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September 22, 2014
Tiger’s Robertson Says Bond Bubble to End in ‘Very Bad Way’
“Bonds derive their value from interest rates, and interest rates are unnaturally low today,” Marks said on the panel.
Stocks derive their value from unnaturally low dividend yields too. So his point was what exactly? Stuff the trillions in cash under a mattress in the long-term hope that it appreciates? That money has to go somewhere.
The unnatural 30-year treasury bond yield was 3.28% when that was said. Since it is now just 2.24%, it can mean only two things.
1. The supernatural vampire is determined to suck the lifeblood out of this economy's short-term savers until it is permanently satisfied. And if there is one thing I know about supernatural vampires, it is the need to feed never truly goes away, lol. Sigh.
2. Stock market investors will continue to laugh at bond market investors no matter how well the bonds do. That's just a given for those who don't understand what the "wimpy" 1% decline in yields over the past few months means over the course of 30 years.
Scratch one more bond bubble billionaire from the treasuries should be avoided at all costs camp. In hindsight, the timing of that advice was legendarily awful. Perhaps he should have factored in what the price of oil was doing, read up on Japan's economy after their real estate bubble popped in the early 1990s, glanced at a 35 year chart of treasury yields to setup a baseline for what natural means in a long-term declining interest rate environment, looked into the deposit glut of US banks, and/or studied the bond yields in the aftermath of the Great Depression. Just a hunch.
This is mot investment advice. It's actually pure unadulterated heckling of a billionaire though, and there's no telling what that's worth. I can say this. I alone got at least 99 cents of enjoyment out of teasing a financial superior and supposed market expert. Your actual return on reading investment may vary. Past giggling is not necessarily indicative of future laughter outbursts. ;)
Monday: New Home Sales
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21 comments:
I should point out that the quote I usef was not said by Robertson but he was certainly a believer in the theory (as seen in the headline).
Oh, and for the record, I predicted in December that the 30-year treasury yield would stay below 3% for all of 2015.
I have no opinion on it's current direction, other than to say my safety margin hit a new record today. Wow.
I believe supernaturally high levels of debt lead to supernaturally low bond yields. That's the way it worked from 1920-WWII, and that's the way it has worked from 1980-WWIII.
Rats! I didn't mean to spoil the ending.
Mr Slippery,
Hahaha! I knew it was rats!!! I can stop reading the book now. Thanks!!! :)
Yellen is misunderstood! She doesn't want to raise rates. She wants to raise rats! You know, so she has a rat army for the coming monetary war. Hahaha!!
As a homeowner, I can speak ftom personal experience that there is a huge difference between rates and rats. I have never found the former in my crawldpace, lol. Sigh.
In Denmark some lucky mortgage borrowers are paying a negative interest rate - I suppose their variable mortgage rate must have been set at a Bank of Denmark rate plus a wee bit, and voila!
I wonder whether we should mortgage the house into Danish Krone. What do you think?
dearieme,
THe insanity truly does know no zero bounds!!
12 million jobs under trend:
http://research.stlouisfed.org/fred2/graph/?g=YZZ
Someday the politicians are going to have to do more than make mouth noises about this.
Adding construction makes it fit better:
http://research.stlouisfed.org/fred2/graph/?g=Z05
still a 12.5M jobs gap there.
Speaking of rats, it was no coincidence the previous Fed chair was named Ben.
Yellen keeps promising to raise rats, but watch out of the long tail (and the long tale). The whole situation is rodentculous!
Troy,
Politician mouth noises? I love how you've shown the appropriate level of respect, lol.
Mr Slippery,
This explains why the optimists think our economy has huge tailwinds right now!
We're trapped in ZIRP, runnin' the maze, all hoping for our fair share of government cheese. Oh SNAP!
Perhaps the very nature of money is changing and low rates are a symptom. Anemic currencies.
Sporkfed
Sporkfed,
I think you are right. Those who belueve interest rates must rise due to excess money printing probably don't realize that excess money flowing into the bond market actually pushes rates down, not up.
Further, excess money printing would be associated with an anemic currency.
Excess money printing is not flowing into the purchase of canned goods though. I guess the 1% have limits on how much canned goods they can stomach.
It would seem very difficult to get consumer price hyperinflation in a mostly discretiobary service economy. It's not like prople can rush off and hoard landscape services or cable programming. When push comes to shove, they can stop using said services though. Go figure.
Crazy world.
Once sgsin, please excuse the typos. My iPhone typing speed is improving much faster than my accuracy. This is good practice. I see some light at the end of this tunnel. :)
12 million jobs under trend:
Another interesting thing about that chart is the period 1992/1993 and the 2M gap.
I remember that time well, McDonalds was posting help wanted signs in the windows of their restaurants with the actual per hr. rate they were offering. It was well above minimum wage which was not all that common at the time and they couldn't find enough people to fill all the jobs they had open.
Be careful, that light could be a train.
Fritz_O,
I'm trying to remember the last time I saw hourly pay posted in public. It's been a long time. One of the local burger chain's once did it. Might still be doing it. Haven't eatdn there in years. I love the food but it's too far from my home.
Anonymous,
When it comes to my iPhone typing ability, I can only hope to someday be fully train'd. ;)
Don't tell John Williams (or Julian Robertson), but the inevitable hyperinflation has been poned again.
Oops, look at the one year resolution in the above link to get a sense of the poning!
They just don't get it. Inflating the paper assets of the 1% and deflating the purchasing power of the majority doesn't cause hyper-inflation in cpi goods!
mab,
Haven't you heard? The oil price is all part of the grand conspiracy involving CPI manipulation. True consumer price inflation is running closer to 10% You just need to know where to look for it. I haven't been to the store lately but I assume that thanks to hyperinfkation and a dramatically weaker dollar, imported bananas are currently running about $10 per pound, And if they aren't, then that is just more proof of the hidden conspiracy.
The lack of a visible conspiracy is why ShadowStats is one of the great ones. Well, and Lenny Dykstra too of course. They're like too pees on an iPod. It's all about adding value just when you think something can't be improved, lol.
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