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the fed has no idea how things will play out themselves so i wouldn’t even attempt to guess ..but it is bond investors who are really in control and where they bid rates .
right now there is no doubt the worlds bond investors see us pretty close to a bottom with the 30 year at 3.88 and the ten year at just 3.69% .
despite poppa fed raising rates investors are bidding them down as they smell trouble brewing and so we have the proverbial inverted yield curve ..
that happens when investors see things differently then the fed .
historically it is the bond investors who are correct when this happens
if we fall in a recession , high yield and corporate bonds can get hammered like 2008 ..
only treasuries are sure to go up if the fed loosens because we are in a recession.
in fact most non treasury investment grade bond funds can be really beaten up as the sweet spot right now where 70% of investment grade bond money is , is in the BBB grade .
that is one rung above junk .
any credit down grades in a recession can have all these funds and institutions that can’t hold anything less then investment grade dumping them blowing up the corporate bond market .
that is the big elephant in the room now.
personally i own no bonds or money markets that are not treasuries
Last edited by mathjak107; 06-04-2023 at 05:07 AM..
Going back to the OP, wonder if we now have truly National Banks. A bank that has branches in 48-50 states. Move from CA anywhere & you don't have to change banks. Go on vacation anywhere & you can always find free ATM machine.
In the bank takeovers US Bank extended it's region into the West. The big got bigger.
Then the executives from the sold bank get to make a New Bank. Mostly affects accounting & IT departments (don't need 2).
People dont carry much cash any more,so being out of town,looking for free ATM machine?
If you are on vacation,you probably wont be doing business with retail stores which only take cash.
Brick and mortar bank branches carry fixed overhead,banks have been shutting them down one by one
Going back to the OP, wonder if we now have truly National Banks. A bank that has branches in 48-50 states. Move from CA anywhere & you don't have to change banks. Go on vacation anywhere & you can always find free ATM machine.
In the bank takeovers US Bank extended it's region into the West. The big got bigger.
Then the executives from the sold bank get to make a New Bank. Mostly affects accounting & IT departments (don't need 2).
You got a point, there.
I never wanted to follow the crowd. Credit Unions for me. Just 3: 2 here on the island. And a joint account with my son and wife around L.A., where he lives. He can just grab money that I want to give him for his birthday, for example.
In Canada, the "Big 5" have about 90% of deposits---- including money in Credit Unions. That's like a gov't sponsored monopoly.
if we fall in a recession , high yield and corporate bonds can get hammered like 2008 ..
only treasuries are sure to go up if the fed loosens because we are in a recession.
in fact most non treasury investment grade bond funds can be really beaten up as the sweet spot right now where 70% of investment grade bond money is , is in the BBB grade .
that is one rung above junk .
any credit down grades in a recession can have all these funds and institutions that can’t hold anything less then investment grade dumping them blowing up the corporate bond market .
that is the big elephant in the room now.
personally i own no bonds or money markets that are not treasuries
Can never rep again....maybe perma ban?
I definitely have made the mistake before of taking Corporate debt to trade like treasuries. They don't.
I do find it funny in that I believe the Federal Government will never be able to pay back its money owed, but the reality is the demand for the safe harbor is what's craved. It's like McDonalds. Not the best burger, but everyone around the world knows what to expect.
people think because they own bonds they are protected ..but that is just false .
corporate bonds are dependent on the same things stocks are as there is a credit rating they need to maintain .
high yield bonds have more in common with stocks then bonds …they are tied to the equity markets for the. most part . they shouldn’t even be considered as much diversification away from stocks .
so just buying a total bond fund , which is anything but total will never provide the fighter cover of long term treasuries nor the weight in a recession or depression to protect one’s equities .
real diversification from the major economic outcomes only comes from treasuries .
one can use an intermediate term treasury fund like IEF . Or they can split the bond budget between long term treasuries and very short term treasuries or treasury money markets forming a barbell .
it will have the same interest rate sensitivity as the intermediate term fund but offer a lot more flexibility.
going back to 2020 let’s compare using 100k
50% tlt and 50% money market is 93,915
100% in ief is 93,132
100% in ief tended to do better over most time frames but it did not offer as much flexibility as the barbell.
there are some time frames the barbell did better but they were mostly from around 2010 or so.
bnd total bond fund rarely beat the treasuries out despite lower expenses and higher rates
Last edited by mathjak107; 06-08-2023 at 03:48 AM..
“will recover and then some in the next 5-10 years”. And then some. 5-10 years is not a long time to a long term investor.
I bought BAC during the GFC, and even with the recent pullback, I’m still up 330% and getting a 10% plus dividend yield on cost. I’ve trimmed the position a bit recently to pay for a daughters college tuition, but it’s still a very profitable position.
If you can stand the volatility inherent in financials, now is a good time to buy solid companies.
Agreed. Although I'm not making regional/small banks a large portion of the portfolio. Appropriate amounts being put at risk, in line with the extent of the risk (and volatility) involved. My BHB has been up over $33 in the past year but stands at below $25 right now. Good time to add.
Of course, there are those on this forum who will disagree with ANYTHING because they have to convince themselves that they are the smartest ones around. Screw them. Everyone's circumstances and risk tolerance and goals and purposes are unique.
no ,there are those here who will disagree when the facts and numbers say something is not performing and lags the pack over and over.
it is important for others to have the facts so they can make their own informed decision when someone recommends something that clearly has not performed at a time that the asset group has done well .
a reit that performs poorly when real estate had a good run up is no proxy for real estate holdings , it basically performed as a bond not real estate in that last discussion
Last edited by mathjak107; 07-03-2023 at 03:52 AM..
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