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@DanHardy Yes, relative to new and future retirees. If the 10 year moves sideways from this point in a narrow channel for yield; total return (which includes price movement) would be muted. Any search for yield must be carefully weighed against from where the yield arrives and why; as well as what circumstances going forward will alter the yield. Not unlike today and U.S. investment grade bond yields; I'm not concentrated upon the fact that the yield continues to move lower, as the underlying price performance is far out pacing the yield. At this time our house is not chasing any yield for income, but yield (downward) for price performance. Total return on any given investment, while attempting to prevent loss of capital continues as our primary focus. Sideways movement of pricing for any investment is a possibility for extended periods of time. So, those expecting and wanting performance from equity investments can also get stuck in sideways price movements. Obviously, total return becomes diminished, regardless of the investment area. Retirees who have chosen to not be involved with investments in the stock/bond markets find themselves stuck with the choice of a CD or similar. We know what these returns will be at this time. Annuities currently are unable to offer returns of consequence (although some folks might find other aspects appealing). Pension funds and some large institutions are looking everywhere to provide for their future needs. Many of these organizations have finally begun to pull away from the fancy hedge fund promises and fees. The "alt" investments folks are also clawing to prove they know what their doing with "other peoples money". The enormous California retirement fund reported a "year to year" (June 30) total return of .62%. Batman would surely do a "holy crap" for this folly. Central banks globally continue to "play". Bank of Japan recently did not further reduce bond yields with market intervention, but expanded their ability to purchase Japanese market etf's (equity) specifically designed for the Bank of Japan to purchase. The ECB, among other ongoing purchases is also purchasing eurozone corporate bonds. I have no idea with what our Federal Reserve is involved within the market place.
For recent historical reference.Government " G " Fund as part of the Thrift Savings Plan offered to Government employees and U S Military personnel The G Fund buys a nonmarketable U.S. Treasury security that is guaranteed by the U.S. Government. This means that the G Fund will not lose money. Last 12 mo. through 6/30/2016 2.02% First offered on 04/01/87
How come we never hear from anyone who purchased lots of longterm T-bills 1988-1990? They are coming up pretty soon. Is this a case of 'investor returns'?
G-fund since April Fool's '87 to last xmas was ~5.3% annually on average; SP500 was ~7.1% and with very different taxation, right? Who woulda thunk.
Central banks globally continue to "play". Bank of Japan recently did not further reduce bond yields with market intervention, but expanded their ability to purchase Japanese market etf's (equity) specifically designed for the Bank of Japan to purchase. The ECB, among other ongoing purchases is also purchasing eurozone corporate bonds. I have no idea with what our Federal Reserve is involved within the market place.
Gotta go help at high school band camp.
Most interesting times continue.....
Catch
Japan is showing the way in many ways. Europe might get a little help with the decline in the Euro and Sterling but not much.
The US Fed is talking about raising rates - are they nuts or trying to help the world more then the USA?
I have high yield bonds and the dividends are decreasing. I've been using the dividends to purchase other funds such as PREMX. Have you seen DSL's take off!
I think think in a few years people will be exclaiming Wow! you are a getting 4% dividend payment!
@davidmoran You noted: "How come we never hear from anyone who purchased lots of longterm T-bills 1988-1990?" I don't know anyone who ever purchased individual long term U.S. bonds. There are probably a few folks in my small world of investors who have, but have not stated so. Do you know of anyone? Regards, Catch
In those days TreasuryDirect was as unavailable as on-line brokers and on-line anything! Money market funds were just becoming available as a cash management tool .I don't recall if you could even go to a locally owned bank and buy a 30 Yr gov bond.Most retirees depended on CDs and local Utility Co dividends for income.
Thank you for choosing TreasuryDirect! You can buy a marketable security (Bill, Note, Bond, F R N, or TIPS), and schedule reinvestments through BuyDirect. http://www.treasurydirect.gov/indiv/TDTour/buy.htm
@catch, no, I do not, but I have lost touch w former brokers or indeed the kind of person who would do that for himself or his family in the first place. As for ease of purchase, I do not know exactly how hard it was, but I bet if I told one of my expensive guys at Paine-Webber to go get me some of them there T-bills, he would've been able to do something. The thing is, at so many times then and since, everyone would be saying, and you (I) would be agreeing, Why the heck are you settling for a mere 9% ??
@DanHardy I'm keeping inflation on the stove (on a "side burner") if only to keep myself honest. Is it starting, or is this only a meandering, to and fro? I don't think it's wise to bet too much on trend-following here. If the bond vigilantes become convinced that inflationary pressures are building up and here to stay, there won't be much the Fed will be able to do about it (and if they were to decide to try, I suspect it would have to be in a way that would be a "naked tell" they have been playing favorites all along). Get caught leaning, and there could be some hell to pay.
@DanHardy I'm keeping inflation on the stove (on a "side burner") if only to keep myself honest. Is it starting, or is this only a meandering, to and fro? I don't think it's wise to bet too much on trend-following here. If the bond vigilantes become convinced that inflationary pressures are building up and here to stay, there won't be much the Fed will be able to do about it (and if they were to decide to try, I suspect it would have to be in a way that would be a "naked tell" they have been playing favorites all along). Get caught leaning, and there could be some hell to pay.
May you live in interesting times.
Well the work that comes to mind is stagflation - but not the '70s flavor - History may not repeat but it rhymes.
There are key differences from the '70s.
Now with have weak growth & that will continue
Now we have pass through of energy, food and service industries but not in other areas. "Free Trade" will help to keep imported goods prices down and keep US workers worried.
Now the worker does not have pricing power. They will have to suck up any price increases.
Bottom line - while we have inflation you have to look where it is coming from - e.g. health care and health insurance is much larger part of the US economy then it was in the '70s.
So while we have inflation returning from the dead it is weak, we do not have the other aspects to make it a concern to bond prices. There is a lot of liquidity sloshing around the world looking for a return.
For pre-retirees who do not have a public pension, any effort to eliminate debt service prior to retirement will only enhance retirement cash flow. There are some for whom this strategy doesn't matter. Their cash flow will be more than sufficient anyway. But for most of us, entering retirement with cash flow needs slashed by one-third or more can be life saving.
A lot of it has to do with the U.S. depegging from gold in 1971 creating a system of floating currencies, and the subsequent trade imbalances created with first, Japan, then China ( and creating of credit bubbles; Japan in late 80's and China now ? ). They've "printed" in order to keep their currency from falling ( has kept their products cheap ) , then use the money that they make from the U.S. ( and other trade partner countries, U.K. ) buying their products / manufacturing capacity / resources to buy equities, bonds ( pushing rates lower ), real estate, etc. Unless an investor/retiree can: 1) successfully navigate and ride / has ridden the "gravy" train of asset / real estate bubbles and busts successfully 2) has real estate rental income, then the reliance on the "yield" delivered from debt instruments ( and the variability in payouts of dividends ) is somewhat futile
A lot of it has to do with the U.S. depegging from gold in 1971 creating a system of floating currencies, and the subsequent trade imbalances created with first, Japan, then China
True but most people don't understand that. They hear gold standard and think it is a stupid idea. They don't understand the monetary and fiscal tools used in that system.
I think you prove my point that you are included in the "people don't understand". It was Bretton Woods in 1944, not Brenton. And you evidently fail to note that I'm not talking about 1944, or 1971, but 1929. You may not understand, but the United States most definitely was on the gold standard in 1929.
I think you prove my point that you are included in the "people don't understand". It was Bretton Woods in 1944, not Brenton. And you evidently fail to note that I'm not talking about 1944, or 1971, but 1929. You may not understand, but the United States most definitely was on the gold standard in 1929.
Comments
Derf
Yes, relative to new and future retirees. If the 10 year moves sideways from this point in a narrow channel for yield; total return (which includes price movement) would be muted.
Any search for yield must be carefully weighed against from where the yield arrives and why; as well as what circumstances going forward will alter the yield.
Not unlike today and U.S. investment grade bond yields; I'm not concentrated upon the fact that the yield continues to move lower, as the underlying price performance is far out pacing the yield.
At this time our house is not chasing any yield for income, but yield (downward) for price performance.
Total return on any given investment, while attempting to prevent loss of capital continues as our primary focus.
Sideways movement of pricing for any investment is a possibility for extended periods of time. So, those expecting and wanting performance from equity investments can also get stuck in sideways price movements. Obviously, total return becomes diminished, regardless of the investment area.
Retirees who have chosen to not be involved with investments in the stock/bond markets find themselves stuck with the choice of a CD or similar. We know what these returns will be at this time. Annuities currently are unable to offer returns of consequence (although some folks might find other aspects appealing).
Pension funds and some large institutions are looking everywhere to provide for their future needs. Many of these organizations have finally begun to pull away from the fancy hedge fund promises and fees. The "alt" investments folks are also clawing to prove they know what their doing with "other peoples money". The enormous California retirement fund reported a "year to year" (June 30) total return of .62%. Batman would surely do a "holy crap" for this folly.
Central banks globally continue to "play". Bank of Japan recently did not further reduce bond yields with market intervention, but expanded their ability to purchase Japanese market etf's (equity) specifically designed for the Bank of Japan to purchase. The ECB, among other ongoing purchases is also purchasing eurozone corporate bonds. I have no idea with what our Federal Reserve is involved within the market place.
Gotta go help at high school band camp.
Most interesting times continue.....
Catch
The G Fund buys a nonmarketable U.S. Treasury security that is guaranteed by the U.S. Government. This means that the G Fund will not lose money.
Last 12 mo. through 6/30/2016 2.02%
First offered on 04/01/87
Regards,
Ted
https://www.tsp.gov/InvestmentFunds/FundOptions/fundPerformance_G.html
G-fund since April Fool's '87 to last xmas was ~5.3% annually on average; SP500 was ~7.1% and with very different taxation, right? Who woulda thunk.
Europe might get a little help with the decline in the Euro and Sterling but not much.
The US Fed is talking about raising rates - are they nuts or trying to help the world more then the USA?
I have high yield bonds and the dividends are decreasing. I've been using the dividends to purchase other funds such as PREMX. Have you seen DSL's take off!
I think think in a few years people will be exclaiming Wow! you are a getting 4% dividend payment!
You noted: "How come we never hear from anyone who purchased lots of longterm T-bills 1988-1990?"
I don't know anyone who ever purchased individual long term U.S. bonds. There are probably a few folks in my small world of investors who have, but have not stated so.
Do you know of anyone?
Regards,
Catch
Thank you for choosing TreasuryDirect!
You can buy a marketable security (Bill, Note, Bond, F R N, or TIPS), and schedule reinvestments through BuyDirect.
http://www.treasurydirect.gov/indiv/TDTour/buy.htm
As for ease of purchase, I do not know exactly how hard it was, but I bet if I told one of my expensive guys at Paine-Webber to go get me some of them there T-bills, he would've been able to do something.
The thing is, at so many times then and since, everyone would be saying, and you (I) would be agreeing, Why the heck are you settling for a mere 9% ??
@DanHardy I'm keeping inflation on the stove (on a "side burner") if only to keep myself honest. Is it starting, or is this only a meandering, to and fro? I don't think it's wise to bet too much on trend-following here. If the bond vigilantes become convinced that inflationary pressures are building up and here to stay, there won't be much the Fed will be able to do about it (and if they were to decide to try, I suspect it would have to be in a way that would be a "naked tell" they have been playing favorites all along). Get caught leaning, and there could be some hell to pay.
May you live in interesting times.
There are key differences from the '70s.
Now with have weak growth & that will continue
Now we have pass through of energy, food and service industries but not in other areas. "Free Trade" will help to keep imported goods prices down and keep US workers worried.
Now the worker does not have pricing power. They will have to suck up any price increases.
http://economistsview.typepad.com/economistsview/2008/03/frbsf-the-econo.html
Bottom line - while we have inflation you have to look where it is coming from - e.g. health care and health insurance is much larger part of the US economy then it was in the '70s.
So while we have inflation returning from the dead it is weak, we do not have the other aspects to make it a concern to bond prices. There is a lot of liquidity sloshing around the world looking for a return.
Unless an investor/retiree can: 1) successfully navigate and ride / has ridden the "gravy" train of asset / real estate bubbles and busts successfully 2) has real estate rental income, then the reliance on the "yield" delivered from debt instruments ( and the variability in payouts of dividends ) is somewhat futile
http://www.businessinsider.com/ben-bernanke-murders-the-gold-standard-2012-3
http://bonddad.blogspot.com/2012/08/the-gold-standard-is-still-stupid-idea.html
http://www.pkarchive.org/cranks/goldbug.html
Yes, those worked particularly well in 1929.
Read and learn
https://en.wikipedia.org/wiki/Bretton_Woods_system
PS - I hope that spanking won't leave a mark.
Read and learn: Gold standard, From Wikipedia
Save your snotty remarks for someone else, Dex.
wealthtrack.com/robert-kessler-bullish-treasuries/