I see a couple things relevant to yield creep in TBond
1) what kind of profit potential is there when yield was 5.0%, or 4.8% ???
I doubt much at all unless you think longbond can reach 4.0% (NOT!!!)
so much money has gone into stocks, like last week in a big way
whether that money gets burned is another question altogether
2) a nasty dollar effect may be unfolding as we watch, read, sleep
the USdollar has held up almost too well in the last few months
I believe a Euro rally may happen soon, at the dollar's expense
the US is seen likely to lead the world into a recession, in foreigners' eyes
if so, and anticipated, then foreign money will flee
and that money is typically held in the form of US Treasury Bonds
forget Japan, an effing basket case, replete with cultural obstacles to fixing torn shoelaces
a worldwide anti-Greenspan wave of lost confidence could be happening
3) some minor evidence of inflation is popping up
once again gasoline is rising, almost 10% in last couple weeks
but commodities are generally tame now
it might not last, but it could be temporarily real
gold is up slightly, and gold stocks are up
faves are Homestake Mining (HM) and Agnico-Eagle (AEM)
4) with internet young'uns dead/buried, IPO money scarce, and VC money gone...
companies are soon likely to anticipate lack of competition and raise product prices
it could have already begun, on the bond investment side
5) any company experiencing a slowdown in orders, shipments, etc...
might feel some strain with product pricing
esp if they are reluctant to layoff workers on furlough
in 1998 so many laid off workers, only to hire back with premiums
as result, labor cost per unit might actually rise perversely
and companies might want to raise prices to close the profit margin gaps
6) could money be exiting bonds to pay taxes ???
people could be reluctant to sell depressed stocks to finance the tax bill
why sell stocks when you can sell your nicely appreciated bonds
7) money could be exiting bonds to finance trips to Vegas
this has been a tough year for so many
and I know of a great many people who could benefit from a good toss with a hooker
or at least a cheap stirring lapdance at the Cheetah
maybe it could be your nextdoor neighbor
but I think the biggest reason is #1 -- bond potential is seen as slim
never underestimate the damage from a declining USdollar #2
just my take, Jim |
