Topics of Interest
Australian Financial Service Licence 230050
Jeremy Grantham 27/2/2012 "Believe in history. History repeats. All bubbles break. Be patient and focus on the long-term. Wait for the good cards."
What works for investors. https://www.puzzlefinancialadvice.com/what-works-for-investors
There are times to sell. Now is one of those times.
February 25, 2020
"Tidal wave of central bank liquidity" ... has "bid up asset prices to unprecedented levels." Chris Joye, Coolibah Capital
February 10, 2020
Most likely 12-year return now worse than 1929 - Hussman
February 4, 2020
Causes of the GFC - now more extreme
November 5, 2019
IMF warns Corporate Debt is $27Trillion timebomb
October 21, 2019
Not a great time to own Australian banks
October 19, 2019
Emerging markets are comparative safe haven - Western economies are a basket case - Don Amstrad, Aberdeen
October 18, 2019
Too much private debt caused the last 43 crises.
October 17, 2019
"These are dangerous times — far more so than many now recognise" - Martin Wolf
October 18, 2018
Four late cycle signs - MFS
September 25, 2018
I'm busy working on my blog posts. Watch this space!
March 7, 2018
There are a range of sources of rising bond yields:
Gradual "normalisation" after bond yields were suppressed by quantitative easing (and other central bank manipulation) and after a 5000 year low in interest rates. https://www.businessinsider.com.au/chart-5000-years-of-interest-rates-history-2016-6?r=US&IR=T
After a very long bull market for bonds in USA and Australia, commencing in 1982, US and Australian bond markets may be commencing a bear market. https://www.puzzlefinancialadvice.com/single-post/2018/01/14/Implications-of-huge-bond-bubble-crash---and-has-it-started
After exporting deflation for the last 20 year, China is now starting to export inflation.
Strong economic growth and very low unemployment is starting to drive up wages in USA. This may well be exacerbated through the fiscal stimulus and deficit spending of Donald Trump's company tax cuts.
Historically, bond yields tend to be CPI + maybe 2%.
Supply and demand.
Increased supply of US government bonds. Donald Trump's corporate tax cuts, will lead to significantly higher fiscal deficits, leading to higher amounts of US Bonds the USA will have to sell each year. This additional supply of bonds for sale will be exacerbated by the US Fed which is starting to reduce its balance sheet. https://www.puzzlefinancialadvice.com/single-post/2018/02/27/Charlie-Aitken-joins-chorus-warning-of-expensive-defensives
Reduced demand for US government bonds. The surplus countries that have been funding the US fiscal and current account deficits, may well be in the process of reducing their surpluses because of economic activity in their own countries. https://www.platinum.com.au/Insights-Tools/The-Journal/Macro-Overview
In response to Donald Trump's tariffs and trade war as discussed by Warwick McKibbin. https://www.puzzlefinancialadvice.com/single-post/2018/03/06/USAs-Achilles-heel-in-trade-war
For a view on how far bond yields will rise over the next 12 months, let us turn to highly regarded economist Ken Rogoff ( https://en.wikipedia.org/wiki/Kenneth_Rogoff ) from the AFR Business Summit 6/3/2018:
So Ken Rogoff sees US 10 year bond yields up 1% over the next 12 months 3.9% from the current 2.9%..... which is also up from 1.4% in July 2016. This means that:
While a US bond of 10 years duration last lost 13% of capital value since July 2016,
this same bond would lose another 8% over the coming year.
Keep in mind that all US assets are priced off US government bonds. So this bond yield rise has significant negative ramifications for all US asset prices.
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