Tuesday, August 2, 2011

That Lovin' Feeling (Musical Tribute)



Am I referring to real yields hitting new lows yet again at every point on the yield curve? While true, not exactly. I'm referring to what "unexpectedly" poor economic reports can do to the stock market.

August 2, 2011
Stock Market Breaks Down: ETF Bulletin

Today the U.S. stock market and major equity indexes suffered a major breakdown as investors responded to unexpectedly poor economic reports.

It's a dirty dance. Be careful out there.

8 comments:

Stagflationary Mark said...

As a side note, the heckling of Forbes has produced dividends.

Forbes: Worried About Inflation? TIPS Aren’t The Answer

One remaining rule: Under no circumstances go beyond 10 years.

Investors who ignored the advice of Forbes did quite well in hindsight. The yield on the 30-year TIPS has dropped roughly 0.3% since that was written on July 13th. For those doing the math at home, that's 0.3% per year extra each year for 30 years. It tends to add up.

Apparently the doubling of real rates has been poned until further notice. (It's an inside joke for some readers based on the word postponed.)

The problem is, Cutwater’s research shows that TIPS have zero correlation to inflation.

Why do people pay to read Forbes when they claim that inflation linked treasuries have zero correlation to inflation? Anyone? I'm open to theories.

tj and the bear said...

Got gold? OOPS, sorry! ;-)

Mr Slippery said...

Why do people pay to read Forbes when they claim that inflation linked treasuries have zero correlation to inflation?

Maybe they are talking about chained inflation, GDP deflator, PCE deflator, core inflation, or the billion prices project inflation. There are so many!

Lots of stock carnage today. I hold some corporate bonds, and they are benefiting from the yield crush, but some more than others. Everyone was looking for the relief rally that only lasted about an hour on Monday. Poof, it's gone.

getyourselfconnected said...

This song makes me think of Tom Cruise....

Stagflationary Mark said...

tj and the bear,

Got 30 year TIPS? Good grief. Talk about a rally. I'm up over 25% on the long-term bonds I bought back in February. No joke.

It's almost like the market thinks long-term real returns are going to suck for the next 30 years.

Stagflationary Mark said...

Mr Slippery,

Everyone was looking for the relief rally that only lasted about an hour on Monday. Poof, it's gone.

All the media attention was directed at the "bond crisis" (even as bonds were appreciating).

Now the media attention finally sees that something else was going on.

Doesn't that just figure?

Stagflationary Mark said...

GYSC,

Well, we are apparently heading to the Danger Zone.

Stagflationary Mark said...

Wow! Check this out.

S&P 500 Falls Toward Danger Zone Support Level

Danger Zone! It really is a Tom Cruise moment.