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Known Stock Market Leverage Hits WTF High. Out the Other Side of its Mouth, the Fed Warns about Hidden Leverage that Blew up Archegos
WolfStreet ^ | 05/18/2021 | Wolf Richter

Posted on 05/19/2021 12:04:56 PM PDT by aimhigh

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To: entropy12

I agree, a big sell off is overdue, but I think it could be 40-50%....

We’ll see, I think the job situation will turn around as a few more states stop paying the extra unemployment compensation which then be followed by a massive increase in prices, which will cause interest rates to skyrocket killing off the housing market and devastate the already anemic auto industry...

We will be in another stagflation situation like the 1970s except worse this time IMO....


41 posted on 05/19/2021 3:06:10 PM PDT by srmanuel (`)
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To: entropy12

Mattress bonds lose value in inflation, I bonds rate are tied to consumer price index


42 posted on 05/19/2021 3:10:06 PM PDT by Cold Heart
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To: Cold Heart

You know they cheat like hell on that. Real world inflation is always higher than the CPI.


43 posted on 05/19/2021 3:40:44 PM PDT by BiglyCommentary
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To: BiglyCommentary; Cold Heart

“Real world inflation is always higher than the CPI”

There’s barely any inflation premium, if any, being demanded by bond buyers.


44 posted on 05/19/2021 5:29:37 PM PDT by Pelham (Liberate the Democrats from their Communist occupation)
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To: entropy12; BiglyCommentary; srmanuel

“It will not be a flash crash, because FED will not allow it.”

I don’t know that the Fed could do anything about it, other than the indirect process of providing liquidity to money center banks. The Fed doesn’t buy equities AFAIK. In fact I’m pretty sure that they are prohibited from buying stocks.

They may have bought baskets of corporate debt before, maybe in the 2008. But bonds don’t convey ownership whereas stocks do.

OTOH the NYSE could suspend trading. Anyway they used to be able to do that. That book I linked to upthread.


45 posted on 05/19/2021 5:43:19 PM PDT by Pelham (Liberate the Democrats from their Communist occupation)
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To: Cold Heart

If interest rates are allowed to rise to level commensurate with real inflation, the current bond values will be drastically lower. For example last months inflation rate was over 4%. Lets say FED raises short term interest rates to 4%.
Then a bond selling for $1000 could drop by 20% or more.

Money hidden in mattress will lose only 4% in value.


46 posted on 05/19/2021 8:49:22 PM PDT by entropy12 (President Trump saved Millions of lives with his warp speed push for covid vaccines. Trump or Bust!!)
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To: entropy12

I bonds are structured differently.

1) The bond never goes below your original cost.
2) Interest is at the CPI, adjusted 2x per year. Compounded monthly.
3) You can’t sell it for one year. If you sell it after one year but before 5 years you lose the last three months interest.
4) Maximum purchase per year is $10,000
5) Lowest increment of purchase is $25.
6) a few other oddities

I was looking for something better for someone else other than their savings account and came across the I Bond


47 posted on 05/19/2021 9:04:38 PM PDT by Cold Heart
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To: Cold Heart; BiglyCommentary

Note that only the interest rate paid on I Bonds is calculated based on CPI. Value of bond (what you can sell it for) can move a lot based on interest rates.


48 posted on 05/19/2021 9:12:44 PM PDT by entropy12 (President Trump saved Millions of lives with his warp speed push for covid vaccines. Trump or Bust!!)
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To: Cold Heart

Compared to savings account, any bond is better IF YOU CAN HOLD IT TO MATURITY. If you need to cash it out for needs before maturity, the value will be based on interest rates change since you bought the bond.


49 posted on 05/19/2021 9:15:38 PM PDT by entropy12 (President Trump saved Millions of lives with his warp speed push for covid vaccines. Trump or Bust!!)
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To: entropy12

No. The principal stays what you paid for it and any interest that is added brings the value of the bond up. The value of the I Bond can only go up.


50 posted on 05/19/2021 9:24:49 PM PDT by Cold Heart
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To: entropy12

any bond is better


One has to consider the ability to pay.

“Laws” are changing. What was the large bankrupt corporation during obama that pension funds were paid out before secured bond holders?

I had a client holding $50,000 of bonds we wrote off on the tax return.


51 posted on 05/19/2021 9:27:10 PM PDT by PeterPrinciple (Thinking Caps are no longer being issued but there must be a warehouse full of them somewhere.)
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To: PeterPrinciple

https://www.forbes.com/2009/04/09/gm-auto-industry-personal-finance-guru-insight-obama-bankruptcy.html?sh=566af0f121e2

obama plays chicken with gm bond holders

politics in bankruptcy. precedent has been set.


52 posted on 05/19/2021 9:34:58 PM PDT by PeterPrinciple (Thinking Caps are no longer being issued but there must be a warehouse full of them somewhere.)
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To: Cold Heart

All I can say is I made much more money in stocks and high-yield bonds than I-Bonds which I still own bought way back in 1990’s.


53 posted on 05/20/2021 7:33:58 AM PDT by entropy12 (President Trump saved Millions of lives with his warp speed push for covid vaccines. Trump or Bust!!)
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To: entropy12

Thanks. I’m trying to encourage someone to shift their meeger savings account from an inflation loosing account to something more protective.


54 posted on 05/20/2021 7:57:32 AM PDT by Cold Heart
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To: PeterPrinciple

I don’t buy individual bonds anymore at age 81. But when I did buy them in my 50’s, it was always AA or better. Now I find lot easier to make money timing the market over couple of years holding periods.


55 posted on 05/20/2021 8:43:15 AM PDT by entropy12 (President Trump saved Millions of lives with his warp speed push for covid vaccines. Trump or Bust!!)
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