The bond bubble bust

[william the wie]

Bill Gross, Warren Buffet, the Aden sisters and almost all other respected interest rate followers are expecting a near term bust in bonds and many are talking about a 20-30 year bear market in bonds. This could be a mild bear with 30 year treasuries over 30 ears rising to 8% yield. OTOH a rise to 20+% over 20 years is within the range of possibilities. So other than buying treasury LEAPs what are the other effects and markets to keep in mind?

 

[topspin]

I'm praying to Jah for that. We'll have a miny boom in stocks. I'll buy those bonds all day at 8%

 

[loosecannon]

Bill Gross, Warren Buffet, the Aden sisters and almost all other respected interest rate followers are expecting a near term bust in bonds and many are talking about a 20-30 year bear market in bonds. This could be a mild bear with 30 year treasuries over 30 ears rising to 8% yield. OTOH a rise to 20+% over 20 years is within the range of possibilities. So other than buying treasury LEAPs what are the other effects and markets to keep in mind?

To what do Buffet, Gross and the sistahs attribute this collapse in the bond market?

I don't doubt it, the US should be one of the PIIGS, as should Japan. But apparently that hasn't been the case.

 

[topspin]

the elimination of fear of socialism will boost equities and crush bonds.

 

[Trajan]

yea well bernanke is about to submarine the dollar again...good luck on your yields being worth a warm bucket of spit, hes only putting off the inevitable. he was supposed to have started months ago winding back the int. rate. instead hes all in, or that is we are , suckers along for the ride to perdition.

btw- I have been in a cali munny in big way, AKP, it has performed very will for the last 2 years, its been going soft though, and I am out. Times are about to change, big time here.

 

[topspin]

good luck buying food with an IOU

 

[Skull Pilot]

Blond Bubble Butts

NICE

 

[william the wie]

Bill Gross, Warren Buffet, the Aden sisters and almost all other respected interest rate followers are expecting a near term bust in bonds and many are talking about a 20-30 year bear market in bonds. This could be a mild bear with 30 year treasuries over 30 ears rising to 8% yield. OTOH a rise to 20+% over 20 years is within the range of possibilities. So other than buying treasury LEAPs what are the other effects and markets to keep in mind?

To what do Buffet, Gross and the sistahs attribute this collapse in the bond market?

I don't doubt it, the US should be one of the PIIGS, as should Japan. But apparently that hasn't been the case.

What I missed completely is that a while back Marketwatch had an analysis of the STS system going back to 1693 on the LSE. STS is easy to remember but hard to explain.

Buy after halloween day, then sell in May and walk away. That little rhyme will make you serious money and avert serious losses 5 out of 6 times only nobody knows why. Due to almost all stock markets being in the northern hemisphere it is called the Seasonal Trading System.

Well the Fed announced it would reinforce this cycle by using QE II during the STS period and then stop during the start of the down cycle (more usually the flat period of the cycle but it will be a down cycle this time due to Fed action.) As to Gross, Buffet and the Aden sisters they all use somewhat different approaches. Also the demographics really suck next year due to it being 43 years after the bottom of the birth dearth in 1968. The TIPS auction for a yield of -055% is another bad sign so there are a lot of reasons to expect bad times ahead and the people I mentioned didn't give enough detail about what weighting they gave to the various signals for me to explain their calls. I can and have explained why I agree with these calls.

 

[uscitizen]

Umm won't this up our nation debt or at least the money/interest we pay on our debt?

 

[william the wie]

Umm won't this up our nation debt or at least the money/interest we pay on our debt?

Not technically but volatility will go even further through the roof as the Fed does it 1990s BOJ imitation so we can have our very own lost decade or two.

 

[loosecannon]

Umm won't this up our nation debt or at least the money/interest we pay on our debt?

DRAMATICALLY. Esp if the 8% interest figure holds true.

We would prefer 8% inflation and 2.3% interest on the debt.

 

[william the wie]

Umm won't this up our nation debt or at least the money/interest we pay on our debt?

DRAMATICALLY. Esp if the 8% interest figure holds true.

We would prefer 8% inflation and 2.3% interest on the debt.

Given the probable levels of money destruction coming out of foreclosure gate there are two conjoint problems.

The Fed could monetize the entire federal debt (unlikely I will admit) without getting ahead of money destruction and then get putbacks from all of the toxic assets it has bought. What that means even is unknown. Even Japan's nightmare doesn't give us any clues to predict possible outcomes.

Bank runs may end traditional banking early. At the rate traditional banking is losing market share it should survive until 2030 but that ain't guaranteed. (non-bank banks are increasing market share at a 1.1% annual rate with only 20% more to go till no more banks.)

I would think 8% interest rates and some marginal level of deflation is the most likely outcome.

 

[uscitizen]

Umm won't this up our nation debt or at least the money/interest we pay on our debt?

Not technically but volatility will go even further through the roof as the Fed does it 1990s BOJ imitation so we can have our very own lost decade or two.

Not technically? It seems to me that the Fed will be paying more interest for money "borrowed" for them to spend. What am I missing here?

If I get a loan for 3% vs 8% i will pay less interest on the loan.

or should we all long for the old days when a home mortgage was 19%?

 

[william the wie]

Umm won't this up our nation debt or at least the money/interest we pay on our debt?

Not technically but volatility will go even further through the roof as the Fed does it 1990s BOJ imitation so we can have our very own lost decade or two.

Not technically? It seems to me that the Fed will be paying more interest for money "borrowed" for them to spend. What am I missing here?

If I get a loan for 3% vs 8% i will pay less interest on the loan.

or should we all long for the old days when a home mortgage was 19%?

the Fed is buying treasuries with bookkeeping money and holding them to maturity. No borrowing costs are incurred and much of the yield and profits are returned to treasury (very convulated process but that is how it ends up working.)

 

[loosecannon]

Umm won't this up our nation debt or at least the money/interest we pay on our debt?

DRAMATICALLY. Esp if the 8% interest figure holds true.

We would prefer 8% inflation and 2.3% interest on the debt.

Given the probable levels of money destruction coming out of foreclosure gate there are two conjoint problems.

The Fed could monetize the entire federal debt (unlikely I will admit) without getting ahead of money destruction and then get putbacks from all of the toxic assets it has bought. What that means even is unknown. Even Japan's nightmare doesn't give us any clues to predict possible outcomes.

Bank runs may end traditional banking early. At the rate traditional banking is losing market share it should survive until 2030 but that ain't guaranteed. (non-bank banks are increasing market share at a 1.1% annual rate with only 20% more to go till no more banks.)

I would think 8% interest rates and some marginal level of deflation is the most likely outcome.

The Fed is juggling about 3-4 planets now. I think that they may already be monetizing the whole debt. There is a kind of loose corelation between 1.7 trillion in easy money pumped into buying bonds and a 1.55trillion deficit.

Then there is SS. Somebody is gonna have to pay to redeem those bonds in the "trust fund".

Then there are the toxic assets the Fed absorbed, and as you point out perhaps a whole lot more of those via foreclosure gate and the commitment the Fed (and it's member banks) has already made to low interest 30 year loans.

The way it looks to me is as if the Fed has basically been told point blank: "you will do this even at the expense of killing the Fed (and the member banks) or we will kill the Fed (and the member banks)instead and make other arrangements".

I can't imagine the Fed surviving. But that's cool with me. If the Fed defaults and the US government survives it's all good. Maybe we can force the Fed to buy dubious state bonds as well.

 

[uscitizen]

If anyone had checked I think those bonds sold to finiance the S&L bailout are due about now. they were 30 yr bonds I think.

 

[william the wie]

I have no idea of what to tell you in regards to that but state bonds are in some cases being guaranteed by the treasury. At least one IL issue and I presume others .

 

[Big Fitz]

I'm just waiting for George Soros to post his op ed raising his doubt in the stability of the US Dollar, just like he did to 4 other nations, including Britain, in which he can crash the currency and then sell short making billions.

All the ignorant and wrong people will be clamoring for a world currency then.

none of this, I think is totally coincidental, and loaded with opportunists running their own games to profiteer off of financial misery of those who can't do more than survive.

 

[miller]

I am now in the process of filing a suit against PIMCO (Bill Gross says the opposite). Look at the PIMCO website. They rigged the futures higher to get larger fees on their trillion $$ portfolio.

When my law suit is filed the US Treasury market is going to collapse.

 

[Liberty]

won't the dollar inflate to high heaven if this happens?