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What would you do?
Old 08-02-2006, 09:15 AM   #1
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What would you do?

If interest rates were to rise to the levels of the period from Oct '79 thru Oct '85, would you buy bonds?

I noticed that the 10-year treasury averaged* 12.1% yield during that period.* If, knowing what you know now, that happened again, would you increase your allocation of* treasuries?* Maybe lock in the dreaded annuity?

*Simple average of monthly ending yields from Oct '79 thru Oct '85.
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Re: What would you do?
Old 08-02-2006, 09:29 AM   #2
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Re: What would you do?

If I can predict the future with accuracy (or certainty), I would know exactly what to invest (or not to) now.
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Re: What would you do?
Old 08-02-2006, 09:40 AM   #3
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Re: What would you do?

The problem with that period is that inflation was raging pretty hard. I wouldn't be all that eager to buy long dated treasuries unless I was confident inflation was going back down. I'm not all that sure inflation will stay under control now, which is why I think TIPS, etc. are probably a better choice.
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Re: What would you do?
Old 08-02-2006, 10:24 AM   #4
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Re: What would you do?

I'd buy long bonds. Its a sure bet that every stop would be pulled out to crush inflation. I doubt with what we know now that long term high inflation would be allowed to stand.

Sure worked out for my dad. He's still got a bunch of bonds paying high single digits and retired on that box o' bonds...no worries about the stock market at least. Depression baby.
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