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30Y Treasury Yield Breaks Below 3.00% Amid Best Week In 2 Months
Well at least something makes some sense. Whether it is a safety bid from the ramping up of global terrorist attacks or a reflection of a possible Fed policy error (or their jawboning over low equilibrium rates), US Treasury yields at the long-end are rallying. 30Y just broke back below 3.00% to push it to its best week since late September...
As the curve drops to its flattest in 3 months...
Charts: Bloomberg
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Raise rates, well maybe , maybe not... we could be we'll see...
My BIG bet on treasuries is already yielding capital gains
PLUS
I am collecting interest at 3.1%
AND
I will get my investment back at par.
Infinitely better than destroying money in shiny lead.
Considering the real cost of your government's liabilities, you might want to invest in a little bit of lead and lead-propulsion mechanisms...
You know its a bubble when...
People are openly bragging about their gains and getting upvoted for it. Why simultaneously putting down another asset class that has been doing poorly.
But its never trendy being a contrarian at the right time..
But maybe this is the bubble that will never pop.
I doubt a burst bubble can change an asshole into something less annoying. Once an asshole, always an asshole.
But by time you collect your money back it is not worth as much due to inflation. That is how the scam works.
In a greatly simplified way here it is:
You loan $100 to me and I'll pay you $5 a year and at the end of 20 years give you your $100 back.
You should have about $200. But your $200 can only buy $100 worth of goods because inflation at 5%/yr ate all the value out of the investment. You just gave me an interest free loan for 20 years.
Come back again.
Compare that with a 20 year gold return 1995-2015. From roughly $400 to $1100. Even with inflation at 5% you still make $300.
Want to look at other periods of time? 5 year etc?
http://www.kitco.com/charts/historicalgold.html
And how does your analysis change if we look at gold from 2011 to now ?
Again, gold pays zero interest, so what does my family live on while waiting for the 2nd coming ???
So I get 3% in 30 years when real inflation is 3% every year.
Banks get free money at 0.10% to lend out at 4.5%-29%?
Sounds like an organized crime syndicate to me.
Treasuries pay 3% EVERY year, not just after 30 years.
Yeah, the regime has crushed interest rates, but it is what it is, and I cannot change it.
The only thing that I can do is use my wits and capital to earn the maximum amount of income possible to provide for my family.
Treasuries pay nothing once you ex out inflation. Plus you pay income tax on a non existing gain.
Canadian example
Canada Inflation Rate
The inflation rate in Canada was recorded at 0.90 percent in November of 2013. Inflation Rate in Canada is reported by the Statistics Canada. Inflation Rate in Canada averaged 3.21 Percent from 1915 until 2013 but we will use the 0.90%
Rates of return on interest as of January 01, 2014
Accounts $60,000 and over rate 0.35%
.90 (-).35 = minus -0.55. So after inflation, you have a negative .55 return.
So your $200,000 in a savings account costs you $1100 a year. (.55% of 200,000 is $1100)
After year one, you are left with ($200,000- $1100=)$198,900
Is this what you call a sound investment or savings strategy ?
Negative yields.... Plus you pay income taxes on the .35% return even though it is no return at all ! Using the governments own statistics.
Interest Income
Investments such as Canada Savings Bonds, GIC’s,
T-bills or strip bonds, pay interest income which
is taxed at your marginal tax rate without any
preferential tax treatment.
So the law says that you have to pretend that your $1100 dollar loss on your $200,000 savings doesn't exist. And you have to pay taxes on the imaginary return. Lets do some imagining...
.35% return on $200,000 = $699
Federal tax rates for 2013
15% on the first $43,561 of taxable income.
15% of $699= $104. So you lose $104 to taxes.
So you can add that to your already negative $1100 loss.
$1100+ $104 =$1204 loss.
$200,000-$1204= $198,796
All your pseudo-analysis is just political dogma.
My treasuries are paying me real income at the rate of 3% that I use to pay real living expenses for my family.
AND
I get my investment returned at par.
You do not state what other investment has the same or better level of security and return ?
Getting your money back doesn't mean squat when your money loses value as prices rise. That is what he was explaining. If real inflation is in the 5 - 7% ball park then you are losing the difference.
You clearly don't understand value.
More political dogma.
You STILL do not state what other investment has the same or better level of security and return, especially what other investment defies the decline of inflation ?
Over time, the stock market will outperform treasuries. If you can handle the huge declines when were in a recession.
My family lives continuously and therefore needs steady continuous income - not the volatility and high risk of the stock market. If I were in my early 20's and investing for my retirement decades away, then I would agree with you, but I need income and preservation of my capital.
If you are living on treasuries then how much do you have to own at 3% return ? You must have lots of money that you are willing to part with
If you think basic math is dogma your missing some screws. Simply holding on to cash would be better than buying a guaranteed lose of return.
But if you were looking for income I would say some stocks that have a decent dividined or rental property. Government bonds at this point are like playing Russian roulette.
Canadian banks have nice dividends and those are taxed lower than interest income if you live in Canada.
You are entirely too trusting.
Yea real income while the principal becomes less valuable in inflation adjusted terms. And that's not political is it actually the point of central banks to ensure inflation so your principal gets less valuable every year.
Still more political dogma.
You all keep replying with polemics about the effects of inflation - we all know what inflation is and what it does - NO NEW INFORMATION in any of these posts about the existence and effects of inflation.
As an investor who has to earn income to provide for his family, I must choose between the investments available, and inflation is a reality that I cannot avoid or change.
You STILL do not state what other investment has the same or better level of security and return, especially what other investment defies the effects of inflation ?
We can't unless you concede that you have no real income gain at all.
You should hold a diversified amount of physical cash instead. Mainly of Euro's.
Your opinion is that I am losing money investing in treasuries that pay me 3% real income, and that pay me par upon maturity,
AND
that I should instead be invested in "physical cash, mainly Euros" -
WHICH PAY ZERO INTEREST AND THE EURO HAS LOST 1/3 OF ITS PEAK VALUE!
YOU ARE A CLOWN !!!!
You still have not revealed what the magic investment is that earns income faster than inflation destroys it - do you have one or did you just want to make a big statement about how destructive income taxes and inflation are, something that all of us adults already know ????
Yes, such "let the majority eat cake" monetary experiments have been tried before. This one will end no differently.
Economist (just after coming out of a 15-year Coma after a car accident): "So the Fed is going to move in December? Makes sense based on the data. I'm surprised they waited this long to cut rates."
Nurse: "Actually I thought I read that they were going to raise rates"
Economist: "Uh wha?"
Sovereign debt, much like the Fed, is becoming less relevant every day. Interesting times...
Yields of 30-day rose but yields beyond two years fell on Fed's hawkishness. So apparently market consensus is Fed will raise in December, but move will fail and Fed will have to cut again around two years later, thwarting normalization that would have occurred if the Fed waited longer to begin raising. Wild.
The regimes will continue to suppress interest rates, except possibly at the overnight rate, just to get the money market and inter-bank lending revived.
In the years to come, as interest rates in the USA are crushed to the levels in Europe, you will WISH that you could get AS MUCH AS a miniscule 3% rate of return on your savings.