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In percentage terms, TIP had the largest one day sell-off (-0.81%) since 12/4/09. It was nearly double normal average volume too. Investors wanted out.
Investors in IEF (-1.00%), GLD (-1.86%), SLV (-2.57%), and USO (-1.91%) felt even more pain today, although none of those funds were sold-off on high volume.
Copper Falls Most in a Week as Dollar’s Surge Cuts Metal Demand
The euro slid to a 10-month low against the greenback after government officials said the European Union may need International Monetary Fund help to bail out Greece, and Fitch Ratings cut Portugal’s credit rating. Copper prices are down this year, heading for the first quarterly decline since 2008 as the dollar climbed.
Oil slips 1.5 percent on crude stock build, dollar
(Reuters) - Oil fell more than $1 a barrel on Wednesday, weighed down by a larger-than-expected rise in crude stocks and a stronger U.S. dollar.
Stocks fall after agency cuts Portugal debt rating
NEW YORK (AP) -- Major stock indexes fell from their 2010 highs Wednesday as weakness in the housing market and rising European debt loads revived investors' pessimistic view of the economy.
For what it is worth, here is what I said yesterday on Yahoo's TIP message board.
Re: All is calm in TIP land
The price of oil has been similarly calm over the last few weeks. I don't think that's a coincidence.
...
I doubt this is a permanent condition. It feels a bit like the eye of the hurricane to me. I suspect down might be coming next, but that's just a hunch.
Re: All is calm in TIP land
In theory, cash can outperform TIP over any fixed period. Since I sold TIP in November, cash has done ever so slightly better. The jury is still out on what happens next though.
So what does this mean? Since real yields and TIP's price are inversely related, that means real yields just jumped higher. MAB had the following to say a few days ago in the comments of a previous post.
I still think the prospect of rising real rates is what keeps Bernanke up at night.
Hello higher real rates. Hello Fed Chairman insomnia.
ICE: Mortgage Delinquency Rate Increased Year-over-year in October
-
From ICE: ICE First Look at Mortgage Performance: Serious delinquencies hit
17-month high while foreclosure activity remains historically muted
• At 3.45% ...
3 hours ago
9 comments:
You just had to know I was going to post in this thread:
It FINALLY happened!
I am finally, after investing in the dollar on 02/23/10, positive. And in a big way.
Here's to Ben losing a lot of sleep in the very near, and very distant, future :-)
WooHoo!
G.H.,
Congrats!
I nearly posted a comment on UUP. I saw that it did well today. I felt that my post's title pretty much said it all though. :)
In hindsight, my TIP trade continues to work out well.
1. I sold a large chunk in November. As of today, cash has outperformed it by roughly 1%.
2. I had TIP gains but my income was so low in 2009 that I extracted them tax free. That's always a win.
3. I have only put about 1/3rd of it back to work. 40% of it went into the 10-Year and it is down 1% (about the same as TIP since I sold). The remaining 60% is in the 30-Year. Although the 30-Year took damage today, I still have a slight gain.
4. The remaining 2/3rds of my TIP sale sits in cash. I'd like to buy more TIP with some of it, but I continue to wait for a better price. Right now it is earning 1.1% in an online savings account.
I also love it when sarcasm holds up in hindsight. Check this out.
Re: What are you guys talking about???
Scared? If you say so. All I see is risk vs. reward. If you expect to make very little reward then you better be taking very little risk.
The real yield on the 5-Year TIPS is very close to 0%. 0% is the floor. There's almost no upside reward left. There are lots of ways real yields can rise from here though... from a deflationary crash, to stock market euphoria, to too much government debt offered with too few buyers interested. Take your pick.
You heckle the board with talk of potential losses of 10% like money just grows on trees for you. If so, loan me $100 and I'll pay you back a guaranteed $95. There's clearly no reward for you, but it's just a 5% loss. No big deal. Right?
I should mention that the 10-Year and 30-Year bonds I bought were inflation protected bonds (TIPS). I intend to hold both until maturity.
Assuming we don't hyperinflate and the government does pay me what I'm owed, then it really doesn't matter to me all that much what interest rates do between now and when they mature.
If they rise, all I will have lost was the opportunity to have done better.
Further, the bonds I bought do have deflation protection. I will at least get their face value back at maturity. I doubt that matters for the 30-Year TIPS, but it might for the 10-Year.
I cringe at the thought of what never ending deflation would do to my blog though. I would be facing serious competition.
Confusion of Prosperity
Deception of Prosperity
Delusion of Prosperity
Fallacy of Prosperity
Fool's Paradise of Prosperity
Mirage of Prosperity
Misconception of Prosperity
Mockery of Prosperity
Myth of Prosperity
Pipe Dream of Prosperity
I'd probably have to lower my prices. $0 seems about as low as I can go and still not turn a profit though, lol.
Stag, no need for you to post on UUP, I'll gladly do that if/when the price rises. I jumped to over 1% gain just today!
I remember when I first found this message board. The topic was "Sold TIP @ ...." or something like that.
I jumped in and made some points about sell-stops and questioned your exit. You proceeded to give me the low-down on exactly why the upside was limited, similar in fashion to the way you did the yahoo bunch. I listened. And learned.
I didn't sell my TIP right away but it served to heighten my awareness and made pulling the trigger when I did both non-emotional and informed.
I hope the investors? at yahoo re-read your posts and take 'em seriously.
1. I closed my 1.1 online account. The cash now sits in my safe.
2. A majority portion of my brokerage money market fund cash has now found its way into my safe.
3. I had a nice CD ladder built up however that ladder is shrinking as CD's come due and that cash is also finding its way into my safe.
4. I am holding VWITX (mid-term tax-free muni) and VFIIX (GNMA's) subject to tight sell-stops in both taxable and non-tax accounts. Liquidations in taxable accounts will......well you know, find their way into my safe.
I can live with 0%.
Not that that's necessarily crafty or wise and not that it'll hurt the banking system. It's simply that I'm not doing it to hurt Ben's fraudulent banking system, I'm doing it to help me. Help me feel better.
I secretly (or not so secretly) wish we would have a run on Ben's banking system. Not well managed banks. Ben's banks. I'll be danged if my cash is going to be put to use in his system. And I'm willing to pay for that satisfaction.
I would like more of the "People" to feel the same way and act accordingly.
G.H.,
I'm really glad that it is working out well for you. Keep this in mind though.
An individual TIPS bond bought during an initial auction and held until maturity will outperform cash held for the same duration. That assumes the government does pay you of course and doesn't just default.
TIP offered no such guarantee though, since it is made up of bonds that have already inflated and could in theory deflate back down.
You might consider I-Bonds for your safe. I think the odds of the government defaulting on I-Bonds is extremely low, if only because it targets American savers. This would also be consistent with the government reducing the amount we can buy each year. They plan to pay.
The rate on I-Bonds isn't good. However, they will do at least as well as cash. The value of an I-Bond can never deflate. Once you have a gain in a given month, that gain is permanent. The reason is that I-Bonds appreciate through interest and that interest rate can never go below 0%.
Should I-Bonds interest you, wait until mid-April. The fixed rate resets on May 1st. It's currently 0.3% and is good for the life of the I-Bond (up to 30 years). If real rates rise by then, then the newer I-Bonds may have a better rate.
It is not whether you are right or wrong, but how much money you make when you are right and how much money you lose when you are wrong. - George Soros
Words to live by!
I am predicting more deflation. However, most of my nest egg sits in inflation protected TIPS and I-Bonds. I'd lose too much money if I was wrong, and it just isn't worth the risk to me.
For those just tuning in...
I-Bonds pay 0.3% over the inflation reported in the CPI-U and are tax deferred for up to 30 years.
If inflation averages 2% per year, then I-Bonds bought today should average 2.3% per year.
I just want to make sure that's clear.
Stag,
I'm posting quotes from a link on Mish's blog: Money Madness In Oz
"...decision to offer savings and term deposits rates well above most official market benchmarks...
...term deposit rates being higher than mortgage rates for the first time in two decades.
The average term deposit rate now is 5.93 per cent while the official rate is 4 per cent, implying a spread of 193 basis points. In March 2008, when the cash rate was 7.25 per cent, the one-year term deposit rate was 6.6 per cent."
Emphasis added.
I've a safe full of cash just yearning for that kind of return. So, the obvious question is, how do I move my cash to AU and get ~5% returns???
Can you imagine, banks paying depositors MORE than they can get back in mortgage rates?!?! I am reading that right aren't I?
Now, here's an interesting comment that MISH posted within the blog post:
"This is likely to backfire when the Aussie credit bubble bursts during the next deflationary downturn, as real estate and commodities prices again fall and loans go bad, requiring Aussie banks to increase or maintain reserves against those deposits."
So, let me see if I understand this...
Aussie banks are currently raising rates to psychotic levels in order to raise deposits (funds) but in this analysts view this fund raising will result in banks having to raise money (reserves) to insure the psychotic levels of deposits they are so desperately trying to raise.
Is that about right?
And speaking of Mish:
Treasury Yields Rise; What's Cooking?
"...2010 might be the year where there are no hiding places at all except in the much despised US Dollar."
Trend trackers will rejoice should this be the case.
G.H.,
From your first link...
"I think that's because banks are seeing it's somewhat of a zero-sum game. There's a pool of hot money that churns through the banks, and in the end it doesn't materially change any bank's market share."
So much money is chasing zero-sum games these days, at least in my opinion.
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