Category Archives: Inflation/Deflation

Imagine you could make a time-jump a few years out into the future. What might you expect to be different? You'd know what the iPhone 7 looks like. You'd know whether the Ravens and Niners had a rematch, and who won. You'd also know the level of interest rates after the Fed winds down its bond-buying program. While nothing is certain, most investors assume that interest rates will be higher in a ...

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The Federal Reserve Board of Governors today released minutes from its January meeting, at which it apparently discussed the fact that it might not be able to continue its current pace of bond market manipulation. In case you've forgotten...the Fed is buying up hundreds of billions of dollars of public and private bonds in order to artificially hold interest rates low. It pays for this by flooding bank vaults with ...

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Summary of conversation we have with clients a few times a week: Aren't you worried about interest rates going up? The ten-year treasury is only paying 1.7%...rates are probably probably going to go up, and bond prices decline when interest rates go up. Why are you buying 10-year muni bonds? Simple answer: Because the muni bond yields are high enough to provide us a fair rate of after-tax return, even if ...

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We get calls from journalists from time to time. Here are links to a few of our thoughts, as reported by online news sources: FoxBusiness had Rick as a guest again, talking about investing in 2012. "Invest cautiously in 2012. Preserve capital." The Chicago Sun-Times interviewed Rick about higher-yielding investments. September 2011. "In his view, the stock market is priced for 'a continued and unbroken economic recovery.”'But the bond market 'is priced for a ...

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Debt Reduction the Post-War Way In the 35 years following the end of WWII, the rate of inflation exceeded the interest rate on our government's debt about a quarter of the time. The so-called "real rate" of interest was negative, and materially so. In the estimation of Carmen Reinhart and Belen Sbrancia, in a paper published in March of this year, a negative real rate of interest resulted in America's goverment ...

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Nov
03

The monetary printing presses, that is. As expected, the Federal Reserve Board of Governors announced today the resumption of its "Quantitative Easing" program. That's a nice academic euphemism for "printing money." The Fed will be reaching out into the capital markets and buying six hundred billion dollars of Treasury bonds. For reference, that's about half of current annual federal borrowing. The objective of the policy is to pull down longer-term ...

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Rick appeared on CNBC to talk about Bernanke, Fed policy and the bond market on August 30.

Gentle Ben Bernanke gave a big speech yesterday at Jackson Hole. There were two main themes in the talk. The first was an overview of where the economy has come since the Panic of 2008. In paragraph after paragraph, he gives the little bit of good news, followed by an immediate, "however..." It's the "howevers" that have concerned us and continue to. His rhetorical pattern reminds of dealing with teenagers. "Hey, ...

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Simple words of advice. While it might be tempting to play where all the action is, we've always done well by standing on the curb and watching the craziness whiz by. Investors are piling into long-term bonds, which makes sense only if one believes that inflation has been whipped once and for all and for all time. Sure, inflation is zero (or less) at the moment, and it might stay ...

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Jul
20

We hit the "print" button on our quarterly commentary early last week (about July 12). A day or two later, we received Jeremy Grantham's quarterly commentary. Grantham's commentary goes to a client base worth tens of billions of dollars, while ours goes to a more earthly total dollar valuation. Nonetheless, it was refreshing to see that our view of the world is substantially in line with one of the globe's ...

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