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Old 09-26-2012, 04:01 PM
 
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what they dont realize is the dollar is a commodity like any other commodity. cash is dollars.

buying all cash assets like cd's,the bank money markets at the wrong part of the economic cycle is no different than buying any other asset class at the wrong time.

the asset class to have bought as rates fell were longer term bonds. folks chose not to so they were on the wrong side of the cycle.

think about all those crying now how the low rates are a fed plot to punish savers

well think about it ,the flip side is if rates rose what about all the millions of retirees in bonds , target funds ,bond funds and anything else interest rate sensitive. you can bet as retirees watch the price on their supposed safe target date funds fall they will cry the fed raising rates is a plot to take their money.
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Old 09-26-2012, 06:55 PM
 
Location: Cody, WY
10,420 posts, read 14,550,484 times
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Quote:
Originally Posted by mathjak107 View Post
what they dont realize is the dollar is a commodity like any other commodity. cash is dollars.

buying all cash assets like cd's,the bank money markets at the wrong part of the economic cycle is no different than buying any other asset class at the wrong time.

the asset class to have bought as rates fell were longer term bonds. folks chose not to so they were on the wrong side of the cycle.

think about all those crying now how the low rates are a fed plot to punish savers

well think about it ,the flip side is if rates rose what about all the millions of retirees in bonds , target funds ,bond funds and anything else interest rate sensitive. you can bet as retirees watch the price on their supposed safe target date funds fall they will cry the fed raising rates is a plot to take their money.

This is really a conspiracy engineered by the FRB and the IMF to bankrupt the elderly. Once they're bankrupt they won't be able to pay for drugs so they'll die earlier leavingf certain favored entities the ability to buy their assets at low prices.

They've already done this in Argentina with the whole population so they know how to do it.

Remember that this is a conspiracy thread; we need to get back on topic. We mustn't let government agents assigned to c-d to distract us.
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Old 09-26-2012, 07:13 PM
 
Location: Chicago
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It is certainly a planned effort by all central banks to shift wealth from the middle class and savers to the wealthiest. There is simply no way that they do not understand this since it has been made crystal clear in a number of editorials and letters to the editor which outline the exact effect of what is happening. There were several this week alone in the Wall Street Journal and the Chicago Tribune.

This is all underscored by today's announcement that household income has fallen over 8% over the last four years. Add this to the overall inflation which, without substitution, is close to 6%, you have a tremendous loss to each household over each of the last four years.

The effect on retirees is even more vicious since, without interest on their savings, their principle which they have to live on for the rest of their lives is rapidly evaporating. The Fed has replied to my letters of concern by simply saying they don't care. Similar answers from my Senators and Congressperson. They don't care but retirees are no longer a viable political force.

It is horrifying what the bankers are doing to people around the world as riots are erupting across the Middle East and Europe. It will intensify since the only way to get out of this mess is for the bankers and corporations who stole the money in the first place, to return the money (via very heavy taxes on their wealth). Of course, this will not happen. Instead the central banks are forcing more austerity on retirees and households while they pile on the debt which demand repayment. Sooner or later the sovereigns will be forced to default on those trillions of dollars in debt, causing even greater worldwide hardship.

BTW, in this regard, Obama and Romney are exactly alike the central banks. They don't care one bit what happens to retirees. Not one iota. The purchasing power of social security will be inflated away, medical costs will continue to escalate, and retirees will be forced to live with children or together in order to make ends meet.
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Old 09-27-2012, 02:43 AM
 
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like i said ,wait until you see the devastation that retirees will feel when rates rise and their bond funds,income funds and target date funds all drop 8-10% for every 1% rise in rates.

since 2009 alone 1 trillion flowed out of money markets and banks into bonds and another trillion left equities for bonds.

now those on the other side of the fence having their money reduced by rising rates will cry foul.

Last edited by mathjak107; 09-27-2012 at 03:48 AM..
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Old 09-27-2012, 10:23 AM
 
Location: Chicago
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It is absolutely ridiculous beyond imagination to believe that an economy can be built on top of reckless money printing. All this money printing is doing is shifting wealth to the top 1% (this is substantiated by the actual facts). The shift is slow and relentless and has and will continue to impoverish people.
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Old 09-27-2012, 10:29 AM
 
Location: WA
5,641 posts, read 24,892,362 times
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Quote:
Originally Posted by mathjak107 View Post
like i said ,wait until you see the devastation that retirees will feel when rates rise and their bond funds,income funds and target date funds all drop 8-10% for every 1% rise in rates.
...
Yes I was worried about that and during a re-balance in the recent past avoided bonds (a mistake in hindsight) as it seemed rates could not reasonably be expected to go lower.

Now that the government has become so deep in debt (an extra five trillion+ in the last three years) any increase in interest rates will stagger the shaky plan the US currently uses for operating. Won't the FED make even larger moves devaluing the currency to keep rates low? If we even went back to 'normal' rates of the recent past the government would only have funds to pay retirement, health care, and interest. There will be no room for any other expenses including the military.

The future is very uncertain, more so than just interest rates.
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Old 09-27-2012, 10:41 AM
 
Location: Chicago
5,559 posts, read 4,609,156 times
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Originally Posted by cdelena View Post
Yes I was worried about that and during a re-balance in the recent past avoided bonds (a mistake in hindsight) as it seemed rates could not reasonably be expected to go lower.

Now that the government has become so deep in debt (an extra five trillion+ in the last three years) any increase in interest rates will stagger the shaky plan the US currently uses for operating. Won't the FED make even larger moves devaluing the currency to keep rates low? If we even went back to 'normal' rates of the recent past the government would only have funds to pay retirement, health care, and interest. There will be no room for any other expenses including the military.

The future is very uncertain, more so than just interest rates.
There is no free lunch. Wealth cannot be manufactured at the printing press.

The Fed is financing the Federal deficit by purchasing 100% of the U.S. debt. How is this trick accomplished? Where is the free lunch?

What is happening is the income is going down, prices are going up, interest on savings is literally being taxed at 100%. The result is a gradually decaying economy and lifestyle (it is happening in slow motion, but readily observable if one observes the economic statistics), and persistent unemployment. The only reason it is not as bad as in Spain and Europe is because the inevitable is being delayed somewhat (cannot be done for too much longer) by pilfering savings (savers are paying for all this by having their interest taxed at 100%). Retirees are getting poorer at an extremely alarming rate. There have been numerous warnings by many eminent economists, but Bernanke is just counting the days to when he is gone (just like Bush) and will live the inevitable mess for someone else to clean up.

We are headed exactly in exactly the same place as Greece, Italy, Spain, Portugal, Ireland, etc., it is just being delayed a few years. The laws of economics (concentration of wealth = no growth) cannot be undone by a printing press. Just remember all this when you bemoan your situation in a few years. And BTW, neither Obama and Romney have any policies that will stop this inexorable slide.
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Old 09-27-2012, 11:26 AM
 
Location: Alaska
5,356 posts, read 18,508,614 times
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Quote:
Originally Posted by mathjak107 View Post
like i said ,wait until you see the devastation that retirees will feel when rates rise and their bond funds,income funds and target date funds all drop 8-10% for every 1% rise in rates.
As a general rule, for a 1% rise in interest rates, the value of fixed income investments will drop by its duration. For instance, the duration of Vanguard's Total Bond Index Fund is less than 6, so it would see something less than a 6% drop in value. Still devastating. The real worrisome part is that when rates rise, it will be something greater than 1% (maybe 3-5% over a year at worst).

One strategy is to reduce your duration risk. That is, move from long-term bond funds to short-term bond funds. You'd move from a duration of 6 to a duration near 1, thus limiting your loss and being shorter-term, it will recover quicker. This does come with a current hit to income. There is also timing risk. Do it too soon and you'll have lower income for more years. Do it too late, and your long-term bond fund loses value.
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Old 09-27-2012, 11:38 AM
 
Location: Chicago
5,559 posts, read 4,609,156 times
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Today's Wall Street Journal features another op-ed piece detailing how "East Money Is Punishing the Middle Class". Basically all family income growth during the last 40 years has been erased in the last four years by the Federal Reserve (7% real decline). This is how the Feds are "paying" for the national debt and all of the losses incurred by the disgusting loans made by the banks. The middle class and retirees are being devastated. Also, good comments on the article.

Wall Street Op-Ed
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Old 09-27-2012, 12:03 PM
 
106,121 posts, read 108,094,712 times
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Originally Posted by akck View Post
As a general rule, for a 1% rise in interest rates, the value of fixed income investments will drop by its duration. For instance, the duration of Vanguard's Total Bond Index Fund is less than 6, so it would see something less than a 6% drop in value. Still devastating. The real worrisome part is that when rates rise, it will be something greater than 1% (maybe 3-5% over a year at worst).

One strategy is to reduce your duration risk. That is, move from long-term bond funds to short-term bond funds. You'd move from a duration of 6 to a duration near 1, thus limiting your loss and being shorter-term, it will recover quicker. This does come with a current hit to income. There is also timing risk. Do it too soon and you'll have lower income for more years. Do it too late, and your long-term bond fund loses value.
The duration figure only hold 100% true for treasuries.

anytime you have corporate bonds the outlook for credit risk is in the equation too.

you really dont know exactly how much of a drop you will see from the perception of credit risk. for intermediate bonds around 8% is average .


high yield funds dont even bother carrying a duration figure as they are more dependent on perception of credit rating risk than interest rate risk.
dont forget besides interest rate risk bonds trade on perception of credit risk and that alters things .
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