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And yet another article on this very timely topic. Trends offer reverse in January so my radar will be especially sensitive then. I am dreading the occurrance of this great (maybe too widely predicted) reallocation because I just don't know at my age and financial situation I ever want to venture into equities again. Then again, if it's anything like the 80s and 90s.....
The writer in your link noted: "Since 1981, ten-year interest rates have fallen from 14% to below 2%, all the while boosting the prices of existing bonds, to the benefit of investors, with annual corporate bond returns averaging nearly 10% during that time. Interest rates are being pinned down by a combination of weak economic growth, international flight to quality and quantitative easing, but BofA’s credit strategist Hans Mikkelsen notes that
“this is not a natural state”
and that’s it’s only a matter of when, not if, interest rates start rising."
Many central banks continue to be in a run with one another to grow the debt. For developed countries, this may cause little change; as they (central banks) are all playing the same game. Little change being "buying time" and with fingers crossed. What they (central banks) may be pushing for in the "old name of growth" may come to pass as a "new name of growth" with its own pattern of consumption.
The writer's note is correct at this time regarding, “this is not a natural state”. The writer apparently anticipates stronger growth and employment as a possible mover in pushing interest rates higher. Time will tell about this. The year 1981 is a unique year and time period for the author to use as a guage of the 10 year yield movement.
Someone's history or some period's history may repeat itself; but I surely can not predict which history it will be; and can only attempt to be intent upon watching moves and trends.
'Course, either Morgan Stanley or Goldman Sachs noted in a market report early in 2011 that the 10 year note was headed towards a 5% yield for that year.
1929 was a watershed year, too. The worst of the Great Depression happened a few years later, though. The Great Recession of '08 is playing out now. The greedy excesses of 1928 leading to that Crash were no accident. Neither was the '08 Crash. In fact it was even facilitated by the legal, legislative dismantling of Glass Steagall. In was greed run amok. It was insanity. Even elected "leaders" were believing Gordon Gecko when he said, "Greed is good." Some talking heads who were interviewed even predicted that the bubble will NEVER burst, it couldn't happen. They'd still be eating crow if not for our collective amnesia.....There have been some encouraging statistics lately re: the economy. The disappointing earnings numbers being reported from Wall Street do not surprise me, though. The more encouraging numbers---about the unemployment rate, for example--- come from the fact that when things become too dire, both major parties are guilty of simply re-defining what "unemployed" means. If you're unemployed for too long, you simply cease to exist, statistically.
No, we are on the GRAND FUNK RAILROAD, and this funk will be long, secular and institutionalized. It's not going away for generations. That "Greatest Generation" associated with W.W. II sacrificed greatly on a daily basis, and too many paid the Supreme Sacrifice, to preserve liberty. Since the LBJ years, methinks, we've just constantly screwed up, shooting ourselves in the foot, and basically creating a giant mess.
The Fat Cats will do just fine. The System is set-up to their advantage. So, the Markets might not shine, but will perform adequately, thanks to government intervention. Meanwhile, Main Street is strewn with potholes, shops cannot manage to stay open, wages are stagnant, but taxes are going UP. (Just look at the property tax I have to pay.) I recall a private conversation with a fellow from Chile, who dated my sister many years ago. He said: "Americans are going to have to get accustomed to paying MORE, for LESS. He was 3000% correct. That was in the 1970s.
Comments
http://blogs.barrons.com/incomeinvesting/2012/10/23/bonds-at-risk-as-great-rotation-into-stocks-seen-starting-in-2013/?mod=BOL_hpp_blog_ii
The writer in your link noted: "Since 1981, ten-year interest rates have fallen from 14% to below 2%, all the while boosting the prices of existing bonds, to the benefit of investors, with annual corporate bond returns averaging nearly 10% during that time. Interest rates are being pinned down by a combination of weak economic growth, international flight to quality and quantitative easing, but BofA’s credit strategist Hans Mikkelsen notes that and that’s it’s only a matter of when, not if, interest rates start rising."
Many central banks continue to be in a run with one another to grow the debt. For developed countries, this may cause little change; as they (central banks) are all playing the same game. Little change being "buying time" and with fingers crossed. What they (central banks) may be pushing for in the "old name of growth" may come to pass as a "new name of growth" with its own pattern of consumption.
The writer's note is correct at this time regarding, “this is not a natural state”. The writer apparently anticipates stronger growth and employment as a possible mover in pushing interest rates higher. Time will tell about this. The year 1981 is a unique year and time period for the author to use as a guage of the 10 year yield movement.
Someone's history or some period's history may repeat itself; but I surely can not predict which history it will be; and can only attempt to be intent upon watching moves and trends.
'Course, either Morgan Stanley or Goldman Sachs noted in a market report early in 2011 that the 10 year note was headed towards a 5% yield for that year.
Take care,
Catch
No, we are on the GRAND FUNK RAILROAD, and this funk will be long, secular and institutionalized. It's not going away for generations. That "Greatest Generation" associated with W.W. II sacrificed greatly on a daily basis, and too many paid the Supreme Sacrifice, to preserve liberty. Since the LBJ years, methinks, we've just constantly screwed up, shooting ourselves in the foot, and basically creating a giant mess.
The Fat Cats will do just fine. The System is set-up to their advantage. So, the Markets might not shine, but will perform adequately, thanks to government intervention. Meanwhile, Main Street is strewn with potholes, shops cannot manage to stay open, wages are stagnant, but taxes are going UP. (Just look at the property tax I have to pay.) I recall a private conversation with a fellow from Chile, who dated my sister many years ago. He said: "Americans are going to have to get accustomed to paying MORE, for LESS. He was 3000% correct. That was in the 1970s.