Fed buying Treasurys..

ranshdow

... with all the proceeds from maturing MBSs. Um-hmm. QEII is started, the battle is joined- a legion of tight-fisted consumers and corporations, hoarding their bux paying down debt & refusing to spend, vs. the Leviathan, the mother of all printing-presses.

Debaser! Debaser!

Disinflation must be worse than thought..

7over8

well, if no one else will buy your paper - what to do?

buy your own!!

cohodk

<< <i>well, if no one else will buy your paper - what to do?

buy your own!! >>





Demand for Treasuries from U.S. investors is climbing as consumer spending and incomes stagnate and the savings rate reaches the highest level in almost 18 years

jmski52

cohodk, buddy - the reason that commercial banks are buying treasuries is because they don't know what else to do with our stimulus money (i.e. tax dollars), since nobody is taking out business loans.

It's not a healthy situation. When interest rates are forced up, what do you expect will happen to the debt that gets rolled over? And let's not forget those retirement obligations & other unfunded liabilities of our dear government.

"Running out of time" is an understatement.

Just my two cents. Buy precious metals. And yes, you are correct, have cash also.

cohodk

This isnt just commercial banks buying treasuries. Individuals are buying through mutual funds. People are scared. The USA is not going to default and 1.47% every year for 5 years is better than the returns they've gotten in stocks or real estate.

The banks are not lending cuz there is not really a demand for loans and there are few qualified candidates.

A rise in rates would be healthy for America. The longer the Fed waits, the greater the chance we repeat Japan. A higher interest rate will boost domestic demand for Treasuries. The increase in interest payments would go directly into the US economy since most debt would be held by Americans. So, a rise in rates, could have some stimulative benefits. Its time to reward savers. For them, deflation is good. I say, bring it on!!

Bernanke raise rates NOW!!

For those who think the USA will default, do you think it would be a 100% loss? Even debt holders in Enron got some money back. But this is a moot topic as the USA is not going to default on anything, except on some promises to entitlement programs. IE, raise retirement age and get less benefits.

jmski52

A rise in rates would be healthy for America. The longer the Fed waits, the greater the chance we repeat Japan. A higher interest rate will boost domestic demand for Treasuries. The increase in interest payments would go directly into the US economy since most debt would be held by Americans. So, a rise in rates, could have some stimulative benefits. Its time to reward savers. For them, deflation is good. I say, bring it on!!

Bingo! I agree that a rise in rates would be healthy for America, but only if the government stops what it's doing.

Furthermore, what do you suppose happens to those people and funds who have piled into fixed income instruments at these extremely low levels of interest rates?

Killing off a bunch of bondholders is another forum of default. Same thing as what happened to the Chrysler bondholders. The rules no longer apply. That 1.47% return will sure look like crap when rates go to 3.5% or so. Eh?

gsa1fan

Raising retirement age to 70! Work my whole life dreaming of 65 retirement now the freeking crooks on wall street wanna raise retirement.

Talk of this BS "new Normal" Where they raise unemployment to 7.5% = new normal.

All so wall street does not have to factor unemployment in the grand scheme or should I say SCAM!!!

pf70collector

They are proposing raising the retirement age to 70 for all those below 50 years of age. Hoping that Congress's inaction can hold off for another 2 years when I turn 50. There should be no animal farm mentality for gov't employees also (except for Fireman and Policeman- don't want to be rescued by a 65 year old Fireman). Gov't employees should not be able to retire at 58 either.

roadrunner

Individuals are buying through mutual funds.

I discussed this same topic last week which showed "individuals" and the UK buying the bulk of the treasuries this year. The only problem with that is that both entities are broke or tapped out. It makes more sense that both these categories of bond "demand" are ways to hide who is really buying them....the USTreasury via a number of well disguised smoke screens. The problem is that about $1.5 TRILL extra in bond sales has occured the past few years that exceeds the US govt debt issuance over that period....that can't be accounted for by money supply or by rollover debt either.

roadrunner

cohodk

Jmski, if the bondholders hold to maturity, all they've lost is opportunity cost. They still get their principal back.

When social security first began it has a retirement age of 65 while life expectancy was 63!! If we go back to the original standards, then maybe the age at which to get benefits should be 80??!! Im presenting this just for arguements sake and not advocating this.

Until 1935, no one was "entitled" to a retirement. A monster called social security was created and it must now be tamed.


Roadrunner, individuals are not tapped out. Almost all who are working still contribute to a 401k or other plan. They may be tapped out in terms of disposable income in that they choose not to spend, but those who have jobs--7 of 8 people--are saving more. Walk into your local brokerage firm and ask the brokers what their clients are buying.

mrearlygold

jmski52

Jmski, if the bondholders hold to maturity, all they've lost is opportunity cost. They still get their principal back.

Cohodk! Oh, my goodness! Do you think that the principal on those bonds will be worth what it is right now? Remember, the Fed is keeping rates artificially low right now because they simply can't afford to screw up any semblance of a business recovery. But the market isn't going to let them keep doing it. You and I both know that.

When rates go up, the price of the bond goes down. If you stay trapped in the thing until maturity, you get absolutely killed by the devaluation of the dollar that has occurred in the meantime.

Being the nimbler trader that you are, I'm sure that you wouldn't be holding any bonds over 2 years to maturity. So, are you piling into bonds right now? I wouldn't advise it. jmski

renman95

The Fed will go the route of Japan because it's less catastrophic than going Weimer. They've looked at Japan since 1989 as a fairer path than post 1921 Germany. Besides, they don't want to pay 76 million boomers high interest on their passbook savings. I don't know how long the Fed can manufacture and contain deflation but the after effects don't look welcoming.

On a Beck side note, I heard him say on his radio show in 2008 that the Fed will eventually monetize US debt. He said he took a lot of flack for that. Yesterday he asked the question, who will bail out America? No one. But, a global entity may meld America'a assets into theirs. Time will tell. Meanwhile Michelle Antoinette says let them eat cake!

gsa1fan

I said wall street meaning their whipping boy Tim G. for - get it now! A blind man can plainly see he's taking care of his boys.

Cohodk; you don't feel they will raise the 401K & IRA with drawl age with out penalty too?

I do know that Social Security was created for a temporary fix. I also realize it's unsustainable as it sits now.

pf70collector

One of my funds in my 401K Select Pimco Total Return has a YTD Return at 8.23%. Kind of scary.

ranshdow

One of my funds in my 401K Select Pimco Total Return has a YTD Return at 8.23%. Kind of scary.

It is. What's extra scary is that fund is basically Gross, El-Erian et all, sitting at their trading desks in Newport Beach, speculating

Don't look at me I own it too

cohodk

<< <i>Jmski, if the bondholders hold to maturity, all they've lost is opportunity cost. They still get their principal back.

Cohodk! Oh, my goodness! Do you think that the principal on those bonds will be worth what it is right now? Remember, the Fed is keeping rates artificially low right now because they simply can't afford to screw up any semblance of a business recovery. But the market isn't going to let them keep doing it. You and I both know that.

When rates go up, the price of the bond goes down. If you stay trapped in the thing until maturity, you get absolutely killed by the devaluation of the dollar that has occurred in the meantime.

Being the nimbler trader that you are, I'm sure that you wouldn't be holding any bonds over 2 years to maturity. So, are you piling into bonds right now? I wouldn't advise it. jmski >>




That returned principal could be worth more if deflation sets in. There is a strong possibility that higher yields could translate to a much higher dollar (disinflationary). You wouldnt get "killed" owning bonds to the same magnitude you would as owning stocks or even PMs. Remember gold lost 75% of its value. I cant see Treasuries losing anywhere near that much, unless one had long dated zero coupons. But you wouldnt own zero's anyway as you would be looking for an income stream.

Personally, bonds are not sexy enough. I've averaged 20% annual returns over the last decade and dont think I could duplicate that with bonds, unless we have another credit crisis similar to 2008. Many good bond traders made 30-50% in buying bonds in late 2008/early 2009. Right now I see several solid companies that have dividend yields 2-3x higher than the 5-yr Treasury yield.

The 10yr is currently making a parabolic move. We'll see how high it goes before stalling. People are scared. Scared money creates price distortions. Price distortions create opportunity.


When you withdraw from a 401k you pay income taxes, so there really isnt an incentive to raise the distribution age. You must start to withdraw at 70 1/2, so maybe they lower that?

7over8

Roadrunner - agreed "individuals" is not who we think they are----

if there was transparency, we would really find out the games that are going on behind the scenes