How Dumb are T-Bond Investors?

A

aeliodon

4% yield

After taxes: 3% yield

After 2-3% inflation: .5% yield

After 3% currency devaluation: -2.5% yield


Now I've used very conservative numbers above. I cannot understand why anyone would buy T-Bonds. I can understand the Arabs, China, and Japan buying because we have an agreement with them to tolerate a trade deficit with them so long as they reinvest the dollars into our debt.

But what about everyone else? Why would everyone else invest in an asset with a negative net yield?

I guess the answer is too much liquidity. You can't even say there isn't enough risk premium - becuase there is absolutely no compensation for risk at all. There is a risk penalty in this environment - you actually get penalized for saving and investing.

No matter how much money you have its impossible to 'live off interest' - with such negative net returns. In this environment the only way to preserve and grow capital is to learn how to trade and use leverage.
 
btw, foreign banks soak up US debt to keep interest rates low so the US consumer will continue to buy all the plastic WalMart crap from Asian exporters...

since foreign central banks dont have to show profit or loss on debt holdings, they can print enough money to buy all the US debt they want or need....
 
The speculator as hero - think about that. Because successful speculation is the only way to keep your head above water (financially) in the long run. Otherwise the evil government will eat it all up thru taxes and the evil CBs will eat it all up thru inflation and currency debasement.
 
Quote from aeliodon:

The speculator as hero - think about that. Because successful speculation is the only way to keep your head above water (financially) in the long run. Otherwise the evil government will eat it all up thru taxes and the evil CBs will eat it all up thru inflation and currency debasement.
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Good vs. Evil?

Evil~Good

Lion:Gazelle Spider:Fly

Well, it is what it is...such as it is.
 
Quote from daddyeaux:

99.9% of the US population wouldn't understand what your numbers mean

btw, I think street level inflation is running around 8%
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Not sure what you mean with "street level inflation", maybe the drugs you buy for yourself in your Bronx neighborhood? Inflation is a very accurate assessment and although the reported numbers are always slightly revised it DOES capture realities very accurately. there is no way your "street inflation" runs 3% higher than reported one. That is simply untrue. Perhaps you want to read up on how inflation numbers are actually crunched before they are reported, I think this would make all clearer.
 
Quote from aeliodon:

4% yield

After taxes: 3% yield

After 2-3% inflation: .5% yield

After 3% currency devaluation: -2.5% yield


Now I've used very conservative numbers above. I cannot understand why anyone would buy T-Bonds. I can understand the Arabs, China, and Japan buying because we have an agreement with them to tolerate a trade deficit with them so long as they reinvest the dollars into our debt.

But what about everyone else? Why would everyone else invest in an asset with a negative net yield?

I guess the answer is too much liquidity. You can't even say there isn't enough risk premium - becuase there is absolutely no compensation for risk at all. There is a risk penalty in this environment - you actually get penalized for saving and investing.

No matter how much money you have its impossible to 'live off interest' - with such negative net returns. In this environment the only way to preserve and grow capital is to learn how to trade and use leverage.
More...

...because some investors/fund managers dont want to expose themselves to the same volatility than what stocks exhibit? Or, what would you invest in during a market correction to the downside that may last 6 months or a year or even two? Not everyone is a self-proclaimed daytrader such as you and is content with his 2-5 ticks per trade, lost or made.

....and what is your currency devaluation figure? What if you are a foreign investor and speculate on a strengthening in the USD while investing in USD t-bonds?

Sorry but most of your point do not make any sense whatsoever....but....good luck with your ES.......
 
Quote from daddyeaux:

Hey Vol,

you have the credentials to appear on Kudlow's show...
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Perhaps you try to make a point rather than just letting everyone know you did not get laid last night and are pissed off at the rest of the world....
 
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