thepupil

Is this a China ETF?

So if you had to pick a number for the delta between 100% VTSAX and 70% VTSAX / 30% VBTLX , over the next ten years, what would it be? Is it greater than say 1-2%/yr? If so why? I suspect you will say "who cares?" to which I would respond, "anyone w/ a 401k". I care about index returns for about $70K/yr. It's material to me. It may not be material to you. But I also care about it for the portion of my portfolio I control. I don't have a high degree of confidence in generating HUGE outperformance/high absolute returns. A certain 5-6-7% / yr with consistent carry and low risk of nominal capital impairment is a nice tool to have. It's not THE tool, but it's A tool.

yes, agreed with @Spekulatius. I don't think anyone is saying that "bonds will absolutely and definitively beat stocks over the next 10 years". What I'm saying is that "having 10-20-30% in bonds will potentially have lower opportunity cost [maybe none or negative cost] vs a portfolio of 100% stocks over the next 10 years when comparing portfolios comprised of broad market indices". To phrase a bit less clumsily, I expect the go-forward return on a portfolio of 70% stocks / 30% bonds to be "competitive" with a portfolio of 100% stocks. I expect the path to more closely resemble 2003-2013* than 2013 to 2023 2003-2013, balanced index lagged all stocks by 0.5% / yr. 2013-2023 that number was close to 5.0%/yr. That's a huge difference. I'm not looking to lag passive indices by 5%/yr, that's destructive to my wealth / purchasing power. If I lag by 0.5% and have a smoother ride, that's a tradeoff I'm willing to take. All the better if I can outperform in my stocks and not lag at all. The reasoning is that we are at a 5 handle on agg (mostly tsy's and MBS) and a 6 handle on IG corps. Bond returns, if held for their duration are pretty predictable; if you lose initially, you make it back on the reinvestment of coupon. I expect them over the duration of the index (7-8 years) to return their current YTM's. I also expect some rebalancing benefit. I don't expect stocks to repeat the 12%/yr of the prior decade. I'm not crazily bearish, just when i look at the ingredients of earnings growth, yield, multiple change, etc, I don't get to 12%. Therefore, for many of us who can only invest in indices for a substantial portion of our ongoing and existing savings, I think it makes more sense to own bonds, than it has in the last decade. I also find myself surprised that the bond market has become MUCH more attractive and we've entered a much higher return on savings environment without me having experienced any personal wealth destruction. It seems like I (and a lot of otgher folks) have a ZIRP NAV and now get to ivnest at a PIRP RoA / RoE. Feels like a free lunch for savers. To some extent, I don't think that is sustainable/will last and am therefore adding a chunk of duration, which introduces more price risk, but also more upside if things change. *i just picked these as arbitrary 0-10, and 11-20 lookback so as to not be accused of cherrypicking and just for ease, not trying to pick top of market to bottom of market, or only have "the lost decade" etc.

agree completely. If we think of Utilities as a perpetual TIP, then we've seen the competing 10-30 yr TIPS go from negative yields to 2%+ with little corresponding de-rating from utilities and that's just from rates alone. When you add in the asymmetry regarding these liabilities, it really seems unattractive. Why pay 200% of book value for a 8-9% ROE (4% earnings yield with a slow inflaiton increase) when you can get 2% real from TIPS or 6-7% nominal from bonds. Here's the 2006-2022 and 2012-2022 Per share growth in fundamental metrics. Maybe go forward's a bit better if we have higher inflation, but certainly a shitty starting point. This argument is probably stronger than the staples discussed in the KVUE thread because utilities have just as weak long term growth w/ far greater capital intensity. Another way to think about it is the utilities index returned about 9% / yr w/ divvies reinvested over the last 10 years. over that time frame the index re-rated from 1.5x book to 2.0x book, so you had a nice ~3% / yr from re-rating. If you think that's goes from a positive to negative, then the total return prospects for utility stocks are quite low.

so as y’all know I keep an eye on long duration high quality fixed income. If you look at Fidelity’s offerings (which tend to feature lots of adverse selection l) the highest yield for the rating is in utilities, clearly people trying to decrease their weight to “low risk” utility bonds, including Berkshire related ones. on the margin, I’m a buyer, but at very small size, stuff like BRKHEC 2054 at $85 / 6.6%. Not recourse to the mothership, but it’s still be a pretty momentous decision for Berkshire to give up an important subsidiary. For a small portion of capital, I’d bet that won’t happen. I think taking advantage of peoe ligjtening up in related securities may be the better option than running to the literal fire.

I looked at shorting the short maturities, but couldn’t get borrow….no view here

I own a decent (~5%) position in the Energy Transfer Floaters which mature in 2066. I bought around $79/$80 and they're offered at $81. CREDIT: the bonds are pretty much subordinate to all other bonds of ET, but above the prefs / common. ET has $48B of debt and trades for $100B enterprise value. 2024 EBITDA is $13.5B before a recent acquisition announce. So EV is about 7.5x EBITDA (which seems fairly reasonable, assuming no shenanigans, which I worry about w/ a roll-up) and the debt is about 1/2 that. I think these bonds will do very poorly if ET experiences a credit event. they are junior. But I don't foresee a credit event happening. More on that later... Some VIC writeups https://valueinvestorsclub.com/idea/ENERGY_TRANSFER_LP/1401237966#description https://valueinvestorsclub.com/idea/ENERGY_TRANSFER_LP/7981359147 https://valueinvestorsclub.com/idea/ENERGY_TRANSFER_LP/2125697553 RATES: the bonds pay SOFR + 328 and the most recent coupon was set at 8.65%. This provides >10% of floating rate yield to the bonds at $80. The bonds are callable at par. The vast vast majority of ET's debt is fixed rate and features both coupons and yields below these bonds. I would expect that if short term rates persist or go even higher, then ET would have incentive to call the bonds using cheaper capital. They have a fair bit of near term maturities to work through but generally have been de-leveraging. Most recent acquisition announcement is all equity so leverage neutral. You can make a decent IRR here if the bonds are called. If the bonds aren't called, you'll earn the coupon / price paid over time. HEre's a simplified IRR / MOIC if called at 2,3,4,5 years (assuming an 8% coupon) So what am i missing? I've done enough work to be somewhat comfortable with this bond. I'm willing to wager 5% of my nut on the idea that ET is worth > $50B (vs current $100B EV) and don't mind getting paid 10% in carry or making 25% upside if they decide to call the bonds. If rates fall, these will be less interesting in terms of coupon, but I make money elsewhere. I'm skeptical of roll-ups, but this seems like one that actually makes sense... Any thoughts appreciated. Here are ET's Junior Securities Here is a sampling of ET's unsecureds

Well, I capitulated today and bought a fair bit of corporate bonds where I had liquidity (in my taxable account). 2% in the Bowdoins and Essex (the safest IMO) and about 1% in each of the others. ~10% collectively. After tax these only yield about 3.5% but they service my mortgage and have duration upside. Along w/ a slug of ET floaters I have, my corporate bond basket yields 7.7% pre-tax / 4.4% after tax. I own about 32% of my mortgage amount in this basket. Pre-tax is pays about 88% of my pre-tax mortgage interest. Admittedly that's heavily subsidized by the 10% yielding ET notes whihc have a much worse credit risk profile than the others. Every time I've done this, rates go back down and prevent me from deploying real money in bonds. Maybe this time is different and I'll start getting 7% on safe long duration stuff...I like having lots of line items / credits and would just add names like 5-10 at a time. this increases t-costs though. Would re-iterate the better approach may be treasuries or a fund. Bowdoin 4.69% of 2112 @ $78 / 6% / +163 to the 30 yr. ESS 4.5% of 2048 $76.7 / 6.37% / +188 to the int tsy META 5.75% of 2063 / $96.8 / 5.96% / +157 BNSF 5.15% of 2043 / $94/2 / 5.6% MO 5.95% of 2049 / $90 / 6.75% SHW 4% of 2042 / $77 / 5.9% KIM 4.25% of 2045 @ $75 / 6.4%

So i was into this stuff late last year when it started getting to these type of levels. Stuff like SHW 4's of 2042. Sherwin Williams isn't going anywhere and you're buying at the highest yielding (20 yr) part of the 10-30 yr curve with some credit/liquidity spread and you get to 5.9% YTM / $78. It doesn't seem terrible, my. The problem is when you go to buy and to sell, the t-costs aren't great, so you have to be prepared to lose a few points on the way in / out, this doesn't matter if you're actually intending to hold long term, but I found that when duration/spreads rallied, I made 8 points instead of 12 points and found myself wondering if I'd have just been better off buying more liquid things like tsy futures or calls thereon. I'm looking to extend duration of my parents bonds portfolio and probably will be picking up some stuff like this, but they use Fidelity which is absolutely terrible at bonds...a simpler solution may just to be to buy the Vanguard fund VWETX w/ an SEC yield of 5.2% as of 8/10 and probably a little higher now. also think LT TIPS are interesting. Why should the government give investors 2% real risk free, and the ability to lock that in for 30 years? it just doesn't seem to make sense to me. 30 yr TIPS yeields are highest they've been since 2010. while they debuted at 4% REAL in the late 90's (an amazing opportunity to jus tlock in all one needed in hindsight), still think 2% real is pretty good for a portion of a retiree's capital. All this is said in the context of a tax deferred accounts, not taxable.

I read @rkbabang's rant in the voice of Daniel Plainview

My overall view is similar to that which I wrote 2 and change years ago. High quality US stocks (ie the best of companies in the most expensive and highest returning major market) trade for 24x trailing and 22x forward. Is this a "bubble"? In my view it is not. Is it "cheap" "compelling"? No. Does it offer a mrgin of safety over near term investment horizons? No. What has changed since I wrote that is the 10 yr inflation linked treasury wentr from -1% to +1.7%, CLO AAA yield went from 1.5% to 6.2%, 30 yr went from 1.5% to 4%, HY went from 4.5% to 8.7%, etc. So bonds, cash, low risk floating rate paper, risky bonds etc, all beefed up as as competitors to stocks by ~2-3% REAL and 3-4% nominal, which is meaningful. but the trade off is still not so so clear. it was hard to picture oneself owning any bonds/cash/etc 2 years ago. Now things are better for those. In some ways (as I mentioned earlier), it's been the best of all possible worlds for asset owners as one can take the stock gains and invest in the lower risk stuff at much higher returns without having lost any money. it's a good time to re-assess asset allocation, lock in some gains. maybe do some heding for the more frisky of us... Still struggle to call it a bubble.

yea i hear you. for my 401k its just the indices available, not active funds, so i go with those. I think the quality of the EM index has improved over time (if one is okay owning chinese tech). it's no longer just a bunch of telco's and miners and energy (and the energy is amking lots of money)

this is a fair point, though many of us have a lot of $$$ that can only be invested in indices (of the cap weighted variety) so some degree of view on the overall market's valuation may be warranted. I invest my index only stuff in foreign stock indices these days..I vacillate b/w bonds and foreign stocks and have recently (perhaps stupidly and procyclically) gone with foreign stocks. a recent trip to Europe where verything jsut felt oo freaking cheap relative to my strong dollars tipped the scale for me..Generally the foreign indices are of lower quality and in in lower multiple sectors, so the 13x offered by foreign markets isn't comparable to the 21x of the US. But I think b/w the valuation discount and currency diversification, a reasonable addition to a portfolio....the EM index is mostly just china though...

yea. it's a breath of fresh air. parents portfolio feels so much safer with all this yield...been locking in w/ some duration. they also just turned 70 and both worked long and paid a lot into SS, deferred til 70, they have ~$100K/yr of inflation linked SS income turning on. While that's obviously not typical, lots of boomer savers out there benefitting from the (seemingly unsustainable) simultaneous rise in real and nominal rates and the stock market...while getting fat CPI adjustments to their checks...and the real estate market still humming...just a crazy time

some quick thoughts. - agree manufactured housing / RV parkst are great. Clearly there's institutional bid for marinas right now and these guys have very strong position there. - I've never really looked at SUI other than its bonds (they trade a little wide in sell-offs) ). Reason being whenever I look at equity, I always conclude I'd rather own ELS. - it appears to be at widest discount to ELS in last 10 years on a simple P/FFO basis. (5 second analysis) - It's hard to call a company that's done 13%/yr for 10 yrs AND 13%/yr since 1994 mismanaged. and that's after a 38% drawdown - BUT, I'd also note that SUI has historically been much more dependent on accretive issuance to grow value. They'v increased share count from 36mm to 124mm over last 10 years to roughly double ish AFFO/share. ELS has done similar per share growth in per share metrics with 12% cumulative share count growth. So I'd observe that SUI is potentially more dependent on its stock price to create value where with ELS you can take comfort that the actual portfolio created the value. With such a rapidly growing (EV has 8x'd over last 10 years) company, there's also the potential for any bad stuff to be hidden. - What I find confusing is the company claims 7%/yr SSNOI growth. which with leverage should lead to > 7% organic equity metric growth, which with accretive issuance should lead to even greater growth, but when I eyeball per share fundamental metrics, I only see about a double over 10 years, which implies either the SSNOI record is not real, they've issued dilutively, or....something else. I don't know. - they have nice debt, 10 yr wgt avg maturity for the mortgage portion, seemingly mostly fixed. probably nothing new to you if you looked at in depth already, but just took a gander at it for a bit.

you are probably right. I just did what i thought was closes to shorting the stock but with limited risk/capital outlay...really i probably should have just shorted it and bought the call like did recently with ARKK. I trade options with the knowledge that whatever I do, I'm definitely not optimizing or doing it perfectly, so appreciate the feedback and would love any resources that guide your general thinking as to how to approach. My approach has been that of a middle of the curve liberal arts major who should probably put more time into thinking about the precise construction.

MGK risk reversal. Sell 245 Call, Buy 265 Call, Buy 245 Put. Jan 2024 This gives me about short exposure of 15% MGK and limits my loss to 125 bps pre-tax. I can take the loss in either 2023 or 2024 allowing for flexibility. Probably dumb. Can't resist.

goldman's email format is first.last@gs.com and it obviously just means GFY

For better and worse, a $500k a home isn’t indicative of an area being expensive anymore. Close to average/median home price in US now.

The median and average of S&P 500 stock is up 8% and 11% YTD. For the top 10, those #'s are 48% and 72%. Everyone should be accountable for their performance. Part of the whole point of indexing is to ensure that you capture the big winners in a given year, so narrow contribution to an index's performance does not invalidate those who index (and in fact could be seen as a validation as it illustrates how hard it can be to outperform). with that said, it's probably been one of the more extreme short term periods

I think it's reasonable time to short ARKK on a speculative basis. Speculative stocks have seen a dramatic bounce from their lows / YTD. I shorted about 6.2% today and purchased Jan 2024 calls limiting my loss to about 26% of the position. Should ARKK go > 60, I'll lose about 160 bps pre-tax.

ya…just hanging out in the soup line after all my losses

So this gregmal guy…is he in the room with us now?

why would that be a problem? if anything this would seem healthy for most people given the huge gains experienced 2019 to present, and would not represent an issue for those who bought at the top given they did so with amortizing nominal mortgages and flat prices would allow for an okay exit as long as one doesn't sell first few years due to transaction costs. I mean, my home went up 50% in 3 years. Holding on to that for next 3-10 at flat prices and just amortizing down is kind of my base case...

I think pretty much everyone would agree with you. I've highlighted the key qualifier. Applying a DCA approach assumes a portfolio to which one is able to add through a downturn and is not utilizing for any purpose other than to build wealth for some far out purpose. Most would agree that on a 15-20+ year time horizon stocks will beat bonds/cash. Using DHI as an example. DHI has returned 12.3% / year for the last 20 years. I just did a quick spreadsheet using last 20 years of monthly total returns. Here's your IRR's at various withdrawal rates (with no upward adjustments for inflation, so monthly distribution is the same. $10K invested 20 years ago WR IRR Ending 0% 12.3% $99K 5% 10.8% $44K 10% 5.2% Depletes in 5/2017 (notice that despite the 20 year return of the asset being greater than the withdrawal rate, the corpus is depleted in year 14, volatility and withdrawals kill the corpus) Now let's reverse it. What if we add money? We add 5% of initial 10k / year 10% and 20% Savings Rate IRR Ending 5% 13% $155K (on $20K total invested, $10K initially then $42/month) 10% 13.4% $210K (on $30K total invested, $10K initially then $84/month) 20% 13.9% $321K (on $50K total invested, $10K initially then $166/month) So it's the same as the point I made elsewhere, one's attitude toward volatility depends on whether or not one is adding to the overall portfolio as well as the correlation between investments. I ran this quickly. I may be wrong. Feel free to check/challenge as you wish. @Gregmal one thing I've always found befuddling about your comments on this subject is you simultaneously espouse high qithdrawal rates ("you don't need that much money to do ________ and 4% rule is dumb") and immunity to volatility. The two ideas in my mind are contradictory and potentially dangerous in combination to all but the most adept of investors (which you likely are) but it would lead to ruin for many others. EDIT/ADD: same with bond index for last 20 years, which has returned 3% / yr WR IRR Ending 0% 3.0% $18K 5% 3.6% $5.7K 10% 4.4% Depletes in 6/2016 (Here the corpus is depleted because bonds by themselves aren't generating adequate return. In both DHI's and bonds' case, you die but for two different reasons. The "safe" bonds don't earn enough. DHI makes enough on a long enough time horizon but is too volatile for a 10% WR). So there's no question here. Investing in DR Horton instead of the bond index was superior 20 years ago. Even at a 10% withdrawal rate. But at a 10% withdrawal rate, DR Horton is only 80 bps of IRR better and depletes 1 year later despite returning much more than bonds. So if you think you can identify stuff that will make 12% / yr for the next 20 years...that will likely beat the snot out of bonds (which are currently priced to return 4.8% ish / yr. But as with everything it a big fat "it depends" Now let's get crazy and assume 70% DHI / 30% bonds, rebalanced at the end of every month WR IRR Ending 0% 11.15% $81K 5% 10.5% $41K <---note this is just 7% less than 100% DHI and distributions are the same. 10% 8.4% $340 <---We are on the verge of depletion, BUT we lasted over 6 years longer than 100% DHI. Notice how by doing 70/30 we didn't reduce overall IRR by that much relative to 100% DHI? And at higher withdrawal rates the addition of the safe asset improved IRR and increased survival. But let's assume again rather than subtracting we're adding, just doing the add 20% with the 70 /30, I get a 12% IRR / ending value of $244K, which is 24% less than the almost 14% / $321K for DHI. So at the risk of obnoxious repetition, whether you like volatility depends on whether you're adding or subtracting to the portfolio. Highest and most volatile CAGR WINS if adding. This is basically MPT which most value investors call bullshit. But it's not really all bullshit.