/biz/ - Business & Finance

>>13176938
>>13176924
here's the same graph on a log scale

>>12433077
the model was only using 2 and 10 year bond yield inversions, the one in 1998 was only between the 3 month and 5 year. That said there was a false signal in the late 60s I did take into account. It does do damage because of capital gains tax, but overall, it seems to be better to be safe than sorry. Hence I'm playing a defensive portfolio even though the yield curve only inverted from 1 year to 7 years. I still beat the market for 2018 so I feel fine.

here's the same graph but with a log scale.

>>12400813
I use R and RStudio
https://www.r-project.org/
https://www.rstudio.com/

The data I use I got from here: http://www.econ.yale.edu/~shiller/data.htm

The rest is a lot of cranking out spaghetti

>>12400836
This is true until it's not. .

>>12400866
>>12400882
Exactly
Hence this graph.
>>12400613

>>12389330
You don't necessarily need to buy the exact bottom, you just need to avoid the decline that marks the start of the crash and get back in before it fully recovers to when you started. Usually that's a pretty big window. The ideal time according to my model was 3-4 years of holding. Keep in mind it can sometimes take over a year from the start of the first yield inversion to the start of the recession, sometimes 2 years. I don't think it will take that long this time, but it's better to be safe than sorry!

Here, this graph shows what happens if you hold cash for this same time period, a log scale makes it more clear whats going on. Cash is subject to inflation risk, which is greatly mitigated by bonds.

>>12380572
>>12380631
If you're adding money continually i think you'd really benefit from putting money into bond funds for the moment and waiting until a crash to start putting into dividend stocks and bluechips. Pic related.

Besides the fact that a bond fund will preserve the value of your money they also perform really well during a recession due to falling yields kicking up prices.

>>12369539
Up twenty bucks. Things are looking good.

I'm glad I went through all that trouble to get the historical returns for putting money in bonds after a yield inversion since now I know just about how long I should wait (4 years max), and what returns I can expect in the long term (30% nominal).

You know a strategy is elegant when the only serious problem you run into is capital gains tax.

>>12365210
>>12365408
So I decided to model in capital gains tax, using a conservative average of 25% for each time you sell in order to reinvest.

This bumps the average real return down to
2.5% for reinvesting in bonds.
1.2% for sticking your money in cash
both of which still beat reinvesting dividends for an index fund which is at
0.95%