Lacy Hunt:
"Since the end of last quarter, the 30 year Treasury bond yield has risen to a high of 3.5% in March. In most years economic optimism seems to flourish for the first four or five months of the year. Seasonally, interest rates are usually at their yearly highs between late February and mid May. In fact, in fourteen of the last twenty years the thirty-year Treasury bond yield has peaked in the first half of the year. Our view remains that while interest rates can rise for many transitory reasons, underlying economic fundamentals suggest long-term rates cannot remain elevated and will gradually move lower."
I use EDV and BTTRX as my Long Term bond positions
http://www.investorsinsight.com/blogs/john_mauldins_outside_the_box/archive/2012/04/16/hoisington-first-quarter-review-and-outlook.aspx
Comments
An interesting article and related to similar discussions here.
Chart 1, median household income is of interest. And I would not argue with the data. The income type used in this graph is understood to use inflation adjusted numbering; and generally related to the Bureau of Labor data reflecting the CPI-U, if I recall properly. The CPI gauges have been "reworked" a few times since 1967.
I wrote about this area a few times at FA, but the data is stashed away on the "old" laptop and not readily available for this note.
A few trinkets of data from me starting with 1967 as used in the article graph. Not earth shattering, just some personal notes.
In 1967, the hourly UAW union blue collar wage was $3.10/hour, in Michigan.
A very nice family auto could be purchased for $2,500-$3,000. Let us set this as the hourly wage x $1,000.
In 2012, the hourly UAW union blue collar wage is $25.00/hour. Well will also set this with hourly wage x $1,000 and find $25,000 will buy a decent family car today.
Note: per the UAW/gov't. bailout agreement, new UAW hires are named Tier II and start at $16/hour.
Back to the chart and income declines. Using the normal 2,040 annual work hours found the above noted $3.10/hour worker earning $6,324 per year gross. Today's same worker earns about $51,000 per year gross.
A person today, to maintain the 597% inflation increase since 1967 and using the base of the $3.10/hour wage in 1967 would have to earn about $21/hour to have a nominal purchasing power in today's world. Obviously, there are advances in technology that a very inexpensive to get a user great control and benefit for many aspects of their lives. There are also other consumer areas that have greater than the 597% move since 1967.
A side note as a perspective of how much things change. I wrote a short article for coworkers in 1977, to the best of my recall; to define some areas regarding their wages, as they thought they may be unpaid. The reference for the article was a 1976(?) WSJ story which indicated that Michigan was 3rd in line for high wages per capita; with New York state and Alaska being #1 and #2. As Michigan was a full blown manufacturing state at the time, this wage rate at the time reveals the great deal of monies that was in the hands of blue collar families over several decades in this state.
As to the article that you linked. I will have to read this again when I am not so tired. My first read finds the senario(s) not to be farfetched from possible realities.
Pillow time..............and hopefully, I didn't botch any of the numbers.
Take care,
Catch
Hey Catch,
When interest rates fall these investments (I use EDV and BTTRX as my Long Term bond positions) do very well. Lacy Hunt seems to think we still have a chance for LT interest rates to fall further.