down…the only thing that isn’t down is my bear tracking fund!”
Turns out it was someone I know who was upset that although he had done his best to balance out the risk in his portfolio – and in the main, he & his wife have done a good job of it.
“So how come everything but our bear stock fund sucks over the past week – and how come the bond fund is down?”
As you know, I’ve been a big fan of investing in TreasuryDirect.gov product, where you have your own account with the government and you can pick and chose from among their products….which I did and I’m still happy with the result.
I haven’t discussed it much, but there’s a key difference between investing in a bond ETF and investing in the underlying bond.
In the case of the ETF, you’re – in effect – buying a share in a pool which manages a pile of money invested in bonds. Since the outlook for bonds changes over time, depending on interest rates) the money you put in and the money you get out can vary over time.
So, in the case of this particular friend who’s in a bond fund, let’s pretend that he’d bought a good one like the Vanguard long-term government bond index ETF (VGLT). Since he would have invested in this on November first (had this been the one – it wasn’t) his entry price would have been $63.98. As of the close yesterday, it was 62.04.
My friend was upset that he’d made a sound decision (something to hedge his bet on gold) and here it was, about two week’s worth of trading later and the bond fund portion had lost about 3% of its value.
He then asked me “How’s you money in Treasuries doing? Aren’t you losing money, too?”
A check of my TreasuryDirect account showed that no, I still had all the dough I’d put in (in 2008) plus a couple of bucks of interest.
“How can that be?” he wondered.
A number of find points to keep in mind. The major one is that money in a bond fund is NOT like putting money in stocks. Bonds are fine for very long term money. So, while my friend seems on the face of it to have lost 3% in the latest few weeks, the longer term view is that the 52-week range of the bond fund is 56.37 on the low side and 68.11 on the high side.
Now, the hey thing about my TreasuryDirect position (EE Savings Bonds) is that when you buy a savings bond, you are buying it at a discount to face value. What this mean in practical terms is that if you buy a $25 savings bond for (toss a dart) $19.25, then at any point along the road to the future, cashing in the bond early (with minor very short term exceptions) nets you something in terms of an increase. I take all the discount risk as the Savings Bond buyer, but the risk is known up front (where I like it) by being discounted to face value.
The ETF’s, on the other hand, you’re buying ownership in a pool of bonds which are managed this way and that. but the key thing is they pay a dividend. In fact, here’s a side that reports the most recent VGLT dividend was 18.3¢ a share somewhere near 2.5% annualized. So, even if my friend lost 3% in the past couple of weeks, over the long term bonds he might get back to even or better.
I wouldn’t be in a BIG hurry to sell out of any bond positions just yet, and the article over at Seeking Alpha under the heading “Bond Market Sell-Off is Almost Over” is definitely worth a read.
THIS IS NOT FINANCIAL ADVICE – just a discussion of a discussion between friends.
My position taken several years back – was to put some portion of our assets in metals and some portion in bonds (directly via the TreasuryDirect account. So far it’s working out fine, but in the last week or so, I envy my friend being short via ProShares market index product.
In either event, the main thought was to build a portfolio that would return something near original face value, rather than trying to make a fat return in a period when the whole character of markets is changing. There are so many cross-currents of inflation and deflation in the headlines, it’s enough to make your head spin.
A few readers have asked me what I think of precious metals ETF’s, too. One asked “Are they are good as holding the precious metals directly?”
Depends. I’ve read the prospectuses of a few metals funds and I think the thing most people miss is that they don’t promise much — if any –convertibility to the underlying metals except for ‘jumbo’ investor types. Mostly – if my read of the various prospectuses is anywhere in the ballpark, they offer a return about equivalent to the underlying metals, but in terms of convertibility to physical metals? Might want to read those parts extra carefully.
But let’s drop back to the matter of “How to make a milk stool” on which you can rest a pile of money to retain as much purchasing power as possible. Had a fine note on point from a reader this morning who has been ‘paper trading’ futures:
“This is my (virtual) futures account. I got short before the October dates, so it has been tough not to capitulate. But I was down $280K (in play money) last Thursday and as of now….let me see…I’m down about $64K.
Since last Thursday I have noticed higher volatility in all these markets. Since these trade 24 hrs Sunday afternoon to Friday afternoon, I see a lot of foreign movement in the night.”
Might have to squint a bit to read it, but the ‘paper trade’ he’s had on was a mix of oil, the Dow, and gold.
Building a solid ‘milk stool’ is tough, made even more so by the tendency of investors to think of “unrealized profits” as a “loss” – which is absurd, but here’s how the mindset comes about:
Say you noticed that in July 2005 I told you I was buying silver for $7 an ounce. Taking a flyer on it, you bought a 100 ounce bar.
After leaving it under the bed for 5½ years, you stub your toe on it last week and notice that it’s around $28 something.
This morning, you look at the price of silver which had been as low as $25.03 (as of press time).
If you’re a long term investor, you don’t care, since the only time the price is going to matter is when you sell the silver and unless you need the cash for something today, you kick it back under the bed and forget about it.
On the other hand, some people would to the math and announce quite shamelessly “OMG-WTF!!!??? I have lost $3 an ounce!!! Time to SELL!!!”
Since no one seems to be around holding up (reliable) “But Now!” or “Sell Now!” signs, but since a $1 steak dinner in 1913 is now about a $22.19 steak dinner just on inflation – which we all know is watering down the money – seems to me that over the very long term inflation is always baked in the cake with a few exceptional periods like the Great Depression. And even then – while private gold ownership was illegal – great deals were made for a few ounces of the ‘yellow dog’ at a time ‘cash was king’.
US Government bonds are presently the only thing I’m interested in, since there’s been a brutal sell-off in the tax-free/municipal bond market. But to each their own: This isn’t investment advice. Just coffee with freinds.
Haven’t mentioned my cohort Manfred Rolle of Maxa Research – the folks who build the cookie-watching program I’m so fond of. Turn’s out just when I was thinking I oughta pop him an email, in comes a company press release from Maxa…
“A new variation of Web Bug called “EVERCOOKIE” is now circulating around the world. Coded by Samy Kamkar.
Evercookie uses currently eight different storage locations for its cookie, ranging from HTTP and Flash cookies through to HTML5′s new storage methods and ‘RGB values of auto-generated, force-cached PNGs using HTML5 Canvas tag to read pixels (cookies) back out’ (really!).
If the cookie can be found in any one of those locations, it can be rebuilt (and then stored in all eight places again!) Basically, unless you know exactly what you’re doing (and you have a lot of spare time to hunt down all of the cookies), you can forget about ever deleting an evercookie.”
OK, that’s the bad news. The good news is that Maxa will release Cookie Manager 5.0 shortly and we’ll bring you the upgrade and new installation information as soon as it’s released.
Between www.malwarebytes.org’s product, Maxa, daily antivirus updates and weekly defragging of the hard drive, our computer performance continues just as fast as ‘day one’ operation. Don’t forget to scan your registry once in a while, too…all kinds of junk pops up there, such as file extensions that are no longer used and so forth.
We keep two computers here: One for audio & video production and the ‘production’ computer. Never have both online at the same time, a testament to either sound operating practice or a bit of paranoia…no telling which.
Speaking of web security and such, here’s a nifty idea: Write down your passwords on paper somewhere. Took me about 45-minutes to get logged back in to our two wireless routers here at the ranch to implement the periodic p/w changes. Also, be sure and use plenty of odd ASCII characters (punctuation makes and so forth) since that vastly expands the number of possible combinations to log in. Hater having to go into Zen-like meditation to recall an obscure password, so this time I’ve used the #2 graphite storage device.
Adventures in Antennas
If you’re not into ham radio, you might skip this part and get to work, or something useful, but if you are, I’m back to ‘owning’ the 20-meter ham band with my antenna system back online. First contact was V51B in Namibia with 100 watts and then in CW to Europe with just 5-watts out. Only in ham radio do you find people who are trying to communicate around the world with about a flashlight’s worth of energy.
The small antenna (foreground, below) is our private microwave link into the internet while the one 45 feet higher up is the HF beam and dangling off to the right side of the tower is my recently welded support for the 40 and 80 meter CCD antenna from www.ccdantennas.com
A friend of ours – a KH6 (ham radioese for ‘lives in Hawaii), sends this about ‘magical antennas’ (ham radio’s version of Unicorns):
Ever heard of the new EH-antenna? New physics that extends Maxwell’s equations into 3-D to account for electron rotation. This antenna generates a ‘new physics’ type of penetrating magnetic-component field that will work underwater!! (Submarine communications) They’re currently funded by and working with the military, so I wonder if this info will be available for long.
An incredibly small 80M antenna is a simple 6-ft. pole, 2 inch diameter. Works better than a dipole. Construction info. here: http://www.dxzone.com/cgi-bin/dir/jump2.cgi?ID=9346
The EH Antenna systems company website is here:
Pull down the THEORY tab and blow your mind! Even if you don’t follow the equations, read the Russian’s descriptions of what kind of field is being generated here. This stuff is NOT in the textbooks!”
Not to shock my KH6 friend, but yes, we were discussing crossed-field antennas as long ago as 2002 (link here) along with fractal antennas.
I’m still waiting for a commercial version of the product to come out, since there’s so much math involved in designing a crossed field antenna (CFA) and life’s too short to spend that much time on a calculator.
On a further research note though, you may want to check out the article on the Quarter Century Wireless Association Chapter 70 (Ottawa in VE-Land) website “The Truth and Untruth about Electrically Small Antennas.“ I seem to remember an article or two in the www.arrl.org monthly QST a few years back about some CFA experiments on 40-meters. Some discussion, too, about whether the successes reported with that one were from the antenna itself radiating, or whether it was radiation from the feedline.
My current fascination (yes, poor pun intended) it to tinker with passing feedlines through high density magnetic fields. Intuitively there’s something to be found there, just I don’t know what yet. Another time, I’ll tell you about my Caduceus Balun project, also ongoing.
Still awake? More coffee then!
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Once We Tip
A number of readers have read Clif’s latest post at HalfPastHuman (which deals with Aikido and the sub-art of falling as much as with related mental arts) and have asked two questions: “What does this post mean?” as though I should have some particular insight into flying without and airplane. I have none to offer, preferring to spend more effort on remaining upright than being tossed across a room. The other question is “What’s after the tipping point for Peoplenomics?” This second question is much easier handled under the subject line “Decoupling”, as in ‘personal decoupling’ from the prevailing paradigm; because it’s where the battles of personal freedom are really fought. It begins by deliberating ‘decoupling’ from the world around you.
Places to Go, things to do…
Looking to read some interesting items? Try out the National Dream Center site – which I cooked up to see if there’s another way to peek into the future that would reinforce some of the predictive linguistics expectations. Free – here.
Up this week for the first time: JB Slear’s site www.mygroponics.com where you can buy his popular ebook on backyard (scrounged together) vertical hydroponics which is way cool – life sustaining pastimes are useful, know what I mean?
The folks at Maxa Research have put together a short video (sound track by guess who?) that shows the Maxa Cookie Manager. You can see it here.
I don’t usually get all whipped up about software, but this is one of those dandy tools that just simply works great. First thing I put on my new computer when I got it was Avira Anti-virus and Maxa Cookie Manager (MCM). Either follow the on-screen download instructions of simply click:
Once you try it out, to upgrade to the fully functioning version, just click the upgrade button (!) on the upper right hand side for the $35 unlock to get it to remove even those nasty and highly intrusive ‘non-browser specific’ cookies. Bonus: You computer may run faster.
“Live on $10,000″ A Year
Having a hard time making ends meet? (Like who isn’t, right?) A good starting point to better match up income with outgo is our $10 e-book “How to Live on #10,000 a Year…or less!”
It’s an automatic download. It’s written in an information dense style: The whole thing runs about 65 pages, but it gives you a vision of how to not only live on the cheap, but also how to migrate up the economic foodchain if you have a little hustle left. A bonus section called “How to Build Anything” should instill confidence if you’ve never taken on a home improvement/home creation project before, too….. Click here for the index and details.
Pass It On
A different take on things – that’s what you’ll find here most mornings. If you know of anyone who might also like our content, simply click here and send a link to them. Or, if you hated what you read, send the link to all your ‘worst enemies’. Like they say in Burbank, “Ain’t no such thing as bad press…”