tag:blogger.com,1999:blog-2992740250270600844.post1616654725800497621..comments2024-03-24T05:26:32.964-07:00Comments on Advancing Time: Bond Market Bubble Ending Has Massive Ramifications Bruce Wildshttp://www.blogger.com/profile/10181323607060607040noreply@blogger.comBlogger7125tag:blogger.com,1999:blog-2992740250270600844.post-24056213547623489422017-06-05T17:30:16.980-07:002017-06-05T17:30:16.980-07:00Good points. Thanks :)Good points. Thanks :)Gwen Noackhttps://www.blogger.com/profile/06123651294521130659noreply@blogger.comtag:blogger.com,1999:blog-2992740250270600844.post-12593884046069288082017-01-15T16:33:49.349-08:002017-01-15T16:33:49.349-08:00It's all very complicated, and different inves...It's all very complicated, and different investors have different needs. While being reminded of the problems of bond investments, (recalling the historical events that scream, "Watch out! Liquidity trap dead ahead!") is an important heads up, I have to wonder what percentage of bond holders are still driving blindfolded.<br /><br />This is the real problem in the bond market. The smell of panic is in the water. Keep your wits about yourself, and your powder dry. Opportunity abounds.<br /><br />The free market works. Don't fight the Fed.Anonymoushttps://www.blogger.com/profile/12550352586211249085noreply@blogger.comtag:blogger.com,1999:blog-2992740250270600844.post-8735327377517511882015-12-25T11:27:48.892-08:002015-12-25T11:27:48.892-08:00It puzzles me that so many people who claim to wan...It puzzles me that so many people who claim to want security invest in bond FUNDS, instead of simply buying bonds. There is all the difference in the world between the two. Bonds cannot exactly crash. Bond funds can. <br /><br />The only way you lose on a bond is if the individual entity that issues the bond crashes and burns; but if that entity is the United States, that would mean the entire nation goes bankrupt. While that can happen, it doesn't really matter what you are invested in if things get that serious because when the largest economy in the world goes bankrupt, all bets are off for all investments anywhere in the world, as that is such a huge and disorderly collapse that who could ever say what would be safe and what would be crushed?<br /><br />Bond funds, on the other hand, can crash for lack liquidity. Since many people buy into the fund and can ask to get out, the fund manager can be forced to sell of bonds at a time when the market rate for trading those bonds is least favorable. You can, then, get a run of people trying to get out of that fund to where the fund cannot pay them all off, so it crashes.<br /><br />If you want security, buy actual bonds from the actual issuer and hold them to maturity. They are always worth what they say they are worth unless the issuer, itself, declares bankruptcy; but (if the courts function as they are supposed to), stockholders lose all their value first before bond holders lose anything.<br /><br />This manner by which bonds are secure seems to have been forgotten by the entire world as bonds have become an instrument of nothing but speculation. If you want your money secure, by US bonds with differing maturity dates and hold them to maturity. If the whole country goes bankrupt, nothing is secure, not even gold. The government, remember, confiscated all gold bullion in the days of FDR. It can do so again. Central banks own huge hoards of gold so they can manipulate the price of gold in order to stem a run their own currency, which is worth vastly more to them than is gold because it is their protected monopoly over the entire economy.<br /><br />Unfortunately, 401s don't allow you to own actual bonds. In that sense, our retirement industry is also rigged toward speculators and money managers ... if you want the tax breaks.<br /><br />--Knave Dave<br />The Great Recession BlogUnknownhttps://www.blogger.com/profile/14223663384656024484noreply@blogger.comtag:blogger.com,1999:blog-2992740250270600844.post-160246944006836152015-12-13T15:43:09.328-08:002015-12-13T15:43:09.328-08:00Stan, I want to thank you for a very interesting c...Stan, I want to thank you for a very interesting comment. <br /><br />I think we may be closer in agreement than you think when it comes to getting a rational reaction in a "free market." My comment as to how the market "always being efficient is a myth" was mainly tied to manipulation or it that it often shows more lag time than we might like. <br /><br />In the past I have made reference to Paul Volcker's actions in 1981 acted as a reset that has served us well, it is difficult to say where we would be today if he had not acted, below is a link to that article. <br /><br />As for inflation this time around a lot of new global factors will feed into what happens. I think we should not underestimate how it could take off if enough money escapes the collapse and flows into hard assets. <br /><br />Thanks again and best of luck<br /><br />http://brucewilds.blogspot.com/2015/04/interest-rates-inflation-and-debt-matter.htmlBruce Wildshttps://www.blogger.com/profile/10181323607060607040noreply@blogger.comtag:blogger.com,1999:blog-2992740250270600844.post-69075105381993996982015-12-13T11:29:34.575-08:002015-12-13T11:29:34.575-08:00Very interesting, thank you for publishing interes...Very interesting, thank you for publishing interesting thoughts on the subject of economy and finance. I slightly disagree with the criticism of the free market not always being rational - in my experience it is always rational providing that it does exist!<br /><br />Predicting the imminent bond crash based on rational argument of the need for interest rate to rectify upwards to reflect the real risk of capital lending, is fraught with danger. It reminds me of some other poster who joked that he "predicted" eleven out of the past four bond crashes 8-:) I used to be in that category too, I even used to buy yield-positive ETFs.<br /><br />The reason rational economic forecast fails is because it ignores the role of individual manipulation of the "market" by the financial elite. The oligarchy will not allow interest rates to go the way (up) that would reduce the collateral value of all their assets and all their wealth holdings! Instead they will push the rate even lower, it may even go below zero like in Sweden, Denmark or Switzerland. You will probably see it here soon ... <br /><br />There is also another aspect that nobody seems to realize - that the relation between the interest rate and inflation is non-linear in time as well as in magnitude. Lowering of the interest rates is inflationary and stimulating (production, consumption and boosting the assets value) only in the short term (about a year), but strongly deflationary in the long term (due to overinvestment and overcapacity effect). Thus the financial elites have painted themselves in the long term deflationary corner out of which they cannot escape without suffering very heavy losses to their own wealth! <br /><br />On the other hand, an increase in the interest rate would have had an immediately recessionary & asset-deflationary effect in the short run but would have had an inflationary and economically stimulating effect in the long run. This is why Volcker's 18% rate (around 1981) created a 2 year deep contraction but at the same time triggered a 20-years long high tech boom of the 1980-ties and 1990-ties . <br /><br />Stan Bleszynski<br />Stan Bleszynskihttps://www.blogger.com/profile/03922719716458272303noreply@blogger.comtag:blogger.com,1999:blog-2992740250270600844.post-54669730824690703792015-12-12T15:47:37.657-08:002015-12-12T15:47:37.657-08:00FascinatingFascinatingAnonymoushttps://www.blogger.com/profile/03542638840516194044noreply@blogger.comtag:blogger.com,1999:blog-2992740250270600844.post-41635768832590515282015-12-05T15:33:17.878-08:002015-12-05T15:33:17.878-08:00I think you hit the head of the nail when you ment...I think you hit the head of the nail when you mentioned central banks manipulating the Bond market. Personally I agree with you and think the various central banks are intentionally taking losses to keep the bubble going. This really all boils down to how long the various central banks want to keep taking these losses. Since it's funny money they created technically they can keep eating losses forever which from our point of view isn't a loss anyway it really amounts to them only making 1 trillion when their books show they made 1.2 trillion.<br /><br />By all rights the bond bubble should have exploded the minute the courts shafted the bond holders from the Detroit shenanigans. I think ever since that time the only real investing into Munni and other government bonds have been basically by large funds and insular groups supporting each other and being directed by the Fed.<br />PioneerPreppyhttps://www.blogger.com/profile/09269878017447335944noreply@blogger.com