Posted on 04/04/2021 9:11:23 AM PDT by SaxxonWoods
Yardeni coined the phrase bond vigilantes in the early 1980s to describe investors who want higher yields for government bonds as compensation for rising inflation.
In this case, bond vigilantes are reacting to trillions of dollars in coronavirus aid pouring into the economy. They’re skeptical of Federal Reserve Chief Jerome Powell and Treasury Secretary Janet Yellen’s view inflation will be transient.
For now, Yardeni is in the transient camp.
(Excerpt) Read more at cnbc.com ...
I think the lights flash yellow at 3%.
3% is super low historically. I’ve lived through everything from 0 to 15%. It changes the strategy, not the money making.
Yes, that’s one way, true.
“Increasingly in the last decades, central banks have engaged actively in trying to manipulate rates across the yield curve ie) yield curve control.
Are they successful? I don’t think anyone knows the long-term answer, but the important thing is - they will TALK and they will TRY.”
Yes they will. The only way for us to fail is to let them live in our heads. We must adjust as needed to conditions and keep going at all times. Been doing that since ‘79, it’s been just fine, with the usual ups and downs, which are the price of relative freedom compared to other economies.
What about 8% or higher, which is probably what the real rate might be.
The economy is “red hot” for the big-government/big-corporate criminal complex.
For actual human beings, not so much.
I know a lot of small business people who are doing fantastic.
There are only two things I can do about the FED. React to it when and if needed with my investments, or use the FED as my excuse for doing nothing and getting nowhere.
“What’s your explanation?”
I can’t explain it and have never worried about explaining it over the last 50 years. I adjust my investments and I used to adjust my business (I’m just an investor now) as needed and keep moving toward my goals.
It’s worked out just fine. The collapse story has been stopping people from moving forward all my life. They can explain to you all day long. But they have nothing to show for it. Luckily, I ignored the story and just went about my business.
What most people don’t realize is that the 10yr yield is not controlled by “the market” as you suggest.
It’s controlled by the Fed, and everyone is afraid to fight the Fed (they go with the direction the Fed sets).
But the reality is that the Fed purchase of US treasuries, dilution of value, is what keeps yields low.
In a truly free market, the 10yr would be 7% and the 30yr at 10%+.
And now that we’re on the highway to hell, there is no exit.
Where do YOU think that ends up?
“What about 8% or higher, which is probably what the real rate might be.”
In the 70’s my father would say, “As long as the Prime rate doesn’t go above 10% business will do fine” The number changes all the time, the strategy changes with it, it’s all relative.
Inflation is the bugaboo that’s been around all our lives. It’s the great excuse to claim one can’t get ahead. You’ll hear it from every “water cooler expert” with no money. And yet, some people have always “gotten ahead” while others never do. The people are the issue, not inflation.
Pick whatever number you like, my job is to make money faster than it inflates as much as possible. The number itself is irrelevant.
I’ve dealt with what people today would call extremely high inflation for most of my life. There have always been ways to outrun it and hopefully that won’t change. If inflation was that harmful I would never have gotten anywhere, and I’d be in the same shape as those “experts”.
Remember in the early 1980s 30 year bonds had 12% coupons or higher.
At 6%? Gold and silver start looking real good.
Gold and Silver are rigged markets and I would never invest in either except as a trade. Silver hit it’s last high (adjusted for inflation) in 1986. I have little, but gold and silver are not what I retired on.
I know a lot of people who have been successful and not one of them has retired from investing in Gold or Silver. They done it by investing sweat and money into virtually everything else you can name however.
If I was interested in making money off Gold and Silver I’d be a dealer in them. That’s where the money is in G+S. Just like the Casinos don’t bet, they make their money off those who do.
——“water cooler expert” -——
Although I have been “retired” for a long time, I have occasion to visit corporate offices where people are busily at their computers. Many if not most now days have two monitors.
Water coolers are dusty, unused, and certainly no longer a place for conversation.
Water bottles are the norm
At one large office I visit, the conversation place now is the very large wireless printer. Everybody prints documents there and then when somebody prints 20 copies of a 10 page document, a back log of workers lined up to fetch their document ensues.
I don’t agree with your premise so I can’t comment on the rest of your statement.
I just know what has worked for me for 50 years. Everyone I communicate with who lets the FED and other boogie men affect them are people who have gotten anywhere because they worry about things they can’t control.
The people who have gotten somewhere are those who worked at getting somewhere. The people who have gotten nowhere are the people who waste time and energy griping out things they will never control.
That makes sense. I never worked in the corporate world. I stated working for myself at 26 and still do today at 72. Except it’s much easier now, I just push buttons like your corporate types at their computers.
Owning a treasury.
Pay 1 million dollars for a T Bill paying 0.80 %
If you like the interest income stream, fine
If you need to cash out when the market rate is 3%n nobody is going to give you 1 million dollars for your TBill.
Your loss is bout 15% of what you paid.
Good times, good times
Selling a TBill
Government sells TBills at 1% rate
Later, TBill is rolled over at 3%
Interest on debt is 30 % of Government spend.
Then, interest spend is 90% of Government spend.
Good times, Good times
Hugo Stinnes, now he was a guy positioned for wealth generation
“But the reality is that the Fed purchase of US treasuries, dilution of value, is what keeps yields low.”
THAT premise?
“And now that we’re on the highway to hell, there is no exit.”
Or this one?
“I adjust my investments and I used to adjust my business (I’m just an investor now) as needed and keep moving toward my goals.”
And you adjusted based on what? I’m sure you adjusted it based on what you thought was going to happen in the near future.
No one forces us to pick poot investments, we do that to ourselves. I only invest in bonds when they make sense for my situation, which is sometimes I need a parking place for cash and Treasuries have a tax advantage.
At this time I have no bonds and haven’t for some years. For that part of the portfolio I use preferred stocks and MLPs.
And I don’t worry about the things I can’t affect. I worry only about the things I can affect.
I am watching that. The Treasury has a website that yo can enter your bond numbers and they give you the status as of the date you enter. They all have room to run.
I agree 100% with your last sentence.
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