(12-16-2019, 11:03 PM)Otter Wrote:My investing style the past 30 years suggests that we agree. I've never seen bonds as a growth vehicle. I still don't. If I had paid for an investment adviser when I switched to Vanguard last year, I'd be about 40% bonds right now. For now that would have worked out. From a lower base long bonds do provide a hedge. We clearly aren't there today. I'm sure you've read my investment rules "Never do what you wish you had done last week, month etc". I try to never chase ANYTHING.(12-16-2019, 10:21 PM)fenders53 Wrote:(12-16-2019, 08:36 PM)Otter Wrote:Appreciate the feedback. I'm definitely not interested in a real bond position after the very strong 2019 run. I do indeed want it as a hedge (reliable as possible). that will offer some dividend yield. I can't excited about gold for the lack of income. Stocks like T are exactly what I am trying to hedge against. It yields like a junk bond but a hedge it is not with that debt. I have a lot of above average equity yielders. Any sense of security one gets from being overweighted in them, the Aristocrats or even Utes is probably misguided when everything reverts to the mean. I was perfectly content with 2% yield on my cash, but that's getting much harder to do in my IRA, and I'm pretty cashy. I guess I'll just have to be a better stock picker to make up for it overall. Patience is what's actually required. This might be a long wait and that's not such a bad thing.(12-05-2019, 08:44 PM)fenders53 Wrote: I'm not informed enough about bond funds, but I know I need to get some of my portfolio into a fund for a hedge I'll need some month or year soon. I do have plenty of bonds, buts it's ALL in the short to very short maturity. Yields have die of course for anything short. I was going to do this late 2018, but was afraid the FED would run rates up higher and wreck me overnight. I sure guess wrong on that one. Now bonds have had a nice run so it's going to be a slow dollar cost average in for sure. Anyway I am thinking about TLT which is 20yr treasuries.
Not sure I'd be looking at bonds on the downslope of a 35-year bull market, when bond prices peaked quite a while ago. This year's 75 basis point rate cuts dropped yields by a third, and the Fed is now signaling a pause. With the stock market at all-time-highs, near full employment, and homebuilder indices hitting levels not seen in 20 years, the Fed cutting yields back to Great Recession levels looks pretty unlikely.
Even a small move back towards normal bond yields would destroy bond prices. Funds aren't individual bonds. You aren't guaranteed a return of capital.
I find it hard enough to tolerate token annual dividend increases in the range of 2%, as that doesn't really keep up with inflation. It's easier to stomach with high-yielders like T, which I treat as income farms. Not sure I'd want to give the government a 20-year loan at that rate, as boomers continue to age into the expensive phase of government programs.
The carnage for stocks is a lot less if they go back to average P/E ratios for the past 30 years, vs. what happens to bond prices if they revert to historical average yields.
Also, not sure what the long-term demand looks like for government paper in western economies, which are looking at population stagnation or decline as boomers age out and die. Bonds are based on a promise that the next generation will produce enough to pay the outstanding liabilities plus coupon. Things can coast along fine, until they don't.
Equities at least aren't tied to any particular government, and companies can go where the growth is (assuming the trend of globalization that has dominated since WWII ended continues, and protectionism doesn't reign again).
I'm a bond skeptic, but the skepticism is tied to my general investment philosophies about seeking value. Yields would have to go deeply negative for decades for bond prices to match historic stock market return percentages over the next several decades. It could conceivably happen, but I think the odds are low.
Edited to add - If I felt confident enough to identify emerging market economies with healthy population growth rates, stable governments, high yield vs. US/Euro/Japanese paper, and a decent shot at navigating the turmoil of climate change, I'd take a good look at their bonds. People who can do that reliably tend to work at hedge funds, and make more than I do.
I'm not willing to take a 40% port hit anymore. That day will come with liquidity juiced and PEs somewhat high. This isn't 1999 equity euphoria. I completely "get that". I need a hedge for the short to mid-term. I can't find anything other than cash, and hence this thread as cash is less desirable with current rates. For now the answer may be what I am already doing. A huge basket of extremely short duration bond funds.
I'll continue to follow Gundlach. He is the bond king and he isn't telling me to jump in now. It's his opinion corporate bonds will offer incredible opportunity some year soon, right after people learn their AA and AAA bonds aren't actually quite that safe when it hits the fan. I'm just hoping the FED is smart enough to not play the zero yield game well before corporate profits struggle in a real way. How can it not be obvious that ends bad?
You are correct that emerging markets will offer opportunity. I'm not knowledgeable enough to know how to play that. Pick the wrong hedge fund and I'll lose. And that's why I am hanging out with you picking DGI stocks.
