Comments on: Investment Counselor

By: batmando

batmando — Mon, 01 Dec 2008 15:05:57 +0000

Is anyone into PST now at these prices? How low (for how long) can it go?

By: karen

karen — Sun, 30 Nov 2008 20:48:22 +0000

PS. But there’s no way, the 10 year’s are pricing in negative inflation. Another discussion and quip from John at Across the Curve:

“I had not checked TIPS yields in awhile. The 10 year TIPS yields 2.57 percent which implies that the market expects a negative inflation rate of 0.38 percent on average over the next 10 years. And I want to sell you an interest in the Brooklyn Bridge.”

http://acrossthecurve.com/?p=2192

By: karen

karen — Sun, 30 Nov 2008 20:43:41 +0000

The 10 year is an anomaly that probably will reverse sharply one day. The FT ran this explanation:

http://www.ft.com/cms/s/0/eb677540-bbe3-11dd-80e9-0000779fd18c.html

By: leftback

leftback — Sun, 30 Nov 2008 19:50:59 +0000

“Coming up to four trillion in money markets”

Genius money managers at work again. I ride the train with these guys pretty often and of course they are all geniuses from Ivy League schools with MBAs. They all have first names that sound like other people’s last names, live in big houses and wear fancy watches – but most of them are down about 40-50% on the year.

They were buying up Treasuries this week as well. The usual pattern is that they sit in cash and Treasuries for too long and watch the market rally, then rush out of bonds causing a panic and run headlong into stocks – just before the bear market turns downwards again…

A lot of people have speculated on the buying of 10-year Treasuries this past week. The best explanation I have found is that this doesn’t truly reflect a belief that inflation will be <3% for 10 years. Much of this week’s move was hedging by holders of mortgages as a way to protect themselves against early repayment risk. This week saw an increase in refi activity as mortgage rates fell. Usually this type of hedging is quite volatile and can revert sharply if mortgage rates rise again and refi action dries up.