funny final line by Daily Reckoning on Japan buying USTBonds
Can bond prices continue to rise? We note that long bond
yields of 2.5% were common in the '50s. And while nominal
yields are at record lows, real yields still have room to
fall. As deflationary forces knock down prices, the
difference between the nominal yield and the real yield
widens. Even at a zero percent nominal yield, if inflation
were running at minus 3%, bond holders would still realize
a positive return of 3%. Tax-free.
Richard Bernstein of Merrill Lynch points out that,
historically, people have kept about as much of their
investment money in bonds as in stocks. Now, they are
overweighted towards stocks, with two thirds of their money
in them. By this measure, too, bonds have room to go up.
So who knows? The Japanese are buying. Usually, whether it
is golf courses, great paintings, landmark real estate or
stocks, they buy at the top...but even the Japanese are not
reliably moronic.
We'll have to wait and see...
/ jim |
