Wednesday, May 30, 2012

Jeremy Siegel's 3.5% Real Yields!

It's only a matter of time! Don't be concerned by today's new record lows!

February 2, 2011
More Dangerous Advice from Jeremy Siegel

All this means that Tips investors should beware. Although Tips may compensate holders for future inflation, the interest rate that they offer is far too low to offset the risk of rising rates.

July 11, 2011
The Real Math Behind Siegel's Mythical 3.5% Real Yields

As economic growth recovers and real rates rise, the price of Tips will fall leaving Tips investors with large losses in the face of accelerating inflation.

May 30, 2012
Oil headed for biggest monthly drop since 2008

Prices are falling on expectations that the world won't use as much oil this year as previously thought. Europe's financial crisis is the most immediate concern, but there have been plenty of signs of weaker demand.

See Also:
Sarcasm Disclaimer

Source Data:
FRB: Selected Interest Rates
US Treasury: Yield Curve


Stagflationary Mark said...

S&P 500

February 2, 2011: 1,304.03
May 30, 2012: 1,313.32

Behold the economic recovery in all its grandeur!

mab said...

Numerous markets are signaling deflation:

The Dollar
The Euro
Bonds (very manipulated)

Too many people are tapped out and impoverished with debt. It's that simple.

Jeremy Siegel = FAIL! As if past results are indicative of the future.

Stagflationary Mark said...



It would not surprise me to see another spike in real rates. It might happen. I'll just continue to hold TIPS though. Been there, done that.

Real yields won't stay high in the aftermath. The real economic growth won't be there to support higher real yields.

I'm already planning next year's 0.0% I-Bond purchase. January's looking good to me, lol. Sigh.

EE Savings Bonds yield 3.53% if held 20 years. The 20-year nominal treasury bond yields just 2.32% today.

I'm not too proud to lock in 3.53%. Heck, I locked in January. I felt no great need to be patient.

This is not investment advice.

mab said...

The real economic growth won't be there to support higher real yields.

Yeah, the global backdrop/situation for the U.S. is so much worse than when Japan's private debt ponzi scheme burst.

There are days I wonder whether TPTB can salvage the system. The countervailing forces are formidible.

Stagflationary Mark said...


If I was in charge, I'd punt on 1st down. I just don't think we can rely on getting a good quarter back. ;)