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Jim Grant: Betting On A Goose Egg

TedTed
in Fund Discussions
FYI: Reader Charles Calvert stepped off the USS Shangri-La and into civilian life in 1961 at the National Savings and Trust in Washington, D.C. Little did the tyro securities analyst realize that interest rates were poised for a 20-year lurch to the upside followed by a multigenerational break to the downside.

He realizes it now. Like many who came of age in the inflation of the late 20th century, Calvert has had the devil’s own time adjusting to the era of subzero percent bond yields. He can’t get it out of his head that the borrower ought to pay the lender, not the other way around.
Regards,
Ted
https://www.barrons.com/articles/jim-grant-theres-trouble-ahead-for-austrias-100-year-bonds-51569615760?mod=djem_b_Weekly Feed for Barrons Magazine

Comments

  • hank
    edited September 2019
    Good Lord. When I clicked on this Barrons article it downloaded completely.:)

    I’m a little confused where the article is going. But it’s about the ultra low/ negative rates globally and how that has impacted investor attitudes. Mentions inflation past and present.

    I’ve long thought that the worst scenario a retiree could face (investment wise) would be a horrific slashing of asset values over a relatively short period (read “market crash”) followed in quick succession by rampant inflation. I’m not predicting this. Just think it’s worth thinking about. Those of us invested in risk assets the past decade have had a bit of a “free lunch” it seems to me - double-digit returns during a period of subdued inflation and prevailing interest rates only slightly above 0. The inference here: If it seems too good to be true ... it probably is.
  • Level5
    Hey Ted and Hank,
    A powerful reminder about the advantages and disadvantages of bond convexity, yes?
    Brian
  • hank
    edited September 2019
    Level5 said:

    Hey Ted and Hank,
    A powerful reminder about the advantages and disadvantages of bond convexity, yes?
    Brian

    So that’s what Grant is talking about? I don’t pretend to understand convexity, but am working on it. I gather it’s a somewhat sophisticated way of saying that “Things ain’t always what they seem ...” when it comes to bonds, rates and risk.

    For the curious ...

    image
  • catch22catch22
    @hank
    .....Course, we always have market forces, yes?
    A question could be whether convexity helps dictate pricing regardless of duration, or more so from supply and demand.
    I'm sure with various areas of the markets that what may be more pure math relationships, historical thinking habits and patterns become overrun and overruled by the machines today.
    However, interesting; but above my pay grade for what I'm paid to run the portfolio.
    Good Evening.

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