The expected nominal interest rate should consist of the real interest rate plus inflation. So one can assume that if inflation is expected to rise over the life of the bond, holders would demand a higher nominal rate.
If I wasn't clear, which I guess I wasn't because you didn't understand my wording, I agree with what you wrote prior. My point was that we do not have crystal balls, and I would not speculate on the side that over the next 20 or 30 years that today we are seeing peak interest rates and inflation numbers.
As you rightly point out later, if you agree with the above, and you agree the bond value decreases as interest rates increase, and if you agree that regardless of what the commodity is, if the value is being manipulated or attempted to be manipulated it's probably not a "safe" asset holding... so, I don't really understand why you wrote what you wrote unless you disagree with anything I just wrote.
Arguing to argue again?
I tend to agree. That's why I trade Treauries as rates fluctuate and don't expect to hold them to maturity.
So with the announcement of QE 1 and 2, you have increased your holdings, and are continuing to increase your holding? What is your "sell" level/exit strategy?
I really don't think it's changed that much.
Maybe re-reading some news clips from 2008 and 2009 where fears of a world wide depression was in the back of most people's minds. I recall an interview in march 09 with warren buffet and he said it would be best not to get into the market until there is some signs that the economic free fall is over. Did you just recently write how we
were on the brink a destruction of the currency? Economic upswings are bad for bonds. We are in an economic upswing, it's just a matter of time until money moves from bonds/treasuries and into equities and metals.
and I'm left wondering where the (paying) jobs are going to come from.
If you had a job, maybe you wouldn't be wondering that sort of stuff... But for some reason I think you are employed, and you probably do have a "paying job". Yet you still wonder... I'm
Yeah, really. (My first brokerage account was with Walston and Co., which went defunct in 1974. Remember it? Or are you too fresh out of the oven? At one time it was the second largest brokerage firm in the U.S. )
Set up by mom and dad for you, or is your 84 year old father still building houses?
Call me a contrarian, stubborn, a moron--whatever, but I see all of this dollar-denominated debt around the world that still has to be repaid in dollars.
How about naive
At some point--I don't know when--all of these dollar loans will have to be repaid as well and dollars repurchased.
The problem with the argument is you are forgetting that loan repayments are not guaranteed, and you are confusing fractional banking with sovereign banking. If you really believed in fractional banking, you would understand default is how currency is controlled. Sovereign banking will destroyed the currency as it is repaid, where as fractional banking can adding it to the balance sheet and allowing it to be loaned out at 10:1.
So if you really believe that repayments of loans will somehow lead to lower rates of inflation in a fractional banking system, then I will not argue the third choice in your original self assessment. And perhaps you would do better for yourself in reading up how every 100 dollars of default the bank must RECALL 1000 dollars in loans.
Is it not true then that EVERYTHING priced in dollars is worth less in "real terms," including all of the dollar-denominated assets owned by U.S. corporations (as well as U.S.. listed stocks)? Is it really? Is, say, a rail car in America worth less than a rail car in Germany or France? I don't think so.
One day when you grow up and travel to other places in the world, you will see the real effect of a devalued dollar has on purchasing power. It is not the asset that has less value, it is the purchasing power of the currency that has less value. The rail car is still worth a rail car. But it takes you 20% more dollars to buy that same asset today vs 2 years ago. If it was "worth less" then you could pay the same dollars today vs 2 years ago.
Since you have a hard time understanding concepts outside the US (maybe you have not had the experience since you are still looking for a "paying job")... imagine you have 2 currencies to use to fill your gas tank.
Currency A will fill your tank, but yesterday, would fill 2 tanks.
Currency B will fill 2 tanks today, but yesterday would fill 1 tank.
Do you see what I am getting at? It is PURCHASING POWER NOT VALUE OF THE UNDERLYING ASSET?
