Timing the markets

I am so pleased that you, DrBob and iampops agree about your bullish strategy even though you don’t agree on anything else

I think you misunderstand. I’m not bullish at all, in fact the opposite; I have been slowly exiting positions I think wildly overvalued, leaving me with the merely “overvalued.” :wink:

Except for the few categories I mentioned upthread (and a couple similar) I’m not at all confident of the market’s ability to stay whole for much longer. Of course I said the same thing in 1998 and the mania lasted another 18 months, so… However I do suffer from TINA, and I believe bonds are the worst place to deploy at the moment, but what do I know?

I’m about 50% cash, the rest mostly in heavy dividend payers, and if inflation stays rampant I will get hammered on the cash side. If there is a slow motion crash I will get hammered on the portfolio. If there is some triggering event and I see it early enough I will rush for the exits, as I have before. It’s a time of great uncertainty, that I’m sure of. Heh. To be sure of great uncertainty, that’s a new one.

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I agree. I’m talking short-term (1.5 years or less) bills, not long-term bonds. Just to get a little more interest until the situation is more promising.

Wendy

I got your point but the numbers do not yet persuade me to buy short term treasuries. Last time I looked, a one year treasury returned 1.67 percent, federal taxes knocked it down to about 1.3 percent, and it robbed me of the ability to deploy it in the event of a serious stock/bond/real estate crash in the ensuing year.

FDIC insured cash offers very little downside as compared to short term treasuries and more upside in terms of flexibility. But it’s a personal call, not a right or wrong answer.

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"Question:
How to best ladder bonds to maximize yield in the short term while being poised to buy bonds when the Fed’s rate raising cycle reaches its maximum and the stock market crashes? How would the timing look?

Wendy "


Given the current “breadbasket” problems - which appear to be a world-wide issue - one might
try to consider corporate bonds in areas like fertilizers, seeds, grain processing and possibly
transportation - so firms such as Mosaic, CF Industries, Dow, FMC, the Andersons, General Mills,
Kellogg, Bunge, ADM, Sysco, and the list could go on.

Howie52
FYI - the family has equity positions in GIS and Sysco from the list. I have worked for
several of the companies at various times and in various engineering activities.

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How to best ladder bonds to maximize yield in the short term while being poised to buy bonds when the Fed’s rate raising cycle reaches its maximum and the stock market crashes? How would the timing look?

There’s no really good way. I’ve been buying 8-week treasury bills every week for a few years now. I chose 8-week instead of 4-week because the yield is lightly higher. In any case, every week 1/8 of that money is available to be invested in something better that may come along.

Also, market moves seem to have sped up dramatically recently. In the 80s, a decline could last for weeks, months, even longer, so you had plenty of time to snap up bargains before they began to recover. But nowadays, it seems like only hours, or days, in many cases to have a chance at snapping up some bargains.

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Desert (CVX, XOM, T, BNS, BKH, ED, ATGFF, NI, NWN, TRP, ENB, WRE, WGL, XEL, DUK, SO & KO) Dave

I’m surprised you still have T in there … aren’t they about to slash their dividend? I sold all my T at 27.245 in January, and collected my last dividend from them on 1-Feb. I really have tired of their forays into media … and losing tons of money with each foray. So it’s goodbye for me. I’ve owned some T since the 80s when I worked for them.

At current stock and bond prices there is no compelling need to rush to deploy cash at this point.

You mean other than the fact that cash is losing about 7% a year right now?

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Good point. Even cash cash is expensive in inflation adjusted dollars.

Treasuries of very short duration can allow you to marginally cut the cost of holding too much cash while retaining flexibility in the event of a precipitous crash in stock and/or bond prices.

“Good point. Even cash cash is expensive in inflation adjusted dollars.”

I have a Fidelity IRA. The money market fund is FZFXX, and that is where any interest,
dividends, or money from stock sales goes. FZFXX has an expense ratio of 0.42% ( .0042 ),
and has a yield of 0.01% ( .0001 ), so it actually costs a person 0.41% of the amount of money
held in it for the “privilege” of storing money there.

So even though CD’s pay very little, it’s still a net gain to use short term cd’s compared
to a money market fund. I’m very disciplined about keep short term money ( < 5 years )
out of the stock market, and there is no good place to put it, so just have to accept that,
and look for the least worst alternative.

Will have to look into the short term Treasuries mentioned in this thread, they might
be slightly more least worst than short term cd’s.

Treasuries of very short duration can allow you to marginally cut the cost of holding too much cash while retaining flexibility in the event of a precipitous crash in stock and/or bond prices.

Right now, due to heavily restrained interest rates, it’s only a tiny margin. Instead of losing 7% over the year, you lose perhaps 6.4% over the year. But every basis point counts over the long-term.

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At current stock and bond prices there is no compelling need to rush to deploy cash at this point.

You mean other than the fact that cash is losing about 7% a year right now?

“The return on cash is what you get from having it (not a close substitute) ready when a good opportunity arises.”

DB2

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“The return on cash is what you get from having it (not a close substitute) ready when a good opportunity arises.”

Opportunity or NEED!

Quite amazing that this needs to be explained, specially at METaR!

The Captain

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“The return on cash is what you get from having it (not a close substitute) ready when a good opportunity arises.”

This is absolutely true. I described earlier how I “laddered” 8 weeks of 8-week treasury bills, but I didn’t describe exactly what it was for. I manage a small business that funds deals/loans periodically, and for some of them, we commit a certain amount, but it isn’t drawn all at once, but rather in dribs and drabs over time. So, we have to keep a bunch of cash sitting in our bank account at all times to cover those potential draws. BUT, the business bank account has a really cr*appy interest rate (something like 0.01%) so in order to “juice” the yield somewhat, I moved a relatively small amount of the bank balance into 8-week treasury bills. Let’s say, using round numbers, I need to keep $500k in cash to cover potential draws. If I keep the $500k in the bank account, it will earn $50/yr in interest. If instead I keep $400k in the bank, and $100k in eight $12.5k pieces of weekly staggered 8-week treasury bills, then the bank account will earn $40/yr and the treasury bills will earn about $300-500/yr. But $400k can cover all draws over a few weeks, and if I see it being depleted too quickly, then all I have to do is turn off the auto-reinvest of the 8-week bills and $12.5k will be deposited into the bank account each week on Tuesdays.

And more recently, in my own personal bank account, I do a similar thing to “juice” the yield of the cash in my bank account. You know, the cash that is waiting for a big drop in the markets so I can invest some more! :rofl:

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I have a Fidelity IRA. The money market fund is FZFXX, and that is where any interest,
dividends, or money from stock sales goes. FZFXX has an expense ratio of 0.42% ( .0042 ),
and has a yield of 0.01% ( .0001 ), so it actually costs a person 0.41% of the amount of money
held in it for the “privilege” of storing money there.

Yield is reported net of fees. You are not losing nominal dollars in your money market.

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