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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (52660)	2/4/2006 7:35:07 PM
From: Lee Lichterman III	Read Replies (2) \| Respond to of 110194

Re: >>I think 30 yr treasuries are a buy<< I have been wondering that myself but with a new Fed chair, it is tough to know for sure. I figure if we head into recession as expected with an inverted yield curve and obvious debt problems etc etc, then yes, rates should drop, long bonds should rise and 30 years would be a great play..... however If the world views that the USA is going to allow the dollar to devalue further with a rapid rate drop and continuing deficits, then global buyers may demand a higher yield regardless if we are in recession or not. I know you are in the deflation camp hard core but I just don't think that it is a slam dunk decision. There are too many variables and policy decisions that can skew the future. I still think that in the future, we could see stagflation, inflation or deflation and worse yet, we could have all three during different periods of time. Just as right now, one could argue that we have both inflation in some sectors with concurrent deflation in others. Imported goods are obviously deflationary as technology enables cheaper goods as does ramped up production from China and India in services. Note computer prices, big screen TVs, small appliances etc. They are all deflationary. On the other hand, medical costs, insurance, many commodities like oil, gas, industrial metals like Zinc, Copper, are all higher. It now takes two wage earners to just survive and real estate prices are obviously on fire. Many like TIPs and I-bonds but with the constant jiggering with the CPI formulas, I don't even have faith in those anymore. I personally have been staying in the short end of the curve until I see what Bernanke is going to do as the end of year approaches and the economy shows it is slowing. If bonds start to rally, I will roll up but if the dollar drops first and foreigners start bailing, I may just follow the money to Oz, Kiwis or Europe where one can still get good yield and in a more stable currency. Good Luck, Lee