Originally Posted by tenant13
That will be especially profitable right after rates decline (hopefully not but possibly into negative territory) - any bond held after that would just lose value over time.
US is in the unique situation of being able to print unlimited amount of the world's reserve currency. So our debt is kind of irrelevant: even if nobody else wants to buy US treasuries and finance it, Fed will. But that would definitely lead to domestic inflation - so far we've been able to export it. In which case we may actually see rates increasing...
Most of your comments are true. I hold mostly treasuries during a bear market. During a bull market, I hold mostly equities.
I do disagree with your comment that our debt is irrelevant. The reason why the dollar became the world's reserve currency is because the USA is a very stable country and the number 1 economy in the world.
However, if the US starts printing money like hell, the foreign exchange rates will change so that foreign goods will cost more US dollars which is inflationary. There is also a possibility that other countries will abandon the US dollar and make the Chinese Yuan their reserve currency.
This can happen if the US becomes irresponsible in handling the US economy. Other countries may then find that the Chinese Yuan is a more stable currency. If you represent a foreign country and you see that the US is printing trillions and trillion of dollars, would you have confidence in holding the US dollar in your foreign bank which may decrease in value?