"The rates are likely to go up over time but I do not see the reasons for it to deviate from what is already suggested by yield curves."
>>> Nor do I. The current yield curve, and the futures, being our best insight into expectations.
>>> But... the curve, of course, moves. So our expectations are changed on a daily basis. And, I believe there are some things that are perhaps not given the weight I believe they should have... because they lie further out toward the horizon... and the near and mid-term are given greater weights.
>>> Things such as the massive dollar liquidity that has been unleashed ever since Y2K... and how little of it has been mopped up yet. Things such as the potential for China to eventually move - first to wider brackets for the Yuan, then to free float in their currency.
>>> IMO, the main thing 'propping up' the dollar of late, has been the absence of a suitable alternate store of value. (Growth rates in the EU being so anemic... and Japan so demographically bolloxed-up.) So the possible emergence in Asia of a new 'Tier 1' currency --- given that some 50% or so of our Treasury debt at recent auctions has been landing in foreign hands --- poses some problems of unusually large magnitude... that perhaps have not been fully 'digested' in the markets... or else, are not yet 'ripe' for impacting our ability to finance at 'reasonable' rates.
>>> Some economists that I respect, have argued that when our federal deficits move to say, 5.5% or 6% of GNP, 'crowding-out' effects are likely to manifest. (Ceuterus paribus, of course, assumes that business demand doesn't remain flat on it's back). We look to be moving above the 5% figure before next year is over.
re: but it is a more complete measure than GDP
"maybe you should look up what the word value means?"
>>> Yeah, I noticed that... (but I just 'assumed' you didn't know what you were talking about <G>).
>>> So, what were you talking about?
"Anyhow, I'll give one thing that you have at least a point of argument that is not completely absurd. What you are saying is very unlikely even though that some analysts assume that the spike is very likely. I have seen companies considering scenarios with 1000%+ short term rates - so even you can not beat that <gggggggggg>"
>>> Hey... I didn't say the Four Horsemen of the Apocalypse were riding in (we ARE pretty good at reacting to events, and adjusting course....)
>>> But, consider this: Massive liquidity injected in near-past (money supply up some 40% over last few years), rates near historic lows - but Fed having signaled that the rate cycle has bottomed, long bonds in major bear over past year & long rates rising, commodities rising, especially base and precious metals... but appearance of systemic inflation masked (or held at bay) by the 'export' of deflation from China, south and SE Asia, in manufactures. Trade imbalance with Asia results in massive accumulation of dollars in Asian capitals (currently, 'reinjected' at Treasury auctions) which then suffer from sub-par real returns.
>>> Now add in the Presidential cycle, with 2005 as the 'year 1', consumers over-extended, equities with P/B and P/Es in 'bubble territory', demographic challenges & 'return to mean' for Real Estate, and the Federal government moving into potential 'crowding-out' territory.
>>> Now add in war and a bitter divide in politics, and the possibility for exogenous shocks to the system.
>>> So, how would you manage these risks? <GGG> |
