Saturday, December 13, 2014

My Nomination for Most Interesting Post of 2014 (per Minute Spent Reading)

If you are looking for something interesting to read, do yourself a favor. Check out the following post at Young Money. It won't take long. It's packed full of interesting anecdotes! I could not stop reading it.

December 13, 2014
Young Money: Recent articles of interest

The Wall Street Journal recently polled institutional investors. 91% are bearish on Treasury bonds, and 95% see 10-year yields over 2.5% by the end of 2015 compared to 2.1% today. (I'm not sure about the 4% who expect rates to jump but aren't bearish.)

That's my personal favorite interesting tidbit. I have not felt this alone since 2011.

February 17, 2011
30-Year TIPS Auction Results

High Yield: 2.190%

It was a very lonely auction for me as a retail investor.

As of today, the 30-year TIPS yields just 0.82%.

Where was everyone? Apparently they were too busy reading Jeremy Siegel's "Great American Bond Bubble" rant to show up!

I definitely read his rant. I've written 199 sarcasm reports and it still remains the mother of them all! I just could not believe what I was reading. His theories seemed like satire. You know, something The Onion might write.

August 18, 2010
The Mother of All Sarcasm Reports (v.58)

Why didn't I think to compare my TIPS to the tech stocks of 2000?

If we buy the 10-Year TIPS this very minute and hold it the full 10 years then...

1. We are GUARANTEED to get ALL of our money back, even if deflation strikes.

2. We are GUARANTEED to get an additional amount to compensate us for 10 years of inflation.

3. We are GUARANTEED to get an additional 0.96% per year in interest.

Yes sir. That's exactly like Jim Cramer's Winners of the New World, well, once you strip out all the guarantees anyway.

I wish you could see my eyes rolling now. They've never moved this sarcastically before. I can't even keep them in the sockets. It's making me so dizzy that I'm tempted to vomit.

I did not end up buying the 10-year TIPS. It did not interest me. I went out 30 years in absolute defiance of his rant. "Great American Bond Bubble" opportunities like that just don't come around all that often, especially in a world where interest rates fall over the long-term until proven otherwise. Thanks Jeremy! What would I do without you?

As an important side note, an inflation protected treasury bond is guaranteed to pay face value at maturity. That gives them some deflation protection if bought at face value and held to maturity. The odds of needing deflation protection on a 30-year TIPS seems extremely low to me though. Even Japan could keep their inflation rate at 0% for decades, at least so far. But who can really say for sure? This economy does many things that people (think Chief Economists at the National Association of Realtors) once thought impossible.


James said...

Hey, thanks for the link! I appreciate it and I'm glad you found the post useful.

Stagflationary Mark said...

My goal, when clicking on a link, is to either find something useful or something amusing.

Yours did both, repeatedly. :)