Discussion ***Official*** 2025 Stock Market Thread 💰

[repoman0]

I personally don't like bond funds for that reason. Bonds are supposed to be your stable base so that you get a guaranteed return. But, now the bond fund throws in the gambling aspect of the unknown future into that equation. A lot of advisors say to only buy short term bond funds for that reason, they are unlikely to lose much because interest rates rarely change a lot in that short time frame.

I don’t think this is right. The funds don’t change in value just because of investor expectations, they change because of the reality of the yield at a given time.

Look at VGIT as an example. If you bought at the peak in 2020, when it was $70.50 per share and the ten year yield was 0.6%, you bought because you were happy making $0.42 annually for a total of about $74.70 at term. Today the shares are worth $57.45 but you are making $2.52 annually. That seems only better to me in the meantime if you’re living off of the returns and (should be) equivalent to the $75 you were expecting at the end of the original term if you were willing to lock your money up for ten years in the first place. I am too lazy to look up the yield by month and add it up properly but I’m willing to bet the bond part of my portfolio on it, combined with wanting to avoid the nightmare UI of treasurydirect.

 

[dullard]

I don’t think this is right. The funds don’t change in value just because of investor expectations, they change because of the reality of the yield at a given time.

In an ideal market, wouldn't you say investor expectations and bond yields are one and the same concept? If not, then there is probably something to be exploited there for massive profit if you could clearly differentiate the two concepts.

As for the example you gave, no matter how you measure it, you are down since 2020.

 

[repoman0]

In an ideal market, wouldn't you say investor expectations and bond yields are one and the same concept? If not, then there is probably something to be exploited there for massive profit if you could clearly differentiate the two concepts.

As for the example you gave, no matter how you measure it, you are down since 2020.

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Yes. You are also down since 2020 if you just bought the underlying ten year bond in exactly the same way. You made your 0.6% annually but you’re saddled with an asset worth significantly less than you paid, and paying far less interest than even the “risk-free” fed rate. You need to wait for the average maturity time to get your money back along with the original yield. That is always the case when buying longer dated bonds, whether it’s an ETF or real paper.

Actually, only being down a percent or so annualized is pretty dang good compared to what I expect a 0.6% ten year treasury with five years left is worth right about now.

 

[dullard]

You need to wait for the average maturity time to get your money back along with the original yield. That is always the case when buying longer dated bonds, whether it’s an ETF or real paper.

That is exactly what I was saying. The difference is with individual bonds you get to choose to wait to the end until all paper losses are gone. With the ETF you don't, they are always being bought and sold--and the paper losses may not be gone by the time you need to sell out of the ETF.

With a 10-year bond, I know for a fact that I need to hold it 10 years to be certain of a profit. But I can choose that as part of my strategy. If I can't wait 10 years, then I wouldn't buy a 10-year bond. With an ETF that could be waiting minutes or it could be waiting decades. No way for me to know or to control it. The bundled fund route adds that gambling aspect.

In other words, please tell me the date that VGIT will be back to $70.50/share.

 

[repoman0]

That is exactly what I was saying. The difference is with individual bonds you get to choose to wait to the end until all paper losses are gone. With the ETF you don't, they are always being bought and sold--and the paper losses may not be gone by the time you need to sell out of the ETF.

With a 10-year bond, I know for a fact that I need to hold it 10 years to be certain of a profit. But I can choose that as part of my strategy. If I can't wait 10 years, then I wouldn't buy a 10-year bond. With an ETF that could be waiting minutes or it could be waiting decades. No way for me to know or to control it. The bundled fund route adds that gambling aspect.

You are buying into a bond ladder with the ETF. Look at VGIT’s actual holdings — it’s holding plenty of 1% paper from years ago rather than selling and taking the realized loss. Its yield is slightly lower/laggy for that reason, currently 4.4%ish rather than the full 4.8% of a fresh ten year.

Meh, it’s close enough for me. The price fluctuates minimally and it’s always paying a representative yield. Longer dated bonds have interest rate risk, and you either realize that through getting your 0.6% and losing money that way or taking a paper loss on ETF share prices but getting paid more monthly.

 

[repoman0]

In other words, please tell me the date that VGIT will be back to $70.50/share.

You’ll have your $70.50 plus interest at T=purchase date when it was $70.50 plus the average maturity time of the fund, which is IIRC about 7 years. So mid 2027. Sell it then. Personally my bond allocation was exactly 0 throughout 2020, 2021 and most of 2022 because holding near 0% longer dated assets makes no sense. I did sell a very large 30 year 2.8% bond to the bank in the form of a mortgage refi.

 

[Charmonium]

If we really are in a rate-cutting environment, which we SHOULD be at this point, I'd want to hold freshly issued long term bonds since those assets will go up in price as interest rates fall. But . . .

If Donnie T. really is serious about tariffs, depending upon the sectors he decides to tax with a tariff, that is going to increase inflationary pressures, not to mention expectations.

And that's assuming that his tariff bender is a one time thing. If he continues to do that over the period of his incumbency (god help us all) then the federal reserve will have no choice but to raise rates again.

 

[dullard]

You’ll have your $70.50 plus interest at T=purchase date when it was $70.50 plus the average maturity time of the fund, which is IIRC about 7 years. So mid 2027. Sell it then. Personally my bond allocation was exactly 0 throughout 2020, 2021 and most of 2022 because holding near 0% longer dated assets makes no sense. I did sell a very large 30 year 2.8% bond to the bank in the form of a mortgage refi.

Do you want me to put a reminder on my calendar to revisit this thread in mid 2027 to see if that is true? At your claimed $0.42 to $2.52 annual interest, you've got a long way to go from $57.50 to $70.50. And that is just to break even.

 

[FelixDeCat]

Hate to tell you this but with all the froth in the market, intraday market volatility on small caps of plus or minus 20 to 30% that I see when the megacaps move only 1% up and down all day but cumulatively are experiencing declines...

..I see the apocalypse upon us when Trump takes office...

Combine that with bond vigilantes world wide forcing rates up because central banks are foolishly cutting rates while the Fed itself is still dumping bonds...

I see extreme volatility ahead...extreme highs followed extreme lows..and back...and back because with lack of real leadership it's every man for himself.

Meanwhile oligarchy reins supreme.

 

[FelixDeCat]

I am already down 73% in the wild trading that I do.

 

[repoman0]

Do you want me to put a reminder on my calendar to revisit this thread in mid 2027 to see if that is true? At your claimed $2.52 annual interest, you've got a long way to go from $57.50 to $70.50.

Sure. Your own statistics you quoted from Vanguard have the initial $70.50 investment only down 1% after coupon payments. Two and a half more years worth of $2.52 annual payments puts you right at $75, a couple bucks above it actually which makes sense since it hasn’t quite been five years since the absolute peak.

 

[dullard]

I am already down 73% in the wild trading that I do.

Sorry to hear that. Best of luck in the future.

I'm still on my get rich slowly mutual fund path. With ~15% of my wealth in cash/short term investments with guaranteed return to dump into stocks at a moments notice if there is a dip.

 

[dullard]

Sure. Your own statistics you quoted from Vanguard have the initial $70.50 investment only down 1% after coupon payments. Two and a half more years worth of $2.52 annual payments puts you right at $75.

Down 1% per year on average for 5 years. That is not just down 1%.

 

[repoman0]

Down 1% per year on average for 5 years. That is not just down 1%.

Well it’s actually only 0.48% annualized so whatever. We’re back to $75. Go ahead and add the reminder. The target to match is 7 years of 0.6% returns, also after taxes, so something like $72.50.

edit: I am interested either way and don’t know for sure one way or the other. My expectation is it’ll be close enough that I couldn’t have done better by trying to perfectly time my bond purchases. I consider medium to longer bonds to be a risk asset part of my portfolio, just uncorrelated and more stable than stocks. For stability and guarantees I hold cash and 1-3 month treasury funds.

Worth pointing out that buying long dated near 0% bonds was a dumb move if you did it in 2020 no matter which vehicle you used, obvious both in hindsight and in real time.

 

[IronWing]

If we really are in a rate-cutting environment, which we SHOULD be at this point, I'd want to hold freshly issued long term bonds since those assets will go up in price as interest rates fall. But . . .

If Donnie T. really is serious about tariffs, depending upon the sectors he decides to tax with a tariff, that is going to increase inflationary pressures, not to mention expectations.

And that's assuming that his tariff bender is a one time thing. If he continues to do that over the period of his incumbency (god help us all) then the federal reserve will have no choice but to raise rates again.

I see nothing in the economic reporting that suggests the Fed should cut rates. The bond buyers appear to be reaching a similar conclusion.

 

[dullard]

I see nothing in the economic reporting that suggests the Fed should cut rates. The bond buyers appear to be reaching a similar conclusion.

I'm really wondering if the Fed CAN cut rates.

On one hand, we have Trump insisting that he have a say in the Fed rates. He insisted on low rates last time: gives great short term stock gains, long term consequences be damned.

On the other hand, we have the Fed showing signs of not really being in control of rates as it is. They have cut rates 1% in the last 4 months, but many loan rates are actually going up. While I realize the Fed isn't directly in the 30-year mortgage business, mortgage rates have gone UP 0.84% in those 4 months. 10-year treasuries have gone UP 1.05% in that time frame. Credit card rates dropped, but only 0.29%. Deficits are projected to soar under Trump's campaign promises. Meaning, will buyers actually accept lower rates?

 

[Charmonium]

I see nothing in the economic reporting that suggests the Fed should cut rates. The bond buyers appear to be reaching a similar conclusion.

Then you haven't been paying very close attention. There was a half bp cut last November. That was a surprise even for the analysts, since the Fed tends to do only quarter point cuts.

While their rate cut announcement does have an immediate effect, the market is free to ignore it. Something it seems to be doing now. But it backs up that pronouncement by selling assets off of it 2-4T USD books. This causes the money supply to decrease.

The reason for the current cognitive dissonance is Trump. He keeps staying that he's going to issue new tariffs but no word on what sorts of imported goods - tarriffs being, in essence, a tax levied upon those goods thus making them more expensive than otherwise.

Well, if Trump starts shitting tarriffs - here, there and everywhere - so he can issue some big juicy tax cuts w/o affecting the deficit - that creates inflation. In fact, it is the very definition of the word - an increase in the cost of many products - just not one with any vaguely coherent reason.

 

[FelixDeCat]

I suspect bank earnings will be ok tomorrow.

But bonds will be in control and will react to CPI which will continue to show continued above target accumulating inflation.

As the Fed keeps letting bonds expire and continued pressure from bond short sellers rates may continue their upward trend.

And as you know the market trading algos are programmed to drop stocks on higher yields or raise stocks on lower yields.

 

[FelixDeCat]

Market likes the inflation news so far. Bank earnings good as expected. Rates backing down.

 

[FelixDeCat]

Quantum stocks recovering after some lost up to 50 to 60 percent recently from highs. NVIDIA holding first ever Quantum conference.

 

[dasherHampton]

welp, after all of my bitching and moaning I had a chance to buy back the IONQ calls.

He who hesitates is lost.

 

[FelixDeCat]

welp, after all of my bitching and moaning I had a chance to buy back the IONQ calls.

He who hesitates is lost.

And in that vein, I bought some Rigetti hoping for a nice trade.

 

[dasherHampton]

My heart skipped a beat when I checked the market and saw SPIR up almost three bucks.

Of course I forgot they did a reverse split on that turd. Still down like $1700 overall.

Oh well. Hope springs eternal.

 

[Indus]

Interesting.. a lot of chinese banks up there..

 

[Charmonium]

The reason for the current cognitive dissonance is Trump. He keeps staying that he's going to issue new tariffs but no word on what sorts of imported goods - tarriffs being, in essence, a tax levied upon those goods thus making them more expensive than otherwise.S

I have to apologize here.

I'm a little dyslexic so I tend to get things backward on occasion. One of the many gifts from my childhood brain injury.

By selling assets off of it's books - mostly US Treasuries but any sort of commercial paper is fair game - that has the effect of drawing cash out of the economy. If it's not clear why, imagine this. You have $1M in cash - total. Now the Fed has an auction and you use $100k of your cash to buy some USTs. Your portion of the economy's cash is now only $900k.

If you have thousands of rich sock suckers doing that, the total amount of cash in the economy drops precipitously.

Now here is the mistake. More cash in the economy has the effect of lowering the "value of money." Since interest rates are the measure of money's value, more cash means lower interest rates.

So, to lower rates, the Fed would BUY USTs and commercial paper. That puts more money into the economy thus lowering its value.

So for the present scenario, to lower interest rates, the Fed would NOT SELL assets but rather buy them.

I really do apologize for any consternation I may have caused.