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What On Earth Is Going On With T Bills?
Old 06-01-2005, 11:44 AM   #1
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What On Earth Is Going On With T Bills?

The 10 year note is at a pretty significant low. Why would anyone buy them? A 5 year CD is fetching 5%. I do not understand how bonds get priced really.... but this seems off balance. Any theories?

SWR
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Re: What On Earth Is Going On With T Bills?
Old 06-01-2005, 12:19 PM   #2
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Re: What On Earth Is Going On With T Bills?

If anyone has a good one, Greenspan is all ears. The threat of an inverted yield curve seems to be moving up on us. The most reasonable one I've heard of has to do with the chinese snapping up our debt. It still sounds goofy though.
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Re: What On Earth Is Going On With T Bills?
Old 06-01-2005, 07:21 PM   #3
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Re: What On Earth Is Going On With T Bills?

Since cash or T-biil is immediately available for alternative investments, people are waiting for the market to move - may be.
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Re: What On Earth Is Going On With T Bills?
Old 06-01-2005, 07:43 PM   #4
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Re: What On Earth Is Going On With T Bills?

Quote:
Originally Posted by davew894
I wish we were back on the gold standard...
we are all just holding a thin piece of paper... It's true value is really just the heat a pile of bills would generate in your fireplace.
Gold doesn't burn, but I guess it is mighty sparkly to look at while I freeze.
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Re: What On Earth Is Going On With T Bills?
Old 06-01-2005, 08:17 PM   #5
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Re: What On Earth Is Going On With T Bills?

Well, I'm not sure about T-bills, but my guess is that the Fed is aware of the threat of an inverse yield curve and will start slowing down the increases in short term rate for this reason.
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Re: What On Earth Is Going On With T Bills?
Old 06-01-2005, 09:34 PM   #6
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Re: What On Earth Is Going On With T Bills?

Quote:
Originally Posted by moghopper
Gold doesn't burn, but I guess it is mighty sparkly to look at while I freeze.
Unless it's a kruger

Seriously though, gold is only worth what someone else will give you for it... just like fiat currency. If the sun went nova, and food production suddenly stoped, do you think that you could buy food with gold? Heck no. Gold is only 'worth' something because of its history of being 'worth' something (and the aforementioned sparkly factor).....having said that, I have my own stash of aurum and argentum.... the Ag has done awesome this week... the Au, not so much.
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Re: What On Earth Is Going On With T Bills?
Old 06-02-2005, 04:40 AM   #7
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Re: What On Earth Is Going On With T Bills?

Quote:
The most reasonable one I've heard of has to do with the chinese snapping up our debt.
China currently holds $600 billion worth of treasury bills, but they are not the only nation buying treasuries.* They are just a relatively new player adding their buying pressure to a game long played by several other nations.* The United States absorbs 80% of the entire world's savings.* Foreign governments don't care whether US long rates are a good deal or not, they buy for political reasons regardless of interest rates.
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Re: What On Earth Is Going On With T Bills?
Old 06-02-2005, 01:35 PM   #8
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Re: What On Earth Is Going On With T Bills?

Quote:
Originally Posted by Marshac
Seriously though, gold is only worth what someone else will give you for it... just like fiat currency. If the sun went nova, and food production suddenly stoped, do you think that you could buy food with gold?
I always wonder the same thing when I hear about people stockpiling actual gold "in case it all goes to hell". Guess what, if it all goes to hell, you've got a bunch of really heavy pieces of metal worth nothing to nobody. Not that a stack of paper bills will do you much better. Or 15,000 shares of wellesley
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Re: What On Earth Is Going On With T Bills?
Old 06-02-2005, 02:02 PM   #9
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Re: What On Earth Is Going On With T Bills?

Gold has been money a helluva lot longer than almost anything else. I suspect it still will be long after the US dollar disappears from the face of the Earth.
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Re: What On Earth Is Going On With T Bills?
Old 06-02-2005, 02:04 PM   #10
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Re: What On Earth Is Going On With T Bills?

Better to stockpile guns and ammo.....er, did I say that?

Still, back when we were on the gold standard, inflation wasn't the monster it is now. In fact, I think I saw a small piece on how one pound would buy you the same amount of goods/services in 1900 as it would in 1600 (good suit, x bottles of sherry, or whatever). Still, yeah, if it ever REALLy goes to hell, you're hosed even if you did store up 7 years of food and ammo, since you know once your neighbors saw you weren't starving, they'd be storming the bastille, and you can't shoot'em all that fast!
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Re: What On Earth Is Going On With T Bills?
Old 06-02-2005, 02:13 PM   #11
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Re: What On Earth Is Going On With T Bills?

Quote:
Originally Posted by Laurence
Still, yeah, if it ever REALLy goes to hell, you're hosed even if you did store up 7 years of food and ammo, since you know once your neighbors saw you weren't starving, they'd be storming the bastille, and you can't shoot'em all that fast!
Ya, but who's gonna be first?
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Re: What On Earth Is Going On With T Bills?
Old 06-02-2005, 02:29 PM   #12
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Re: What On Earth Is Going On With T Bills?

The guy who says, "let's get him, he can't shoot us all!"

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Re: What On Earth Is Going On With T Bills?
Old 06-02-2005, 02:32 PM   #13
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Re: What On Earth Is Going On With T Bills?

Thats why you preempt it by saying "I know one of you is thinking of yelling 'lets get him, he cant shoot us all'...as soon as you say it i'm going to shoot you.".

Semi-auto shotgun. You *can* shoot them all. At least make them all extremely unhappy.
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Re: What On Earth Is Going On With T Bills?
Old 06-02-2005, 03:10 PM   #14
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Re: What On Earth Is Going On With T Bills?

Having spent much of the '70's with the attitude that the sky is falling, and suffering from the lack of "progress" brought on by a "what's the use" outlook, I can only say that a little preparedness is a good thing, but the world has been ending since it began.......

If things get that bad, I'm not sure what contingency plan will be "safe". How many guns, bottles of water, bags of rice, bars of gold can one rathole?

No arguments about what safe means!
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Re: What On Earth Is Going On With T Bills?
Old 06-02-2005, 10:06 PM   #15
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Re: What On Earth Is Going On With T Bills?

I wonder if the baby boomers nearing retirement are starting to
shift from stocks to bonds .... that would help lower long rates as
well.

Cheers,

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Re: What On Earth Is Going On With T Bills?
Old 06-02-2005, 11:06 PM   #16
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Re: What On Earth Is Going On With T Bills?

Well, this one really is a conundrum as Sir Alan would say.

Don't think anybody has the complete picture.* So much for the gurus.* But a couple of thoughts:

Basically, 10 year rates are a series of 10 1 year rates.* What Mr. Market is telling us is that short term rates (e.g., 1yr rates) are going to continue to stay low for 10 years.* That is to say -- no inflation.*

Bill Gross has for months been arguing that we have been traversing a tightrope between the forces of deflation and the forces of reflation.* Wouldn't take much to tip us either way.* Just recently he has basically said that the forces of defaltion have won this tug of war.* He sees no inflation and low interest rates for the next 3 to 5 years.
Bill Gross has not always been right.* This may be wishfull thinking on his part.* After all he does have a $475 billion bond portfolio to worry about.

We here in the U.S. don't have a real good grasp of what is going on in the rest of the world.* From what I can gather, Europe appears to be a basket case with low growth and all of our problems, only magnified.* European Union looks like it is going up in smoke.* Japan still has near 0% interest rates -- Japanese mired in a never ending slump.* Chinese -- we know about -- don't consume and save 40% of income-- lend it to us to buy junk.* Bottom line of all this---lots and lots of idle capital and beaucoup liquidity floating in the international system.* And the U.S. looks positively energetic and robust to foreigners.* A great place to invest relative to their own miserable investment options.* May be a lot of betting that the Dollar has been beaten up enough. One way for foreigners to bet on the Dollar is to buy U.S. Treasuries.* Go figure.

Greenspan and the Fed are in a really interesting situation right now.* If Bill Gross is right and there is no inflation and the forces of deflation have won, then continuing to increase interest rates could have a suicidal impact on the economy.* But if they do call a halt at this point it is an admission that the economy is stalling out.* The whole theory of "measured pace", predictability* transparency and telegraphing policy well in advance is coming into question.* IMO Greenspan has been stalling and playing for time with his monetary policy for the past year.* He is now out of time.* Its now damned if he does raise interest rates or damned if he doesn't.* Don't think he can temporize his way with the investment community any longer.* Events are beginning to force his hand to reveal the Fed's true intentions.* My guess-- he will declare victory and announce arrival at the infamous neutral zone -- not too hot ,not too cold-- time for a pause to evaluate things.* The whole thing is beginning to stink.* Not good.

Seems to me we are getting two conflicting signals on investor preference for risk.

On the one hand we have the stock market with its relatively high P/E and convresely low capitalization rates telling us the economy, earnings and dividends are going to continue to grow at robust rates and justify the current very high prices investors are willing to pay for equities.*

On the other hand the bond market is signaling perhaps a flight to safety and a growing conviction that much of the world, maybe including us, is headed for a deflationary recession.*

So what is going on?* Time will tell.*

Donner



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Re: What On Earth Is Going On With T Bills?
Old 06-03-2005, 06:07 AM   #17
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Re: What On Earth Is Going On With T Bills?

Donner,
Now you have me crying for a one-handed economist.
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Re: What On Earth Is Going On With T Bills?
Old 06-03-2005, 08:15 AM   #18
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Re: What On Earth Is Going On With T Bills?

Even a one-handed economist can still lift your wallet...

All this argues for diversification; only those with a magic tool can see into the future.
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Re: What On Earth Is Going On With T Bills?
Old 06-03-2005, 12:43 PM   #19
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Re: What On Earth Is Going On With T Bills?

Yeah but the guys with the magic tool have other problems.
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