Bond rally nearing an end?

Indeed, I just wanted to point out this div played out in a "quarterly" chart...

My perspective regarding rates is:

If consumer spending finally gets hit by oil prices, rates will remain where they are or go down.

If consumer spending remains healthy, but wage inflation shows up, the fed will have to keep raising rates during the 2h06.

Does this make sense to you?


Quote from gharghur2:

Nice divergence there at the second low
More...
 
Good reasoning but replace "wage inflation" by "inflation". In Bernanke's view wage inflation is a phenomenon that happens when expectations are not anchored to a low rate of inflation.
 
Yes, it does!

Feel the economy is real strong and that always creates a fear of inflation, whether it is realized or not. Considering the runup in crude and the crb I'm surprised it's still moderate: core rate 1.9% last 12 months.

There must be something we are all missing. Is the new worker class (immigrants) keeping demand for higher wages subdued?

Energy costs have gone up and the cost of living, but so too has realized/unrealized wealth: investments/housing. Everything is in a bull market, no matter where you look. Except for Bonds of course. But rates are rising, which means savings may again begin to rise.

When bonds hit 7%, they will again be competitive with stocks for the long term. Until then, nobody should even consider them as an investment. Except of course pension funds and central banks, who can always offset the decline with hedging.
 
On one hand there are productivity improvements and on the other hand producers have difficulties passing higher costs to consumers.

It seems to me that demand became much more elastic than before. For example, car sales seem to jump only during months when car dealers are offering sizable incentives such 0% financing, instead of gradually increasing while the unemployment rate is going down.
 
Quote from gharghur2:

Yes, it does!

Feel the economy is real strong and that always creates a fear of inflation, whether it is realized or not. Considering the runup in crude and the crb I'm surprised it's still moderate: core rate 1.9% last 12 months.

There must be something we are all missing. Is the new worker class (immigrants) keeping demand for higher wages subdued?

Energy costs have gone up and the cost of living, but so too has realized/unrealized wealth: investments/housing. Everything is in a bull market, no matter where you look. Except for Bonds of course. But rates are rising, which means savings may again begin to rise.

When bonds hit 7%, they will again be competitive with stocks for the long term. Until then, nobody should even consider them as an investment. Except of course pension funds and central banks, who can always offset the decline with hedging.
More...

Well Tony, isn't that the crux of the matter?

Bull market in anything and everything. Housing? Up. Equities? Up. Precious Metals? Up. International Equities? Up. Emerging Markets? Up.

Everything except as you mentioned bonds, and the US dollar!

The 100,000 question, however, is this:

What asset class will appreciate faster than devaluation of the dollar?

If I knew, I would sleep much better at night. And I think that there is a lot of debate as to what the correct asset really is, without the knee-jerk "buy gold" response.

I'm short the 30 now, and will stay short until at least a 6% yield. Will ride out the fluctuations unless the fed starts buying the long bond, at which time I pretty much bail on the rest of my USD denominated positions.
 
Thank you guys for your comments.

As I understand inflation comes from different sources. At the present time we seem to be closer to the end of a demand-push inflation cycle. Historically this has been followed by wage inflation, unless of course we haven't yet reached a plateau in the demand-driven cycle.

It can also be said that the internet has allowed the US to outsource so many high paying jobs that an impact to the employment cost index figures is not noticeable.

Or simply we are at a point were all economic theory from the 1900s has become obsolete.


:confused:
 
Quote from drsteph:

Well Tony, isn't that the crux of the matter?

Bull market in anything and everything. Housing? Up. Equities? Up. Precious Metals? Up. International Equities? Up. Emerging Markets? Up.

Everything except as you mentioned bonds, and the US dollar!

The 100,000 question, however, is this:

What asset class will appreciate faster than devaluation of the dollar?

If I knew, I would sleep much better at night. And I think that there is a lot of debate as to what the correct asset really is, without the knee-jerk "buy gold" response.

I'm short the 30 now, and will stay short until at least a 6% yield. Will ride out the fluctuations unless the fed starts buying the long bond, at which time I pretty much bail on the rest of my USD denominated positions.
More...

I hold a bit of gold, but since I had to convert my CAD to USD, I've basicaly realized absolutely ZERO gain, so I definitely feel your pain...

You could always leverage your positions, or hedge your currency risk with forwards...
 
Quote from drsteph:

Well Tony, isn't that the crux of the matter?

Bull market in anything and everything. Housing? Up. Equities? Up. Precious Metals? Up. International Equities? Up. Emerging Markets? Up.

Everything except as you mentioned bonds, and the US dollar!

The 100,000 question, however, is this:

What asset class will appreciate faster than devaluation of the dollar?

If I knew, I would sleep much better at night. And I think that there is a lot of debate as to what the correct asset really is, without the knee-jerk "buy gold" response.

I'm short the 30 now, and will stay short until at least a 6% yield. Will ride out the fluctuations unless the fed starts buying the long bond, at which time I pretty much bail on the rest of my USD denominated positions.
More...

Hey Doc,

The best asset play right now is without question Shanghai's SEC. The only problem is it's closed to foreigners :)
So I have to play Hong Kong companies that do their biz in China.

China's bull market is just getting going (less than a year old), while everyone else's is three-plus years old. As are the commdoity bull markets as well.

Now if they open their market so that the SEC ETF that trades in Shanghai was made available worldwide, I'd be a happy man.
 
Quote from steveosborne:

On one hand there are productivity improvements and on the other hand producers have difficulties passing higher costs to consumers.

It seems to me that demand became much more elastic than before. For example, car sales seem to jump only during months when car dealers are offering sizable incentives such 0% financing, instead of gradually increasing while the unemployment rate is going down.
More...

True, everyone's buying smarter and looking for deals...
 
Quote from optionpro007:

Thank you guys for your comments.

As I understand inflation comes from different sources. At the present time we seem to be closer to the end of a demand-push inflation cycle. Historically this has been followed by wage inflation, unless of course we haven't yet reached a plateau in the demand-driven cycle.

It can also be said that the internet has allowed the US to outsource so many high paying jobs that an impact to the employment cost index figures is not noticeable.

Or simply we are at a point were all economic theory from the 1900s has become obsolete.


:confused:
More...

When everyone thinks it is obsolete then it will be working again. Thus far, maybe because of the internet somethings have changed.
 
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