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Yes, there are a lot of good Lynch quotes. Here is another one that I like. He's referring to the early 1980s, when he put a lot of Magellan's portfolio into long Treasuries...
I couldn't imagine that interest rates could go much higher, or stay at these levels for long, without the economy collapsing and the worst nightmares of the backyard fishermen coming true. If that happened, I'd be out there casting in the surf with the rest of them, and Magellan's portfolio strategy would be the least of my worries. But if it didn't, I'd want to be fully invested in stocks and long-term bonds.
bond rates did reverse . it does not mean it happens in one year . it means that eventually a tipping point is hit and bond rates go back down because we start to slow down or the bond market smells a slow down coming because the data says it is ...
1994 was the only year in the last 30 years where the fed increased short term rates more than 1% in a year and bonds did not reverse direction in that year .
however by 1995 bond rates plunged as the data was not looking good ..the fed raised short term rates another 1.62% on top of 1994's increases , except now one year later bonds soared up 15% despite the increases in short term rates .
the left is how much the fed raised short term rates , the right is how the intermediate term bonds did that year.
Last edited by mathjak107; 06-28-2018 at 02:04 PM..
bond rates did reverse . it does not mean it happens in one year . it means that eventually a tipping point is hit and bond rates go back down because we start to slow down or the bond market smells a slow down coming because the data says it is ...
1994 was the only year in the last 30 years where the fed increased short term rates more than 1% in a year and bonds did not reverse direction in that year .
however by 1995 bond rates plunged as the data was not looking good ..the fed raised short term rates another 1.62% on top of 1994's increases , except now one year later bonds soared up 15% despite the increases in short term rates
There was nothing wrong with 1995. The economy was fine, and the stock market was more than fine. Yes, whenever the Fed is tightening there are always some folks who will scream that the sky is falling, but screaming does not make it true.
Bonds did reverse course and also had a great 1995, but it had nothing to do with the economy being choked. We had positive GDP growth for another six years after the tightening ended.
you are missing the point . it is no different than when markets flip after a downturn and to our eyes nothing has changed .
yet collectively the data and reports are showing hints that we miss but markets and rates run on fear greed and PERCEPTION and they collectively sometimes see what we don't .
why do you think bond rates plunged in 1995? we thought nothing was wrong from our limited perspective but remember markets run on perception and the fed ratcheting up short term rates had the bond markets taking a different look at things . bond rates plunged from 7.80% the beginning of 1995 to 5.71 by the end of 1995.
by the end of the year rates on bonds plunged because of the bond markets smelling something they didn't like. it smelled the PERCEPTION of increasing short term rates choking growth .
by 1996 things looked better and rates on bonds rose again going from a low of 5.65 to 6 .89 in 1997 before starting their decent again.
even now while the fed raises short term rates the gap between two- and 10-year Treasury yields recently shrunk to its narrowest since 2007, a sign of weakening sentiment about the prospects for long-term growth.
interesting enough was projected gdp growth was reduced the other day . this is something i have been saying , the projected gdp numbers were to high . i shared robert kesslers view that if you subtract out the fuel for growth which is the low savings rate and the already existing credit card debt consuming our purchasing dollars you see a gdp figure of about 1.50% not 3 to 4% . so now they lowered it and i think it is still to high .
if trillions in qe's money made this the best we can get in gdp growth than bond rates are still to high .
Last edited by mathjak107; 06-29-2018 at 02:48 AM..
why do you think bond rates plunged in 1995? we thought nothing was wrong from our limited perspective but remember markets run on perception and the fed ratcheting up short term rates had the bond markets taking a different look at things . bond rates plunged from 7.80% the beginning of 1995 to 5.71 by the end of 1995.
by the end of the year rates on bonds plunged because of the bond markets smelling something they didn't like. it smelled the PERCEPTION of increasing short term rates choking growth .
That's your interpretation, which I disagree with. If investors really thought growth was being choked, the stock market would have reacted negatively. It did not, and in fact 1995 was nothing but up, up, up... over 37% total return. It was the best year for the S&P 500 in my entire life, even through today. You have to go back to 1958 to find a better year for stocks.
At any rate, we are way off topic. You can feel free to have the last word if you like
bond investors and stock investors do not see eye to eye all the time . we saw that when we had the inverted yield curve just before 2008 . the fed was raising short term rates , stocks were hitting new highs but the bond market smelled trouble on the horizon.
they went against papa fed when it did not like what it saw and smelled trouble brewing and they bid bond rates lower while the fed raised rates and the markets were up hitting new highs . it ended up with short term rates higher than long term rates . .
the rest is history and the bond market had it correct . The yield curve inverted in August 2006, a bit more than a year before the recession started in December 2007
Last edited by mathjak107; 06-29-2018 at 12:32 PM..
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