We are in a new cycle of low interest rates so get used to it

Junkster

https://m.youtube.com/watch?v=eEZe-93MuYc

Spoke at a seminar with Jim Bianco in 1999 when he was just starting out. While economists have a much worst prediction record than stock market prognosticators I was always impressed with Jim’s acumen. He always seemed wise beyond his years. In the clip from two days ago he was firmly in the this time it is different camp (who isn’t) and low rates are here to stay. I hope he is right for many reasons but getting real uncomfortable with the rates have nowhere to go but down scenario. Eleven months ago everyone was in the camp rates had nowhere to go but up. What a difference a year makes, If I can remember will revisit this topic same time next year.

catch22

Hi @Junkster

I remain in the "this time is still different" crowd.

Couple of items with this.
Watching the interest rate calls from 2011 or there about from the big houses. They all had and still have a hell of a time getting used to things these days.
Aside from all of the trade and political turmoil; I have kept trying to weigh big house thoughts and actions on market directions.
There are many possibilities, of course; but I try to place these next pieces together for today (meaning the last 8 years to date). Not in any order:
1. machine trading
2. large houses, and their traders and technicians not thinking this time is different and continue to have adjustment difficulties.
3. technology in the work place and EVERYWHERE
4. the large group of baby boomers and the affects they have in so many market sectors, from consumption or not, down sizing everything, which includes shifts in housing and what type
5. perhaps some folks buying too much expense items with low interest rates on loans.
6. Everything else..... a longer list to be sure
Add to the list if you choose.


Below is the German 10 year bond set for PRICE. This chart defaults at 3 months, but click on the other time frames just above the chart to follow pricing from earlier periods to date.
The reason for the look here, although very narrow and set to one country; is an attempt to discover when yields travel to 0 and below, as to what happens to the PRICE, i.e.; anyone buying?
My thoughts being that there is a point where one can no longer obtain a profit from PRICE gains and obviously no gain above inflation from the yield. Coming to the point of when is it no longer of consequence to invest in bonds of some form or other.
Help me with this thinking, as needed; your insight to this is appreciated.

10 yr German bond PRICE

Pillow time here.
Catch

Junkster

catch22 said:

Hi @Junkster

I remain in the "this time is still different" crowd.

Couple of items with this.
Watching the interest rate calls from 2011 or there about from the big houses. They all had and still have a hell of a time getting used to things these days.
Aside from all of the trade and political turmoil; I have kept trying to weigh big house thoughts and actions on market directions.
There are many possibilities, of course; but I try to place these next pieces together for today (meaning the last 8 years to date). Not in any order:
1. machine trading
2. large houses, and their traders and technicians not thinking this time is different and continue to have adjustment difficulties.
3. technology in the work place and EVERYWHERE
4. the large group of baby boomers and the affects they have in so many market sectors, from consumption or not, down sizing everything, which includes shifts in housing and what type
5. perhaps some folks buying too much expense items with low interest rates on loans.
6. Everything else..... a longer list to be sure
Add to the list if you choose.


Below is the German 10 year bond set for PRICE. This chart defaults at 3 months, but click on the other time frames just above the chart to follow pricing from earlier periods to date.
The reason for the look here, although very narrow and set to one country; is an attempt to discover when yields travel to 0 and below, as to what happens to the PRICE, i.e.; anyone buying?
My thoughts being that there is a point where one can no longer obtain a profit from PRICE gains and obviously no gain above inflation from the yield. Coming to the point of when is it no longer of consequence to invest in bonds of some form or other.
Help me with this thinking, as needed; your insight to this is appreciated.

10 yr German bond PRICE

Pillow time here.
Catch

Can’t offer any special insights. If the crowd is right and this time it is different and rates are headed towards zero that will buoy bonds that offer a higher yield such as junk, non agencies, emerging markets, and more. I remarked the other day that from a contrarian point of view at some point over the next year rates will be higher on the 10 year in the 2,50 to 3% range. I hope that isn’t the case but it would not surprise me at all. Stocks would also be much higher and confound all those thinking a recession is at our doorsteps. You are thinking more based on fundamentals while I am thinking more based on sentiment and the counterintuitive nature of the markets.

davfor

Even 2.5 to 3% on the 10 year in 2020 would be quite low by historic standards. I just don't see what might cause rates to move substantially further than that to the upside in the near future.