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What would you do?
Old 08-02-2006, 08:15 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, 08:29 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, 08:40 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, 09:24 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' worries about the stock market at least. Depression baby.
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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