Monday, May 11, 2015

Euphoric Faith in the Fed

May 11, 2015
Calling the death of bonds (and missing) again

"If—when—we have another recession, those long-term Treasurys will be a very important part of your portfolio, zigging when your stocks zag," Calhoun said.

If we have another recession? If?  Seriously? We now need if/when disclaimers? There's a reasonable chance that the Fed has actually put an end to all future recessions? Is this what some people actually believe?

Okay. I'm game. Disclaimers are us!

It's the last game of the World Series. It's the 9th inning and the bases are loaded. I've just been asked by the person sitting next to me what I think will happen. Here is my heavily disclaimered response.

If/when the pitcher throws the ball then it will be up to the batter to swing. If  the batter swings, the ball may or may not be hit.

1. The ball may be missed entirely. If/when the catcher tries to catch it, things get interesting. Let's assume for the moment that he does try. Does he catch it? The odds say yes but many things could prevent it, not the least of which would be a 7.0 magnitude earthquake.

2. The ball may be poorly hit in which case it could be a foul ball. If/when someone tries to catch it, then many of the cameras may zoom in on that person. Will it be caught? Your guess is as good as mine.

3. The ball may be hit solidly and in a direction the batter intends. Let's assume that it is hit up into the air. If/when it starts falling to earth again, someone may try to catch it. If/when somebody tries to catch the ball, expect the cameras to follow that person.

But what if the ball is hit so hard that nobody on the field can catch it? Then what? That is the most interesting thing about the sport!

Once the batter hits the ball he has a decision to make. If/when he decides to run towards first base, many in the crowd begin to cheer. If/when he reaches the base, he may opt to turn 90 degrees towards second base. If/when he chooses to do so, many in the crowd will cheer even harder. If/when he reaches second base, he may opt to turn another 90 degrees and head for third. Once again, it is entirely his choice. The crowd will reward him for choosing wisely. If/when he reaches third base, he may once again choose to make a 90 degree turn. One thing that could stop him is what the other runners have been doing up to this point though. If the third base coach opted to barbecue some chicken then there may be a problem. It's been a long game and all the runners may therefore be hungry. If/when they finish eating then perhaps the game can end. No hurry though. Victory is assured. Some spectators may wait around to see if/when any of the runners eventually saunter down to home plate. Or not. Like I said, it's been a long game. ;)


Mr Slippery said...

30-year yield closed at 3.03 today. Missed that call, but you made it until May 11 which is darn good.

I am content whatever the yield turns out to be, whether or not we have a recession, and whether or not the entire financial system goes TILT. That would require unplugging the machine from the wall, then back in resetting all the high scores.

Google agrees I am not a robot.

Stagflationary Mark said...

Mr Slippery,

Yeah, it's official. 3.03% breached my 3% max level prediction for 2015. I'm not going to complain one bit though.

As a saver who holds bonds, I want higher rates. That's especially true in January. Big bond maturing. Want to reinvest the proceeds. I don't think I'll hold my breath on great rates though.

I may lose another prediction soon. Although the Fed rate hike has been pushed back as I expected, it may not have been pushed back far enough to make it into 2016. May end up being a nail biter. Time will tell!

The only reason that I can see a billionaire wanting to make another billion is for the better high score. In other words, it must be an ego thing.

As a video gamer, I totally get the high score mindset. That said, the "who has the most wealth game" is not one I can possibly win. I therefore have little desire to play. I prefer to play the "who has the most free time game" instead. Doesn't score nearly as well but works for me. With unemployment relatively high and so many on welfare, it's stiff competition though. :(

Shookie said...

I can neither confirm nor deny that I may or may not agree or appear to agree, disagree or appear to disagree with your post. Interpretations of this comment are yours alone, and should be supported by due diligence.


It may appear that I am not a robot.

Stagflationary Mark said...


I appear to agree with the central theme of your comment or at the very least it could be argued that I appear to have agreed to appear.

You can't ever know for sure though. I may not even be me. I could be someone typing on my behalf, or worse, someone typing on behalf of the person who is typing on my behalf, or perhaps even someone typing on behalf of that person.

I will admit to none of this in court though, unless I am on the witness stand and being told to admit it, or have it on good authority that I'm being told to admit it on behalf of someone who would tell me, or am someone testifying on my behalf and being told to admit it by someone telling me on behalf of someone in authority.


P.S. No idea why hearsay is generally not allowed in court. It all seems so straightforward and bulletproof. :)