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Strategies & Market Trends : MDA - Market Direction Analysis

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To: Terry Whitman who wrote (37736)	1/21/2000 3:13:00 PM
From: Jacob Snyder	Read Replies (2) of 99985

interesting post, Terry, re: yield curve: only the 10Y to 30Y is inverted. This can happen from technical factors. I wouldn't pay too much attention to it unless the 2Y or 5Y inverts with respect to the 30Y. This might happen if the fed raises in Feb., and has a tightening bias (er, I mean, "the balance of risks is toward inflation") Interesting, that the yield on 30Y Treasuries is 6.72%, and the yield on inflation-indexed 30Y Treasuries is 4.36%. That means the market thinks inflation will average 2.36% (the difference between those two numbers) over the next 30 years. 30 years is a long time, and lots of things can happen. Expecting inflation to stay near its historic lows for that entire time period is not a good bet. Even a few years of 4-6% inflation would make the inflation-proofed treasuries a much better investment. The long-term, inflation-adjusted return, for the best-performing asset class (stocks) is only about 7%. That's only 2 2/3% above the totally riskless inflation-indexed 30Y Treasuries. At some point (maybe after I double my portfolio another couple of times, VVBG), I may simply dump everything into those. It's idiot-proof.

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