If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

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iamblessed
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If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by iamblessed »

I have wondered about this question for years. The stock market over the long haul has averaged about 10%
Last edited by iamblessed on Wed Dec 01, 2021 12:28 pm, edited 1 time in total.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by EfficientInvestor »

No. Generally speaking, if interest rates rise, the expected return of stocks would rise along with them. Therefore, the expected return of stocks would also be 10%+ in this hypothetical situation and you would still receive benefit from diversifying among stocks and bonds.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by lvm919 »

That would typically mean that expected inflation was much higher as well, and that stocks would suffer in comparison and be going at lower multiples/better valuations? Given that there is nothing that says rates can't go even higher I'd likely just stick to my AA, but as I haven't experienced anything close to this yet I guess I'll have to wait and see.
You will have to give back your multiples.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by MarkRoulo »

iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
What assumptions are you making about things such as inflation (current and expected), corporate earnings, etc.?

Interest rates don't just go up 8% points in a vacuum.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by tetractys »

iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
That would have been a really smart move prior to the .bomb.
Last edited by tetractys on Wed Dec 01, 2021 12:40 pm, edited 1 time in total.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by TN_Boy »

iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
Absolutely not, for a couple of reasons.

1) You care about real returns, not nominal returns. What if inflation was 10%?
2) I strongly believe 100% *anything* is a mistake. I like diversification. I would never go 100% bonds of any type; I'd always want some equity, even if I was 90
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by Robot Monster »

I think I would keep stocks for the diversification and the longer duration. I'm 47, so 30yr bonds only get me to age 77. I actually have a TIPS ladder that gets me all the way up to 2051, and the money I have in stocks is earmarked for use in the years after.

I think I would only be interested in 30 yr TIPS.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by cflannagan »

As others mentioned, I cannot find myself putting 100% of my NW into one asset. That'd be putting all eggs in one basket.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by Yarlonkol12 »

Seems risky to go all in, what if interest rates and inflation continue going up? You could get wiped out
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by HomerJ »

If I-bonds paid out 10% fixed, and the government would let me buy more than $10,000 a year, I'd put 70% of my money there (although still not 100%)

Maybe only 50%.... I'd worry the U.S. dollar and the government bond program could be in trouble if that was offered.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by Wagnerjb »

Anybody on this forum who is over 60 years old has actually lived through a time when interest rates were indeed at 10%. Nobody was rushing to put 100% of their investments into 30 year Treasuries back then. Inflation is the answer to your question.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by langelgjm »

iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
What's to wonder? 30 year treasuries have been at 10% and even higher in the past, between 1979 and 1987.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by iamblessed »

langelgjm wrote: Wed Dec 01, 2021 1:16 pm
iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
What's to wonder? 30 year treasuries have been at 10% and even higher in the past, between 1979 and 1987.
Looking back don't they seem like a good buy.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by dbr »

It's a naive question. But certainly not if 10% means 8% inflation now and rising to 10%-12%.

Aside from never putting all of one's money in one thing, a person might have put a lot in long Treasuries in 1980 if one knew that interest rates would do what they did do over the next forty years, but one does not know that. Also that year was the beginning of a great bull market in stocks that one would not want to have avoided. A person retiring in 1980 on 30 year Treasuries would have had an SWR of around 7%, but with stocks also more like 9%.

The crux is that what would happen in your hypothesis doesn't have to resemble what happened from 1980 on.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by HomerJ »

iamblessed wrote: Wed Dec 01, 2021 1:17 pm
langelgjm wrote: Wed Dec 01, 2021 1:16 pm
iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
What's to wonder? 30 year treasuries have been at 10% and even higher in the past, between 1979 and 1987.
Looking back don't they seem like a good buy.
Sure. Looking back is easy. Going forward might be different.

Seriously, this is problem a LOT of people have with finance (even, maybe especially, the experts). Backtesting doesn't predict the future.
Last edited by HomerJ on Wed Dec 01, 2021 1:29 pm, edited 1 time in total.
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dbr
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by dbr »

iamblessed wrote: Wed Dec 01, 2021 1:17 pm
langelgjm wrote: Wed Dec 01, 2021 1:16 pm
iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
What's to wonder? 30 year treasuries have been at 10% and even higher in the past, between 1979 and 1987.
Looking back don't they seem like a good buy.
Only in that particular history which also involved high real rates. If a person were buying in at 6% real, it might be a different story. And, as stated, the scenario then includes that inflation abated.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by TN_Boy »

iamblessed wrote: Wed Dec 01, 2021 1:17 pm
langelgjm wrote: Wed Dec 01, 2021 1:16 pm
iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
What's to wonder? 30 year treasuries have been at 10% and even higher in the past, between 1979 and 1987.
Looking back don't they seem like a good buy.
Sure, give me a time machine so that I can zip back to 1982 and buy a bunch of 30 year treasuries. I know NOW they were a great buy. Or give me a crystal ball so I can buy now what WILL go up a lot.

When treasuries were being issued back in the 70s and 80s with such high rates, inflation was very high. Nobody KNEW back in 1980 that inflation would be tamed for decades after that.

The point of maintaining a diversified portfolio is the understanding that we cannot predict the future.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by TN_Boy »

dbr wrote: Wed Dec 01, 2021 1:28 pm
iamblessed wrote: Wed Dec 01, 2021 1:17 pm
langelgjm wrote: Wed Dec 01, 2021 1:16 pm
iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
What's to wonder? 30 year treasuries have been at 10% and even higher in the past, between 1979 and 1987.
Looking back don't they seem like a good buy.
Only in that particular history which also involved high real rates. If a person were buying in at 6% real, it might be a different story. And, as stated, the scenario then includes that inflation abated.
As I recall, when i-bonds were first issued they were paying out relatively high real rates. I did not know then to buy as many as I could. I wouldn't have gone 100% ibonds (stocks have returned more....) but a safe (US treasury backed) high REAL return would be a nice thing to have.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by dbr »

TN_Boy wrote: Wed Dec 01, 2021 1:31 pm
dbr wrote: Wed Dec 01, 2021 1:28 pm
iamblessed wrote: Wed Dec 01, 2021 1:17 pm
langelgjm wrote: Wed Dec 01, 2021 1:16 pm
iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
What's to wonder? 30 year treasuries have been at 10% and even higher in the past, between 1979 and 1987.
Looking back don't they seem like a good buy.
Only in that particular history which also involved high real rates. If a person were buying in at 6% real, it might be a different story. And, as stated, the scenario then includes that inflation abated.
As I recall, when i-bonds were first issued they were paying out relatively high real rates. I did not know then to buy as many as I could. I wouldn't have gone 100% ibonds (stocks have returned more....) but a safe (US treasury backed) high REAL return would be a nice thing to have.
Yes, that is so. The real rate was once 3% and the purchase limits have moved around as well. That is one reason for my less than enthusiastic perspective on 0% real, even if that is higher than most other fixed income just now.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by TN_Boy »

dbr wrote: Wed Dec 01, 2021 1:35 pm
TN_Boy wrote: Wed Dec 01, 2021 1:31 pm
dbr wrote: Wed Dec 01, 2021 1:28 pm
iamblessed wrote: Wed Dec 01, 2021 1:17 pm
langelgjm wrote: Wed Dec 01, 2021 1:16 pm

What's to wonder? 30 year treasuries have been at 10% and even higher in the past, between 1979 and 1987.
Looking back don't they seem like a good buy.
Only in that particular history which also involved high real rates. If a person were buying in at 6% real, it might be a different story. And, as stated, the scenario then includes that inflation abated.
As I recall, when i-bonds were first issued they were paying out relatively high real rates. I did not know then to buy as many as I could. I wouldn't have gone 100% ibonds (stocks have returned more....) but a safe (US treasury backed) high REAL return would be a nice thing to have.
Yes, that is so. The real rate was once 3% and the purchase limits have moved around as well. That is one reason for my less than enthusiastic perspective on 0% real, even if that is higher than most other fixed income just now.
Yes, I quit buying i-bonds a few years ago because I could not get fired up about 0% to maybe .25 real returns either. I actually wound up simplifying and getting rid of our i-bonds -- they were not a big enough percent of the portfolio to be interesting and I wanted to get rid of the extra (Treasury Direct) account.

0% real sort of looks good now, though I *think* that bond yields will not continue to lag reported inflation by such a large margin for all that long. I think .... if only I had that crystal ball ...
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by telemark »

It would depend on what else was going on. If checking accounts were paying 20%, probably not.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by billfromct »

I would put some (50%?) of my retirement fixed income allocation in 30 year Zero Coupon bonds & sell when interest rates came down in 3-5 years. Of course there is no guarantee of interest rates coming down, but they always have over time.

You wouldn’t want to put Zero Coupon bonds in your taxable account because you would have to pay taxes on the “imputed interest” that is calculated but you don’t collect each year.

You don’t hear too much about Zero Coupon bonds when 10 year Treasuries are paying 1.0%-1.5%. Who wants their Zero Coupon bond to compound at 1.5%, but compounding at 10% is a different story.

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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by nisiprius »

iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
I believe in the simpleminded analysis that says that if the stock market returns 10%, bonds are not going to return as much as 10%. So it's an unlikely hypothetical. Like the irresistible force and the immovable object.

But the answer to your hypothetical is "no," simply because of inflation risk. And not just because of recent events, but because of, OK, fighting the last war--I remember the years around 1980, and my parents were seriously affected by inflation post-World War II and told me stories about it.

If there were a 30 year TIPS paying, let's say 7% real (inflation + 7%) I still wouldn't put all my money in them because my investment horizon is much less than thirty years and interest rate risk would be a problem.

But, yes, if I were 20 years old, and if there were a 30 year TIPS paying 7% real, I think I would indeed put all of my retirement savings money into it. I probably wouldn't roll them over when they matured when I became fifty.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by MarkRoulo »

dbr wrote: Wed Dec 01, 2021 1:35 pm
TN_Boy wrote: Wed Dec 01, 2021 1:31 pm
dbr wrote: Wed Dec 01, 2021 1:28 pm
iamblessed wrote: Wed Dec 01, 2021 1:17 pm
langelgjm wrote: Wed Dec 01, 2021 1:16 pm

What's to wonder? 30 year treasuries have been at 10% and even higher in the past, between 1979 and 1987.
Looking back don't they seem like a good buy.
Only in that particular history which also involved high real rates. If a person were buying in at 6% real, it might be a different story. And, as stated, the scenario then includes that inflation abated.
As I recall, when i-bonds were first issued they were paying out relatively high real rates. I did not know then to buy as many as I could. I wouldn't have gone 100% ibonds (stocks have returned more....) but a safe (US treasury backed) high REAL return would be a nice thing to have.
Yes, that is so. The real rate was once 3% and the purchase limits have moved around as well. That is one reason for my less than enthusiastic perspective on 0% real, even if that is higher than most other fixed income just now.
The May 2000 I-Bonds real rate was as high as 3.6%!

From the first issue (Sep 1998) through the Nov 2000 issue the real rates were 3.0% or higher.

But leading up into the dot-com crash folks wanted to invest in the stock market. Because it was going up 20% per year!!!! Why invest in bonds when you can purchase pets.com stock? Or eToys? or QQQ?

By May 2003 the I-Bonds real rate was 1.0%. Folks were much less excited by stocks and the treasury department could offer lower rates and still get customers.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by BitTooAggressive »

iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
I would put more than I have now. I might wait until rates start to fall a bit. Then you are getting the high yield and the benefit of falling rates. But we are a long ways from that.

Also if they are up to 10 you might be afraid they go to 14.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by invest4 »

Like others, I would definitely not take such a position. However, I often think about the conditions that would persuade me to invest a larger portion of my bonds in LTTs (currently TBM).
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by pseudoiterative »

Yarlonkol12 wrote: Wed Dec 01, 2021 12:54 pm Seems risky to go all in, what if interest rates and inflation continue going up? You could get wiped out
That's what I would be concerned about as well.

If interest rates rose to 10%, and you go all-in on 30 year treasuries, ... then what if interest rates go up another 10% ? The market value of your 30 year treasuries at 10% are going to be massively reduced.

There's a good picture illustrating the effect of small changes in interest rates to long duration bonds in this earlier post by typical.investor : viewtopic.php?p=6234969#p6234969

see also https://www.bogleheads.org/wiki/Bonds:_ ... s#Duration

and https://portfoliocharts.com/2019/05/27/ ... convexity/
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by averagedude »

It depends on expected market inflation rates. If 30 year treasuries was 10% and the 30 year TIP rate was 7%, yeah I would buy a heavy dose of treasuries, but I would buy the TIPS.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by Broken Man 1999 »

I don't think I would put 100% of my investment portfolio into only one asset type.

Some portion, maybe, but never 100%. Not gonna do it. Wouldn't be prudent.

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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by 000 »

Would never go all in, nor do I think 10% is even the ceiling.

Wake me up at 15%.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by Leif »

Since we are saying If, then if CPI was 0% or even 2-3%, for the next 30 years, then Yes, I would.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by Makefile »

Anyone have Individual Retirement Bonds? I've only heard about them from mentions in the IRS instructions as they haven't been issued since 1982.

https://www.ecfr.gov/current/title-31/s ... tion-346.1

Basically anyone who bought them in late 1981, or in 1982, received 9% fixed until reaching age 70 1/2. So they could conceivably still be out there until 2034 or so.

The buyer probably felt remorse during the 1980s as rates rose higher than that, only to drop later.

I doubt there were many buyers, as in those years you couldn't contribute to an IRA at all if covered by a retirement plan, as non-deductible contributions to traditional IRAs, and Roth IRAs did not exist.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by Dottie57 »

I still hold individual bonds in an inherited IRA from my parents. The rates are from 7.5% to 8.75%. They all mature within the next 5 months. Bought in 80’s and 90’s. CDs and Bonds were all that were in the IRA.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by moneyflowin »

iamblessed wrote: Wed Dec 01, 2021 1:17 pm
langelgjm wrote: Wed Dec 01, 2021 1:16 pm
iamblessed wrote: Wed Dec 01, 2021 12:20 pm I have wondered about this question for years. The stock market over the long haul has averaged about 10%
What's to wonder? 30 year treasuries have been at 10% and even higher in the past, between 1979 and 1987.
Looking back don't they seem like a good buy.
Actually no it doesn't seem like a good buy. AAPL looks way better.

If you're gonna use the power of hindsight, then I will too.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by quantAndHold »

It would depend on the situation. As far as just being a buy and hold bond investor, what really matters is the real yield, not the nominal yield, and I can’t really answer a hypothetical question that doesn’t address inflation.

That said, dad’s best investment of all time was investing our family’s entire nest egg on 3X leveraged long treasuries in 1981, when rates were >14%. He claimed it was a no brainer that interest rates had to drop. Interest rates dropped to about 10% a few months later, and he sold. He more than doubled his money in four or five months.

He also said it was the only time his investments kept him awake at night. This came from a guy known for dodgy investments that never made money. So there’s that, too.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by 000 »

quantAndHold wrote: Wed Dec 01, 2021 7:29 pm That said, dad’s best investment of all time was investing our family’s entire nest egg on 3X leveraged long treasuries in 1981, when rates were >14%. He claimed it was a no brainer that interest rates had to drop. Interest rates dropped to about 10% a few months later, and he sold. He more than doubled his money in four or five months.
How did he do that back in the day? I'm assuming brokerage margin?
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by Triple digit golfer »

No. It's not diversified and subject to interest rate risk.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by Beensabu »

No.

(1) Shorter durations make more sense when rates are high.

(2) Never 100% anything.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by peskypesky »

No.

Not 100%. But I would put some money into them at 10%. Maybe 1/4 of my portfolio.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by UpperNwGuy »

I would not. I'm too old for 30 year treasuries. I'd stick to my intermediate-term treasuries.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by reln »

EfficientInvestor wrote: Wed Dec 01, 2021 12:26 pm No. Generally speaking, if interest rates rise, the expected return of stocks would rise along with them. Therefore, the expected return of stocks would also be 10%+ in this hypothetical situation and you would still receive benefit from diversifying among stocks and bonds.
Exactly
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by MathWizard »

For me, the only thing that would ever make sense as 100% would be a stock index

Businesses make things.

Corporate bonds typically return more than government bonds,
and generally, corporations who can issue A class bonds don't borrow unless they believe that they will make more with the money than they pay in interest.

So, on average,
stock returns > return from quality corp bonds > return on govt bonds

You get a premium for bankruptcy risk with the corp bonds, and
you get a premium for volatility risk with stocks.

Long term, volatility risk diminishes if you believe in RTM.
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by quantAndHold »

000 wrote: Wed Dec 01, 2021 7:31 pm
quantAndHold wrote: Wed Dec 01, 2021 7:29 pm That said, dad’s best investment of all time was investing our family’s entire nest egg on 3X leveraged long treasuries in 1981, when rates were >14%. He claimed it was a no brainer that interest rates had to drop. Interest rates dropped to about 10% a few months later, and he sold. He more than doubled his money in four or five months.
How did he do that back in the day? I'm assuming brokerage margin?
I honestly have no idea. I was busy finishing high school at the time so I wasn’t paying attention. He told me about it years later. He told me he could have levered up to 5X, but was afraid to.

Living in that house was like living in the crazy investment of the week club, so 3X treasuries wouldn’t have moved the needle of my consciousness. Most of his investments went nowhere, but the 3 he got right…I’m living off of that today.
Caduceus
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by Caduceus »

Probably not, because then stocks would probably be trading at even more compelling valuations. Didn't this already happen before in the early 1980s, I think? Or maybe I mis-remember.
000
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Re: If 30 years treasuries went to 10% would you put all your money in them? If not tell me why?

Post by 000 »

Caduceus wrote: Thu Dec 02, 2021 1:29 am Probably not, because then stocks would probably be trading at even more compelling valuations. Didn't this already happen before in the early 1980s, I think? Or maybe I mis-remember.
Correct, 1982 was a great time to buy both long bonds and stocks.

Really the time to load up on long nominal bonds would at the end of an inflationary period right before the start of a deflationary period (to be distinguished from a disinflationary period such as the last 39 years) but this requires one to predict the future.
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