Long Term Treasuries

[lawman]

John Hussman is warning of Long Term Treasuries.
Hussman Funds - Weekly Market Comment: The Dollar Crisis Begins - December 22, 2008
I have a large investment in Vanguards Long Term Tax Exempt Municipal fund (VWLUX).. I don't really understand too much of what he is talking about. Can anyone tell me if his concerns would apply to the Long Term Tax Exempt Municipal Fund ? I have no intention of selling any shares probably in my lifetime but if share price is at high risk I would like to know it..

[Gotadimple]

They shouldn't as he is speaking of debt instruments issued by the United States government, not those issued by local cities, counties or states. As long as you are satisfied that the portfolio of VWLUX contains no Treasury bills or notes, then his analysis doesn't apply to your investment.

-- Rita

[clifp]

With the disclaimer that I have looked at Muni pricing recently, I think you should be ok.

Last I looked Municipal bond yields were higher than Treasury bonds, which is somewhere between unusual and crazy, because the after tax returns of Muni bonds are so much higher. Yet the risk of default of muni bonds (especially general obligation bonds) is very low.

What Hussman and others (and FWIW I agree) have been saying is that Treasure bond yields are way too low relatively to other types of bonds like munis, and corporate bonds. There are variety of reason for this but the primary one is fear, people are afraid to invest in anything which may suffer during the recession. The way I look at is this, in the late 90s we had a tech/dot.com bubble, in 2006 we had a housing bubble, in 2008 we have a Treasury bond bubble. It will eventually pop and treasury bond prices will fall dramatically and yields will rise. Now when this will happen is anyone's guess.

[lawman]

Thanks guys!
My muni's have already been clobbered more than I ever thought could possibly happen..I did not think his warning would apply to them but I've been wrong on everything else this year so I wanted other's opinons..I'm feeling pretty stupid these days..

[clifp]

Quote:

Originally Posted by lawman Thanks guys! My muni's have already been clobbered more than I ever thought could possibly happen..I did not think his warning would apply to them but I've been wrong on everything else this year so I wanted other's opinons..I'm feeling pretty stupid these days..

The price of them maybe clobbered but I bet the income the fund generate is virtually unchanged this year.

As far as feeling stupid, join the club, I'm thinking of suing all the testing agencies who said I was smart....

[Grep]

I read his latest newsletter with some dread. It paints a picture in which global effects may wash over us quite badly in several different ways.

I don't own any long term treasuries. If I did, I'd slowly be selling. Yields are at historic lows by almost any measure, and prices are correspondingly high. Sure, yields could still go lower (especially long term ones, given the current drum-beat) but, over anything close to their duration, I'd not expect this to last.

And yes, the price of Muni's have certainly come down, but the tax-free yield is relatively high and welcome.

[mathjak107]

TLT was my best performer up 24% ..... while everyone was warning about buying bonds because rates were heading higher and the general concensus on the forum was there was no reason to buy bonds when money markets were almost paying the same thing i kept telling ya all to cover all the bases and forget the noise..you should have long term bonds to protect your other asset classes.. just when it looked like long term treasuries were headed south and no one would touch them they exploded to the upside.... could they go higher? beats me but like i say cover the bases and you dont have to worry about guessing

the talking heads and gurus did a fabulous job predicting this downturn . i wouldnt believe anything they guess at

[haha]

Quote:

Originally Posted by lawman Thanks guys! My muni's have already been clobbered more than I ever thought could possibly happen..I did not think his warning would apply to them but I've been wrong on everything else this year so I wanted other's opinons..I'm feeling pretty stupid these days..

I haven't read this entire thread, so someone may have mentioned this, but...

If you don't like long term treasuries but you do like long term munis you are betting that the spreads between these these two classes will move in your favor more than rates on long term treasuries will increase.

Might be a pretty good bet, but it is a bet.

Ha

[mathjak107]

for ,me its never about rates its about capital gains when the long term treasuries are called upon to do their recession/defllation thing....like they just did this past year

[CuppaJoe]

Quote:

Originally Posted by mathjak107 for ,me its never about rates its about capital gains when the long term treasuries are called upon to do their recession/defllation thing....like they just did this past year

My long term fund is now mid term, not bad at a 11.32% one-year return. If I had a dollar for every time I heard a radio finance guru say "don't go long on bonds" I'd have an extra $5.00! I've never balanced out of it and it's now 12.1% of my PF, I didn't have a percentage in mind when I bought it but it probably started out at about 3% of PF.