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July 2, 2015
What Are the Odds Risk-Free Returns Slowly Go Away?
But from an interest rate perspective, it’s an interesting thought exercise, even if it’s something that can’t possibly be known for many years.
What are the odds that the (relatively) risk-free long-term I-Bond real rate has slowly fallen from 3.6% in 2000 to just 0.0% in 2010, and has been pretty much stuck there ever since?
What are the odds that pigs will fly under the right circumstances? When I say fly, I really mean the "go or move quickly" definition and when I say under the right circumstances, I really mean that a slop trough could be a motivating factor.
There's absolutely no way to know the answers to any of these questions for sure. Life is filled with mysteries.
Industrial Production Decreased 0.3% in October
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Earlier from the Fed: Industrial Production and Capacity Utilization
*Industrial production (IP) decreased 0.3 percent in October* after
declining 0.5 perc...
1 hour ago
5 comments:
In all seriousness, you will only get a 0.0% real return on an I-Bond you purchase today and hold for 30 years.
Asking what the odds of long-term risk-free real returns slowly going away is a bit like asking what the odds of us winning World War II are.
I would bet all that I own that I will never see a 3.6% real yield again in my lifetime. I wouldn't even need even odds.
How can so much money printed and exported ever expect to earn a high risk-free long-term yield again?
To be clear, I mean I would bet all that I own that I will never see a 3.6% real yield on I-Bonds again.
Put another way...
The government can always drive real yields down by printing money.
The reverse is a bit trickier.
If you really want to know when risk-free real rates will rise over the long-term then you may want to ask yourself the following question.
When will the government get into the unprinting money business?
"How can so much money printed and exported ever expect to earn a high risk-free long-term yield again?"
You seem to be alluding to supply and demand, and the notion that an interest rate is a price. Burn the heretic!
dearieme,
Crazy stuff! Might get stoned for saying it! ;)
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