Down goes the Dow

Pointing Out the Obvious wrote:

Big Dog Investments wrote:

No doubt the price of oil has contributed to that, but it is a 12-month figure. And the talk mentioned "safe ireturns" which certainly includes Treasury bonds. The short term ones are at slightly under a 2% yield. So, I think it's fair.

No, 10-year Treasury bonds, which can easily lose a large fraction of their value with a rise in interest rates, certainly should NOT be included in any rational discussion of where one can get "safe returns".

Investing in vehicles in which one can easily lose one's shirt is generally not considered a safe strategy.

Glad I could point that our for you.

You might lose only if you sell before maturity. Treasury bonds are the definition of a safe investment. They're guaranteed.

Big Dog Investments wrote:

Pointing Out the Obvious wrote:

No, 10-year Treasury bonds, which can easily lose a large fraction of their value with a rise in interest rates, certainly should NOT be included in any rational discussion of where one can get "safe returns".

Investing in vehicles in which one can easily lose one's shirt is generally not considered a safe strategy.

Glad I could point that our for you.

You might lose only if you sell before maturity. Treasury bonds are the definition of a safe investment. They're guaranteed.

right, you would get your principal back. but the real return would only be positive if inflation stayed well below the 2.24% mark. And if you want the 2.24% return you are suggesting they offer, we would have to have 10 years of 0% inflation. Which is unlikely.

On the other hand, if we have deflation, which is certainly possible, a 10 year bond would be a brillilant investment.

Whereas with a CD or savings account, your interest rate will go up if inflation starts to rise.

10 year bonds are not safe in the same terms as Cds and banks accounts are safe - not even close.

I'm actually not a big fan of 10-year bonds. I used that number because that is the one most commonly cited. I prefer bonds with short-to-medium terms which also happen to have current yields well above inflation.

As for deflation, the latest numbers indicate we are there now.

Interestingly, inflation has averaged about 2.3% over the past 10 years and a 10-yr T note bought on March 9, 2005 had a yield of 4.52%.

Big Dog Investments wrote:

Interestingly, inflation has averaged about 2.3% over the past 10 years and a 10-yr T note bought on March 9, 2005 had a yield of 4.52%.

ja - I believe historically speaking the 10 year yields around 2% more than inflation. So if we are in for a long stretch of no inflation, then a 2-3% 10 year is, historically speaking, priced right.

So all these cats who keep saying bonds are terrible deals...could be wrong. Today's bond yields could be right where they should be.

All depends on inflation.

it drives the gold bugs crazy just to think about a US without severe inflation - I love this.

Big Dog Investments wrote:

agip wrote:

well that's not really fair, is it? we jsut had a flukish 50% drop in oil, which brought inflation down to much lower levels than it has been.

And the poster is talking about CDs and savings, not long term bonds. those are different animals.

No doubt the price of oil has contributed to that, but it is a 12-month figure. And the talk mentioned "safe ireturns" which certainly includes Treasury bonds. The short term ones are at slightly under a 2% yield. So, I think it's fair.

Please, do tell which bonds you are calling "short term".

Surely, not 5 or 7 year...

say huh? wrote:

Big Dog Investments wrote:

No doubt the price of oil has contributed to that, but it is a 12-month figure. And the talk mentioned "safe ireturns" which certainly includes Treasury bonds. The short term ones are at slightly under a 2% yield. So, I think it's fair.

Please, do tell which bonds you are calling "short term".

Surely, not 5 or 7 year...

5 year is midterm. Anything less is short term. Did you seriously not know that?

If a portfolio loses 50% of its worth (as portfolios did in 200-2002 and 2008-09), and then increases by 50%, what is the value of the portfolio compared to its starting point?

75%

say huh? wrote:

Big Dog Investments wrote:

No doubt the price of oil has contributed to that, but it is a 12-month figure. And the talk mentioned "safe ireturns" which certainly includes Treasury bonds. The short term ones are at slightly under a 2% yield. So, I think it's fair.

Please, do tell which bonds you are calling "short term".

Surely, not 5 or 7 year...

I think I see what you're getting at. I should have written "shorter" term instead of "short". The short term treasuries are in positive territory, but not near 2%. You need to go mid- or long-term for that. Thanks for catching that.

Test of Basic Math wrote:

If a portfolio loses 50% of its worth (as portfolios did in 200-2002 and 2008-09), and then increases by 50%, what is the value of the portfolio compared to its starting point?

yup, I'm going with 75.

Six years ago today the S&P 500 hit an intra-day low of 666, yet the market has tripled during that time period. Has the economy improved, or has Federal Reserve monetary policy juiced by low interest rates and accomodation done the trick? What do you think?

The "Fed has had our back" for six years, what now?

Ghost of Igloi wrote:

Six years ago today the S&P 500 hit an intra-day low of 666, yet the market has tripled during that time period. Has the economy improved, or has Federal Reserve monetary policy juiced by low interest rates and accomodation done the trick? What do you think?

They're obviously inter-related. It's not one or the other.

Ghost of Igloi wrote:

Six years ago today the S&P 500 hit an intra-day low of 666, yet the market has tripled during that time period. Has the economy improved, or has Federal Reserve monetary policy juiced by low interest rates and accomodation done the trick? What do you think?

it's obviously both, yes. Are you arguing that the economy has not improved since 2009?

I'm tiring of you, iggy. You make outlandish claims and then when refuted you refuse to acknowledge your incorrectness. What's the point of arguing if you can make false claims and not acknowledge your error?

Big Dog Investments wrote:

What's are the feelings here about the upcoming European stimulus program?

I think europe is in for a long, japanese-like period of deflation and minimal growth. This is a consensus view, so I'm not offering much of value. But unless they stop with the job killing rules, they just aren't competitive enough.

They are massively rich, so there won't be a serious problem there...but growth is going to be slow.

Of course, even as japan slumped after 1990, the stock market had several massive rallies as false dawns appeared - so buying now as a trade is probably not a bad bet...but just a trade and not a long term hold.

(the UK is different - they have a shot at success)

I have been continuously long the US Dollar Index futures since early 2012 (when conservative types here thought I needed my head examined). One thing related that has not been pointed out in the financial press is that in the Commitment of Traders reports, large commercials are EPIC LEVEL SHORT the US dollar. They are short almost 100,000 contracts and that is a level that has not been seen in at least the last 25 years in the charts.

I think the betting of the smart money (people actually with positions, not morons like write the WSJ) is that ECB is going to take sufficient action of the QE variety that frank deflation will be avoided. If they expected that a Japan-style deflation was going to ensue, I don't think big money folks would be looking to short the US Dollar.

I don't think I'd argue with Goldman-Sachs too often.

Big Dog Investments wrote:

say huh? wrote:

Please, do tell which bonds you are calling "short term".

Surely, not 5 or 7 year...

I think I see what you're getting at. I should have written "shorter" term instead of "short". The short term treasuries are in positive territory, but not near 2%. You need to go mid- or long-term for that. Thanks for catching that.

No problem. That's exactly what I was getting at, but wanted to ask questions before jumping to conclusions and making statements. Thanks for the mature response.

Pointing Out the Obvious wrote:

say huh? wrote:

Please, do tell which bonds you are calling "short term".

Surely, not 5 or 7 year...

5 year is midterm. Anything less is short term. Did you seriously not know that?

You must be a little slow.

If you read what I wrote, it's clear I don't consider 5+ year bonds short term.

I was questioning his statement about "short term ones" being at "slightly under a 2% yield". Those two do not agree, so rather than attacking the guy, I was trying to understand what he meant.

He clarified that he meant "shorter".

This is what folks sometimes call "communication".