Nope, I Don't Fail to Understand the Argument. Truly.
I really do understand the argument. The problem is that the argument proceeds from a flawed analysis of the current state of the US treasury bond market. The analysis of that market is conducted in such a way to perfect and accept the foreign holdings of US treasuries as being permanantly removed from the supply. Since the US treasury Market currently trades, in fact, as though foreign holdings were permanently removed from supply, one can hardly blame people for such analysis. But that doesn't make the analysis satisfying. While I have granted that Japan's holding probably is indeed permanently removed from supply--I used the word "imprisoned"--Japan's position does not support the flawed analysis. The holdings of myriad other central banks, foreign funds, etc are not imprisoned.
My point is as follows: Heinz thinks he is describing a bond market that is classically set up for further gains, based on sentiment. However, what he is unwittingly describing is a bond market that is seriously distorted. The negative sentiment towards the bond market is rational--however, the sentiment has been produced by the distortion, so as Heinz correctly points out, that sentiment is doomed to be ever frustrated (for now). But he never grants the distortion. That's the blind spot.
What is comical is that you fail to understand the argument.
My arguments have been quite different, actually, and I think your post really takes on the collective negative sentiment towards the treasury market. My position is different. I am not a classic Bond Bear right here, and have posted about that several times. My two major points however are what I stated above as Heinz's complacent argument, and, the fact that Americans have zero savings in the aggregate to support the US treasury market in the future during a housing and stock market crash. It won't matter if Bob and Judy in Salt Lake get out of the stock market in time and can afford to move money into treasuries. Steve and Lisa in Atlanta will have to use proceeds from Treasury Bond Sales and Stock sales just to surive their lost income in the downturn. (Forgive the fallacy of composition here but my point about the aggregate savings of Americans is valid.) Again, we get to Heinz's other blind spot--and your's I guess, because you have asserted this as well--which is the the notion there will be domestic capital to support the US treasury bond market in a down turn. There is simply no evidence for it. (Though I have posted several times that I think we see a strong treasury market intially at the Recession's outset.) But my point is about after that first reaction. I just find Heinz' notion astonishing, that the ten year JGB bull market, as an example, should be no different for us.
Do Americans in the aggregate have savings, like the Japanese did (and still do)?
If the Americans do, please correct me.
BTW, your post was awfully shrill and using the letter "F" does not change the impact of the word. Is your tone really justified? I think not.
Best,
LP |
