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Bond Bubble?
Old 11-27-2012, 03:16 PM   #1
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Bond Bubble?

From the NY Post (they are selling papers, so a grain of salt):

"...But sadly, few Americans understand just how risky bonds are at this very moment. For generations, investors have looked to US bonds/Treasuries as “low-risk” savings instruments, almost like a bank CD. Bond losses were always something that happened in other countries like Argentina, Greece or Portugal, not America.
It is not as complicated as some would pretend, but it is extremely important for all to understand — especially those planning on retiring soon. Pension plans, 401(k)s, annuities, IRAs — retirement vehicles have never been more at risk than they are now."

Bond bubble bust - NYPOST.com
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Old 11-27-2012, 03:20 PM   #2
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This has been talked up for years, but it's a game of musical chairs. Eventually the bond Sirens will stop their enchanting music, but it's very tough to know in advance exactly when that will happen.
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Old 11-27-2012, 04:12 PM   #3
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Quote:
Originally Posted by Tekward View Post
From the NY Post (they are selling papers, so a grain of salt):

"...But sadly, few Americans understand just how risky bonds are at this very moment. For generations, investors have looked to US bonds/Treasuries as “low-risk” savings instruments, almost like a bank CD. Bond losses were always something that happened in other countries like Argentina, Greece or Portugal, not America.
It is not as complicated as some would pretend, but it is extremely important for all to understand — especially those planning on retiring soon. Pension plans, 401(k)s, annuities, IRAs — retirement vehicles have never been more at risk than they are now."

Bond bubble bust - NYPOST.com
This quote proves thatthe author has no conception of US bond history. From the end of WW2 until 1982, US treasuries went straight down, almost like clockwork. A Swiss Investor named Franz Pick achieved reknown by labeling bonds as "certificates of guaranteed confiscation". They have gone almost straight up since then, with massive manipulation by Benny and Co. Right now bond prices seem to be stalled or resting at a high level.

That they went down for 30 years or so didn't guarantee that they would continue like this, and today's bond bull market is not guaranteed to last either. Unless he counts shorter generations than generations actually are, I can't see where he gets the "for generations" phrase.

My guess is that long term bonds at today's yields and in today's monetary and fiscal and political environment will over time prove to be collossally bad investments.

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Old 11-27-2012, 04:42 PM   #4
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My guess is that long term bonds at today's yields and in today's monetary and fiscal and political environment will over time prove to be collossally bad investments.

Ha
Seems to be the way to bet. We keep our average duration pretty low. Amazing how many still chasing yields up the curve or to poor quality.

When bonds go bad, there seems to be a psychological factor in play -- people expect stocks to go down quite a bit from time to time. Bonds have an aura of safety.
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Old 11-27-2012, 04:54 PM   #5
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Long term bonds have no where to go but down. short term is another issue.

things arent pretty and the world is deleveraging. i think we still have another year or two where long term treasuries can still be the stars.

a drop of 1% in long term rates really isnt so out of the question and that can yield another 30% gain.

i think with a floor of over 2% and the ability to get 30% plus, i think if i had to make only 1 speculation it would be long term treasuries.

even if they fell a bit before i bailed the gains and interest would more then compensate if things turn uglier first..

dont forget when the fed raises rates they do the short end. the long end still marches to its own beat more ofton then not.

the last time the fed tried to raise short term rates the worlds investors resisted raising the long end and we got the famous inverted yield curve.
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