Bonds…And Rising Interest Rates….

[an]

BG, I was referring to a couple of rentals, not your primary resident. Secondly, where did I said this is for your joe6p? Your average Joe6p doesn’t have a couple of rental properties. Your average joe6p are the renters of these rentals, not the landlord. So, the rest of your argument about student loans, expectation, etc wrt your average gen x/y doesn’t apply.

[Coronita]

[quote=AN][quote=flu]I was talking to my parents just a few minutes ago. Back in 79-80 when they were buying houses in SoCal… The prevailing fixed rate mortgage was 14.75%….Borrowing $150k cost $1866/month.

But at the time banks were doing 5 year CD’s at 18%….

Couldn’t figure that one out.[/quote]
Can you imagine getting 30 years CD in the teens %? Will we see that again in the next decade?[/quote]

I’m not greedy, I just want NXP Semiconductors to reach 100/share. Then I can retire…

Well, I wouldn’t actually retire. But I would then conclusively say I have enough F.U. money.

That’s really my only goal… Reaching F.U. money status.

What’s pathetic is the always.

“Yes sir, yes, sir. Yes, we can do that. Yes, it will be done…by yesterday…”

or when it’s a customer

“Yes, customer, yes customer. You’re always right customer…You look good customer….”

….bullshit…

[bearishgurl]

[quote=AN]BG, I was referring to a couple of rentals, not your primary resident. Secondly, where did I said this is for your joe6p? Your average Joe6p doesn’t have a couple of rental properties. Your average joe6p are the renters of these rentals, not the landlord. So, the rest of your argument about student loans, expectation, etc wrt your average gen x/y doesn’t apply.[/quote]

The “great-timing” scenario you described (which would have yielded boomers or older $9.9M today) is still a “pie-in-the-sky” conjecture, IMHO.

[quote=AN] . . . If history repeats itself and we’ll see the 70s/80s again, can you imagine back then buying a couple of median priced houses in 1970 and selling in 1980 for over 3.5x more? Then take that $150k gain and buy a 30 years CD in the mid teens? If you put $150k in a 30 years CD making 15%, that $150k will be about $9.9M today.[/quote]

If your parents (or grandparents) presumably had this “wonderful opportunity” (to buy 30 yr bonds at a 15% yield) in 1980 with even half or less of $150K back then, why don’t you ask THEM if any of them took advantage of it?

Obviously, if they did, you would likely be supported by a trust fund today instead of toiling away as a “worker bee,” don’t you think :=]

It doesn’t matter whether or not they were average joe6p’s at the time. Go ahead, ask them if this was “doable” at the time whilst still paying their monthly bills to live and even raise a family.

[an]

[quote=bearishgurl]If your parents (or grandparents) presumably had this “wonderful opportunity” (to buy 30 yr bonds at a 15% yield) in 1980 with even half or less of $150K back then, why don’t you ask THEM if any of them took advantage of it?

Obviously, if they did, you would likely be supported by a trust fund today instead of toiling away as a “worker bee,” don’t you think :=]

It doesn’t matter whether or not they were average joe6p’s at the time. Go ahead, ask them if this was “doable” at the time whilst still paying their monthly bills to live and even raise a family.[/quote]It doesn’t matter whether one can take advantage of the 70s inflation and early 80s bond rate or not. That’s irrelevant. What I’m saying I can take advantage of it if we see it repeat again.

Obviously, you couldn’t. But some people on this board obviously could and did.

[bearishgurl]

[quote=AN][quote=bearishgurl]If your parents (or grandparents) presumably had this “wonderful opportunity” (to buy 30 yr bonds at a 15% yield) in 1980 with even half or less of $150K back then, why don’t you ask THEM if any of them took advantage of it?

Obviously, if they did, you would likely be supported by a trust fund today instead of toiling away as a “worker bee,” don’t you think :=]

It doesn’t matter whether or not they were average joe6p’s at the time. Go ahead, ask them if this was “doable” at the time whilst still paying their monthly bills to live and even raise a family.[/quote]It doesn’t matter whether one can take advantage of the 70s inflation and early 80s bond rate or not. That’s irrelevant. What I’m saying I can take advantage of it if we see it repeat again.

Obviously, you couldn’t. But some people on this board obviously could and did.[/quote]

To be fair, those on this board that *did* would have had to have been old enough to purchase their own bonds in ~1980, since we haven’t seen the likes of ~15% yields since ~1983.

If we should see yields like this in the future (and I don’t think we will), of course I will be too old to buy 30 yr bonds (if their yields at maturity are intended for my own use and not that of my heirs). But there would be nothing precluding me from buying lesser-yielding bonds for myself which mature in 5, 10 or 15 years :=]

[carlsbadworker]

[quote=SD Realtor]AN I also dream about the days of high rates to buy bonds. However with those days we saw inflation and mortgage rates that would make you cry. Not to mention credit for business loans. Not fun times man.[/quote]

Why there is no fun? Higher rates will force people to make more prudent financial decisions. And bubbles/bursts are the results of reckless financial decision in the past. With low rates, we are becoming a nation of gamblers, how is that any fun for the next generation?

[all]

Most of the corporate bonds in 80’s were callable (as in >90% of non-junk bonds). So were the us treasury bonds issued before 1985.

[SD Realtor]

Point well taken CW. However it did kind of suck when you literally saw price increases overnight. Also having double digit mortgage rates pretty much sucked for people who were trying to get loans for starting businesses. Don’t get me wrong, we needed to do it then. However today the complexities are exponentially worse.

Think about this, given our spiraling debt and the non chalant policy of simply raising the debt limit, what do you think the effect will be if we see a very rapid rise in rates? How in the hell do we service our debt if treasuries suddenly jumped to say 8%?

Volker didn’t have to deal with 16 trillion in the hole.

I absolutely agree with your assertions about what people need to do. Lets not forget to put govt in those same assertions.

[scaredyclassic]

i remember my dad getting high itnerest bank accts in the 70s. i remember cause he was always bringing home little gifts from the banks. toasters and such. for opening the acct.

he was into the gifts.

[an]

One other reason why I’m looking forward to higher rates is resuming my credit card balance transfer free money “work”. It was nice a few years ago when 1 year CD was 5-6% and credit card companies where giving out 0% 12-18 months balance transfer. If we see CD rates in the teens and CC companies are still giving out 0% balance transfer, then that’s even more free money to be had.

[Coronita]

[quote=squat300]i remember my dad getting high itnerest bank accts in the 70s. i remember cause he was always bringing home little gifts from the banks. toasters and such. for opening the acct.

he was into the gifts.[/quote]

I got croker spaniel stuff animal from then Crocker Bank

[Coronita]

[quote=CA renter]Something else to consider:

——–
“A decision by the Federal Reserve to expand its bond buying next week is likely to prompt policy makers to rewrite their 18-month-old blueprint for an exit from record monetary stimulus.

Under the exit strategy, the Fed would start selling bonds in mid-2015 in a bid to return its holdings to pre-crisis proportions in two to three years. An accelerated buildup of assets would also mean a faster pace of sales when the time comes to exit — increasing the risk that a jump in interest rates would crush the economic recovery.

“There is certainly an issue about unwinding the balance sheet” in a way that “is effective and continues to support the recovery without creating inflation,” St. Louis Fed Bank President James Bullard said in an interview in October. The central bank might have to “revisit” the 2011 strategy, he added.

The Fed is already buying $40 billion a month in mortgage- backed securities to boost the economy, and policy makers meeting Dec. 11-12 will consider whether to purchase more assets. John Williams, president of the San Francisco Fed, has proposed adding $45 billion of Treasury securities a month.

The bigger the balance sheet, “the riskier the exit becomes,” Richmond Fed President Jeffrey Lacker said during a Nov. 20 speech in New York. “That is something we need to think carefully about.”

Krishna Memani, director of fixed income at OppenheimerFunds Inc., said a too-rapid sale of assets risks disrupting the $5.2 trillion market for agency mortgage debt.”

http://www.bloomberg.com/news/2012-12-07/fed-exit-plan-may-be-redrawn-as-assets-near-3-trillion.html%5B/quote%5D

Wrongo….

We should know by now, this ain’t gonna happen, because the fed will keep doing this…….

http://finance.yahoo.com/news/fed-seen-pumping-assets-4-050000764.html

Fed Seen Pumping Up Assets to $4 Trillion in New Buying

[CA renter]

Yep, one of the other reasons we ended up buying a house.

Deflation is the undercurrent, but they will try to print their way out of it, no matter who gets hurt in the process (savers, wage earners, people on fixed incomes).

It’s wonderful how they are relentlessly pursuing QEx…since it’s worked so well thus far! [sarcasm]

[Coronita]

Well Goldman has spoken… Gee i feel so much better now (sarcasm)

http://finance.yahoo.com/news/blankfein-investors-face-big-risk-193728002.html

“Lloyd Blankfein is worried that investors think low interest rates will last forever.

Goldman Sachs CEO Lloyd Blankfein, discussing how ‘Cliff’ deal may work.
“One of the big risks that’s looming is complacency. People are once again complacent about the low level of interest rates,” the Goldman Sachs CEO said at the New York Times DealBook conference Wednesday.
As a result, there could be losses for investors with portfolios heavy with low interest loans, Blankfein predicted.”

[SK in CV]

[quote=flu]Well Goldman has spoken… Gee i feel so much better now (sarcasm)

http://finance.yahoo.com/news/blankfein-investors-face-big-risk-193728002.html

“Lloyd Blankfein is worried that investors think low interest rates will last forever.

Goldman Sachs CEO Lloyd Blankfein, discussing how ‘Cliff’ deal may work.
“One of the big risks that’s looming is complacency. People are once again complacent about the low level of interest rates,” the Goldman Sachs CEO said at the New York Times DealBook conference Wednesday.
As a result, there could be losses for investors with portfolios heavy with low interest loans, Blankfein predicted.”[/quote]

I’ll bet he’s short LT debt obligations. Wouldn’t be the first time that GS did that. Sell the hell out of something, then short it, then bad mouth it. Everyone loses but them. And nobody goes to prison.

[Author]

Posts