

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                        • #27
                          Originally posted by LIFO View Post

                          Given the relative and increasing size of the bond market to the stock market, what then happens to the stock market if bonds once again become attractive and money supply continues to contract?
                          Can you provide a link that the relative size of the bond market owned by the private sector has increased?

                          Bond issuance has increased and central banks have issued a lot more bonds, that they have bought, as part of QE.

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                          • #28
                            Originally posted by Dont_know_mind View Post

                            Can you provide a link that the relative size of the bond market owned by the private sector has increased?

                            Bond issuance has increased and central banks have issued a lot more bonds, that they have bought, as part of QE.
                            What do you need from a link outlining bond ownership? The QE experiment is over and bond runoffs have begun in earnest. Per fed plans, they will accelerate in September. Wanton deficit spending continues.

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                            • #29
                              My practice with bonds has always been low risk and short. i.e. short treasuries, short munis, short cds.
                              Yesterday I bought long-term.

                              Comment


                              • #30
                                Originally posted by jz- View Post
                                My practice with bonds has always been low risk and short. i.e. short treasuries, short munis, short cds.
                                Yesterday I bought long-term.
                                you think long rates are nearing a peak? the worst treasury selloff in history continues...

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