Tuesday, March 24, 2015

19% Guaranteed Real Return!

That's how much today's 0.59% 30-year inflation protected treasury will get you if held the full 30 years, assuming you can wisely reinvest the interest generated at that same great 0.59% rate!

Hey, you didn't think I meant an annual real return of 19% did you? In this environment? Seriously? What kind of blog do you think I'm running here?

Save that kind of delusional and optimistic thinking for the blogs reminiscing about the good times of the past or the ones attempting to extrapolate it forward like nothing has changed. Yes, yes. We all loved the 80s and 90s. Good times. We can't live there forever though. At some point we need to wake up and smell the dying flowers!

Of course, your guaranteed real return will likely fall short of 19% if taxes are considered, especially if you are in the 19% tax bracket.

Have you given any thought to hoarding socks? May or may not do better than that. Hard to say. I certainly have mine stashed away though. No complaints!

Yes, sir. Really looking forward to the prosperity of the future in this land of unlimited opportunity! 30 years of exceptional returns are headed our way!!

Don't forget. Long-term interest rates are rising over the long-term! If everyone keeps chanting it then it must be true. In fact, the louder and more desperate the chanting the higher the rates will go. No proof is necessary! You just need to have faith and believe!!

The stock market you say? Guaranteed to do better over the long-term? That's the spirit! You really do have faith! What's it like to be a true believer?

Have you borrowed cheap money on margin to invest? If so, why do you suppose "they" lent it to you instead of investing in the "sure thing" themselves? I'm not prone to conspiracy theories, so this is actually quite puzzling.

But hey, no worries. Everyone knows the stock market can only go up, just like long-term interest rates can only go up. Some common knowledge facts are universal.


Stagflationary Mark said...

I'm sorry to inform you that the yield has fallen to 0.55%.

Can no longer guarantee you 19% over the next 30 years. It's down to 18% now.

And just like that, another 1% over 30 years just went poof.

Long-term prosperity, baby. That's what I'm talking about.

mab said...

I used to get 1099 tax interest statements from various bank accounts. Not any more thanks to zirp.

I'm fine with it as long as inflation is low. Less paperwork.

Fed policy has inflated asset prices, but has stymied interest income.

Since when have sky-high prices helped the majority? Tech stocks, nifty 50, housing bubble, tulip bubble, etc.

Apparently, this time is different!

Stagflationary Mark said...


Since when have sky-high prices helped the majority?

Um, hello. If sporting events only charged $5 a seat would people still cheer as loud? I think not!

The more people have to pay for things the happier they seem to be! At some point, absolute bliss will be achieved.

"By God man! You saw the Super Bowl in person? I had no idea you were so rich! "

Nobody has to know about the second mortgage that made it all possible. lol. Sigh.

Debt! Making people look wealthier than they really are since 1929! Get you some!!

mab said...


I really enjoy your thoughtful, sarcastic, humorous and provocative responses.

We agree on many things. In a way that's bad. Self fulfilling whatever.... Hey, at least we recognize we could both be wrong. Unfortunately, as events continue to unfold, I don't think we are.

Either way..... soldier on. I'm a small fry in the grand scheme of things. That's fine. For me, a clearer understanding makes all the difference.

Stagflationary Mark said...


I very much enjoy interacting with you in these comments!! Exchanging sarcastic humor beats any game I could be playing on my phone.

Well, unless there was a mad money game with an amusement park theme of course. I'm picturing dogs. And ponies. And maybe some cotton candy. In the mountains.

Cramer's Mad Dash Candy Mountain Kidney Crush with in App Purchases!

I mean really, who wouldn't want to play that every waking minute of the day? It's an adventure! ;)

We do agree on many things but unlike many, we definitely agree that we could be wrong.

In fact, I hope I'm wrong!! My investments are based on could be wrong. I'll do better than most if I am right. If I am wrong then others could easily do much better than me but... I will do better too! I long for rising interest rates. Only helps me! Just not prepared to hold my breath for them. Seens too risky. Need air to live.

One thing that I'm pretty sure about is that Jeremy Siegel is a fool when it comes to inflation protected treasury investments though, using foresight in 2011 and hindsight now. He had the risk completely backwards.

The main risk for long-term savers was not that rates rose, but that rates continued to fall. That's how savers can become financially ruined. The best thing non-greedy savers could do would be to lock in long-term yields in case that happened, which it did and may continue to do.

And yet there he was comparing long-term TIPS to dotcom stocks of 2000? Seriously? And he's a respected economist? Teaches it? At an ivy league school?

You know, that's what I've always liked about physics. It didn't require an ivy league school to "learn" it. Ask any physics professors what a ball will do when you throw ut up in the real world air and at least 99%* of them will agree. Not only that, but they will be right. Go figure!

* Not sure what the other 1% might say. Does Jeremy Siegel's Wharton have a physics department? ;)