Thus Warren Buffett comes out today to say that bonds are "among the most dangerous of assets." And Blackrock's Larry Fink thinks investors should be 100% in stocks, which really means 0% in bonds.I suspect that the "bond market vigilantes" have just about finished licking their recent wounds - they have been wounded by the likes of Operation Twist, European squabbling, and pervasive doom and gloom - and will regroup for another assault on US debt. US credit worthiness is deteriorating rapidly and inflation is set to finally emerge full blown. It won't take much, a bad inflation print, a less than stellar auction (the Germans had one in November)...and bang, yields could go to 4.25% in a heartbeat.
30-year bond auction today resulted in a yield of 3.24%, up about 10 basis point.What was interesting was watching the price of gold. At the same time treasuries went down in response to the auction, gold erased a notable amount of today's rise. Seems like gold is acting as an alternate long bond, at least sometimes.
Unknown, said:"Seems like gold is acting as an alternate long bond, at least sometimes."Or perhaps more likely the respective changes represent a lessening of PANIC.
Scott Grannis, How much effect to you believe the general rise in bond interest rates will have on High Yield Corporate Bonds? Specifically, how will you know when to sell your investment in Hi Yield Corporate Bonds?
Higher Treasury yields aren't necessarily bad for high yield bonds, and in fact the two are often negatively correlated. Higher Treasury yields would be symptomatic of an improving economy and possibly higher inflation as well. This in turn implies stronger cash flows for borrowers, and thus lower default rates and tighter spreads for high yield debt.
Yeah, and just wait for those yields on Japanese bonds. They are going to the moon, and have been for 20 years. Any day now. They will take off. Soon. Okay maybe next year. Or the year after that.Or mayhem we have global gluts of capital, as we have created huge and growing middle and upper classes with the ability to save money. A good thing.But capita is cheap due to supply and demand. A huge amount of supply is out there and grows every year. You want pansy-safe investment like US Treasures, get used to zero.
Increases in bond rates will devastate gold and silver positions, which is why no one should be banking on gold or silver for their future -- hopefully everyone bought into dividend-paying stocks when the DOW was at less than 11,000 -- I expect the DOW to hit 36,000 by the end of decade -- however, the Federal budget problems will continue to get worse regardless -- the coming decoupling between the public and private sectors is the story historians will be writing about after 2020 -- in the mean time, smart investors will stick with income and rent-earning equities, and world-class skills will continue to earn premium wages -- everyone else is in for dark times...
Dr McKibben:I enjoy your posts, but evidently there are two men using the same name and photo. A sort of Jekyl and Hyde tag team.
Benjamin wrote:"I enjoy your posts, but evidently there are two men using the same name and photo."I have noticed that also Benjamin - kind of like coin, two faces.
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