I hope someone can bring light into my brains darkness
I really don't understand why someone should buy long-term
US-government bonds now. In a day like yesterday everything
fell but TLT rose like a rocket and TBT fell like a
stone. Why should someone buy a risky asset like TLT?
You have not only the currency risk (US$) but also a default
risk (USA only have triple A because major rating agencies are
American) and of course the risk of rising interest rates (which is
low given the economical weakness but should imho be very high when
you consider also the risk of default.... but I suppose that's not
counting?)
I understand that when there are rough times like yesterday, an
investor wants to sell risky assets like stocks and wants to hold
cash. And the US$ is probably due for a bounce.
Please can someone tell me
1) Why should someone buy TLT (or long term US government bonds
) and feel save?
2) Who is buying? (I think the buyers must come from the
US...because I don't think that the rest of the world is
blaming the USA for its financial politics but is
still buying their bonds (China) )
UST's are one of the most liquid investment assets in the world
and hence are currently a safe haven in times of
madness. The buyers of UST's are diverse, all
over the world. Includes, govs, corps, private
citizens, etc.
Buying TLT or TBT or other bond ETFs (there are many, check
) is not 'safe' as they will vary with interest rates however,
can be used to make money in times of broader market risk
aversion. You can be on the wrong or right side of the
trade like any ETF.
Given the debt load of the US these statements could change with
time.
I am small enough to just stay in cash and gold. If I had a
trillion to invest there's not many places I can hise other than
the bond market. Here's good article by Martin Armstrong on
why bonds rally.....
nice article and exactly the point I don't understand.
I have still the opinion that in the current environment
everyone should avoid holding US-bonds, even if you have the
"problem" to invest trillions. Maybe it's just too early and the
big players have not yet realised that Us debt is not a good
invest. And when everyone wants to sell we all can imagine what
would happen to the interest rates.
The super rich (and soveriegn funds) will have nowhere to hide
soon. Their the ones who must be sh!tting bricks. It's
one big game of poker coming up. That's why artwork and rare
diamonds are going through the roof as well as gold. people
are running out of options to store their wealth. Perhaps
they could buy real estate on Mars.
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Question about Bonds
Posted by zwyss on 5th of Aug 2011 at 02:49 am
I hope someone can bring light into my brains darkness
I really don't understand why someone should buy long-term US-government bonds now. In a day like yesterday everything fell but TLT rose like a rocket and TBT fell like a stone. Why should someone buy a risky asset like TLT?
You have not only the currency risk (US$) but also a default risk (USA only have triple A because major rating agencies are American) and of course the risk of rising interest rates (which is low given the economical weakness but should imho be very high when you consider also the risk of default.... but I suppose that's not counting?)
I understand that when there are rough times like yesterday, an investor wants to sell risky assets like stocks and wants to hold cash. And the US$ is probably due for a bounce.
Please can someone tell me
1) Why should someone buy TLT (or long term US government bonds ) and feel save?
2) Who is buying? (I think the buyers must come from the US...because I don't think that the rest of the world is blaming the USA for its financial politics but is still buying their bonds (China) )
Thanks for answers
just happened
Posted by rreich on 5th of Aug 2011 at 03:46 am
to be awake after too much wine with dinner.
UST's are one of the most liquid investment assets in the world and hence are currently a safe haven in times of madness. The buyers of UST's are diverse, all over the world. Includes, govs, corps, private citizens, etc.
Buying TLT or TBT or other bond ETFs (there are many, check
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3225058&cmd=show&disp=p
) is not 'safe' as they will vary with interest rates however, can be used to make money in times of broader market risk aversion. You can be on the wrong or right side of the trade like any ETF.
Given the debt load of the US these statements could change with time.
back to bed.
Because its the biggest and
Posted by sobrien on 5th of Aug 2011 at 03:46 am
Because its the biggest and most liquid market and opne of few alternatives when you are trying to protect huge wealth be it soveriegn or personal
sobrien, why not just stay
Posted by zwyss on 5th of Aug 2011 at 05:31 am
sobrien, why not just stay in cash?
I am small enough to
Posted by sobrien on 5th of Aug 2011 at 05:43 am
I am small enough to just stay in cash and gold. If I had a trillion to invest there's not many places I can hise other than the bond market. Here's good article by Martin Armstrong on why bonds rally.....
http://www.martinarmstrong.org/files/Why%20Bonds%20Always%20Rally%2008-01-2011.pdf
nice article and exactly the
Posted by zwyss on 5th of Aug 2011 at 07:07 am
nice article and exactly the point I don't understand.
I have still the opinion that in the current environment everyone should avoid holding US-bonds, even if you have the "problem" to invest trillions. Maybe it's just too early and the big players have not yet realised that Us debt is not a good invest. And when everyone wants to sell we all can imagine what would happen to the interest rates.
the Fed owns most of
Posted by dylan398 on 5th of Aug 2011 at 08:48 am
the Fed owns most of the US bonds....one big Ponzi scheme
The super rich (and soveriegn
Posted by sobrien on 5th of Aug 2011 at 08:43 am
The super rich (and soveriegn funds) will have nowhere to hide soon. Their the ones who must be sh!tting bricks. It's one big game of poker coming up. That's why artwork and rare diamonds are going through the roof as well as gold. people are running out of options to store their wealth. Perhaps they could buy real estate on Mars.