How Dumb are T-Bond Investors?

[u21c3f6]

Quote from aeliodon:

So basically the SMART MONEY doesn't lend at 4-5% - they BORROW at 4-5%. Then the LEVERAGE it on assets that are growing faster that 4-5%.

US T-Bond investors are probably the DUMBEST MONEY out there. I exclude the Arabs, Chinese, and Japanese from this statement because they are getting fat trade surpluses in exchange for investing in T-Bonds.

I don't understand your beef with T-Bond investors. Why does it matter to you?

Remember, to get a rate of return greater than a risk-free rate means there is risk involved, regardless of how little a risk you believe there is. Some of that hedge fund money looking for better returns is probably wishing it was in T-Bonds right about now.

One of the points (at least to me) of amassing wealth is to also hang on to some of it. Many times investors stretch in their quest to increase the rate of return of their assets to only wind up busting out or decimating their account.

There is nothing wrong with tying up some of your assets in risk-free assets to keep them out of harm's way.

Joe.

 

[daddyeaux]

Quote from BJL:

yeah those dumb T-Bond investors looked really stupid last july/august and way back in 2001/2002.

yep, you are right, since 2002 the USD has lost a third of its value...

bond buyer's' principal is getting butchered and they likely dont even know what is happening

 

[The Kin2]

Quote from u21c3f6:

I don't understand your beef with T-Bond investors. Why does it matter to you?

Remember, to get a rate of return greater than a risk-free rate means there is risk involved, regardless of how little a risk you believe there is. Some of that hedge fund money looking for better returns is probably wishing it was in T-Bonds right about now.

One of the points (at least to me) of amassing wealth is to also hang on to some of it. Many times investors stretch in their quest to increase the rate of return of their assets to only wind up busting out or decimating their account.

There is nothing wrong with tying up some of your assets in risk-free assets to keep them out of harm's way.

Joe.

The paradigm has shifted because there is risk. Currency Risk It's something foreign central banks seem to ignore.

 

[Daal]

Quote from u21c3f6:

I don't understand your beef with T-Bond investors. Why does it matter to you?

Remember, to get a rate of return greater than a risk-free rate means there is risk involved, regardless of how little a risk you believe there is. Some of that hedge fund money looking for better returns is probably wishing it was in T-Bonds right about now.

One of the points (at least to me) of amassing wealth is to also hang on to some of it. Many times investors stretch in their quest to increase the rate of return of their assets to only wind up busting out or decimating their account.

There is nothing wrong with tying up some of your assets in risk-free assets to keep them out of harm's way.

Joe.

true

 

[number22]

At current money pumping scheme; we will have enough money for Iran.

In bond market; you have to listen to CBs; Fed; and Goldman.

 

[BJL]

Quote from daddyeaux:

yep, you are right, since 2002 the USD has lost a third of its value...

bond buyer's' principal is getting butchered and they likely dont even know what is happening

Depends on where you reside. Japanese investors have not seen the dollar slide against the yen. And 4%+ seems pretty good compared to 1% domestically.

 

[crgarcia]

Quote from aeliodon:

4% yield

Actually 4.40%
http://finance.yahoo.com/q?s=^TNX

Quote from aeliodon:


After taxes: 3% yield

Nobody pays taxes on interests earned on Treasury Bonds, nobody; much less foreign investors.

Quote from aeliodon:


After 2-3% inflation: .5% yield
After 3% currency devaluation: -2.5% yield

The only real risk is currency devaluation.

T-Bonds are the world's safest investments, and most foreign investors (mostly countries and banks), just can't safely invest such enormous amounts of money, since their countries are unstable.

Even with the dollar devaluation, it is still perceived as much more stable than third world currencies, which may devalue at the whink of the eye, at any moment their presidents (or dictators) decide to print more money to finance their private islands.

So they almost get no alternatives. They might stay in cash, and lose due to inflation.

Something is preferable to nothing.

 

[daddyeaux]

Quote from crgarcia:

Actually 4.40%
http://finance.yahoo.com/q?s=^TNX


The only real risk is currency devaluation.

T-Bonds are the world's safest investments, and most foreign investors (mostly countries and banks), just can't safely invest such enormous amounts of money, since their countries are unstable.

Even with the dollar devaluation, it is still perceived as much more stable than third world currencies, which may devalue at the whink of the eye, at any moment their presidents (or dictators) decide to print more money to finance their private islands.

.

t-bonds are the safest?? think about what you typed....the denomination gets chopped by 30% and you think it's the safest ??? are you kidding me??

 

[budabfu]

t-bonds sucks! ! !

 

[thisisbabak]

Quote from daddyeaux:

t-bonds are the safest?? think about what you typed....the denomination gets chopped by 30% and you think it's the safest ??? are you kidding me??

You have to compare apples to apples here. Treasuries held to maturity are the safest USD denominated asset and therefore have the lowest yield. Foreign investors that buy Treasuries are effectively taking a short position in their local currency vs. the USD and can choose to hedge that risk by selling dollars forward for example. So a foreign investor is actually exposed to both Treasury price, and fx rate changes. The "chopped by 30%" that you refer to is due to the falling USD, not because Treasuries are not safe.