Posted on 05/19/2021 12:04:56 PM PDT by aimhigh
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....
Mattress bonds lose value in inflation, I bonds rate are tied to consumer price index
You know they cheat like hell on that. Real world inflation is always higher than the CPI.
“Real world inflation is always higher than the CPI”
There’s barely any inflation premium, if any, being demanded by bond buyers.
“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.
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.
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
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.
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.
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.
any bond is better
“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.
obama plays chicken with gm bond holders
politics in bankruptcy. precedent has been set.
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.
Thanks. I’m trying to encourage someone to shift their meeger savings account from an inflation loosing account to something more protective.
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.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.