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Rising interest rates? In my opinion, the bond market is simply trying to climb back to the long-term declining trend.
Long time readers know that I post a lot of exponential trend failures on this blog. You might therefore wonder why I trust this one not to fail. The simple answer is that I don't. It's more of a question of which direction it would fail.
I am definitely in the minority. As seen in the chart, we're currently well below trend. I do not believe this economy is strong enough to support a sustained climb back up.
This chart predicts that the 10-year moving average of the 10-year treasury yield will be 3.0% in August of 2018. That's roughly 5 years away. I shall take the under.
It's just an opinion of course.
Opinion has caused more trouble on this little earth than plagues or earthquakes. - Voltaire
My opinion isn't going to do much in the grand scheme of things. If I am wrong, no big deal. I'm in the minority here. Who cares what I think? It is the opinion of the masses, those in ivory towers, and those in power that would concern Voltaire most more than likely.
September 3, 2013
5 ways to prepare for higher interest rates
If you don’t like the idea of buying individual bonds but don’t want to get burned by raising rates, short-term bond funds are an alternative.
Yes, short-term bond funds! It's worked out great so far. Just get in there and patiently wait for the end of ZIRP. It is bound to happen any day now!
Yahoo: SHY Performance
3-Year Total Return (Mkt): 0.56%
This is not investment advice.
Source Data:
St. Louis Fed: 10-Year Treasury Yield
9 comments:
Heaven help us all if we enter the next recession while we're still in ZIRP, and yes, I think it could easily happen.
Easily happen? Watch it happen.
p.s.: I still say you can't argue that economic strength is the sole factor governing interest rates.
So I was at Barnes & Noble the other day looking at books (I know, who does that anymore?). I happened to notice one of those 'For Dummies' (i.e. 'For Luke Smith') books on the subject of R.
I soon realized it had nothing to do with films unsuitable for adolescents or pirates, but instead covered graph trends. So, I quickly sat it back on the shelf, stepped away in a not so nonchalant manner and left.
Oh you mean the "Retiring Wealthy for Dummies" Book? Good choice putting it back because even dummies know you can't retire rich anymore.
TJandTheBear,
I still say you can't argue that economic strength is the sole factor governing interest rates.
I would agree with that. There are *at least* two.
1. Real economic strength
2. The illusion of economic strength
Both seem to get interest rates to rise. You can probably guess which one I think is doing it right now. The list doesn't end there of course.
3. Currency crisis (reaching the ultimate limit that generally comes without warning)
I don't think we'll have #3 in the foreseeable future. Just an opinion. I'm not going to argue what the foreseeable future is. Might be a year. Might be the rest of my life. Oh please let it be the latter, lol. Sigh.
Luke Smith & Anonymous,
I thought it was "Recessions for Dummies" but I stand corrected.
R For Dummies
Visualize it learn to use R's powerful data visualization features to create beautiful and informative graphical presentations of your data
Well, maybe I stand corrected. I'd like to think that recessions do make it easier to create beautiful and informative graphical presentations of my data. Perhaps I'm biased, but what's more beautiful than a failed exponential trend? Hahaha! *cough* Sigh.
Gallows humor.
Might be a year. Might be the rest of my life. Oh please let it be the latter, lol. Sigh.
Should the odds start to favor the former I intend to rig the game a bit by engaging in life-shortening risky behaviors such as sky diving, tornado chasing, and shark wrestling, lol. Sigh.
More gallows humor.
Now that interest have risen a little, it's plausible that they could move in either direction. Which changes things.
dearieme,
Relaxing Swinging Pendulum
Oh, yeah. Relaxing. Not at all creepy, lol. Sigh.
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