So question is how to profit (other than selling bond funds)?
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Well if he’s correct and inflation goes on the rise significantly, I’d think that real estate would not be a bad place to be. Lock in low 30-yr rate now and use the fact that RE is usually a decent inflation-hedge to profit from property appreciation.
I love the last line of this article: https://www.marketwatch.com/amp/story/guid/66F5501A-913E-11EA-9208-AF2E6FA5B5BC about Mr Siegel.
He “garnered acclaim after he forecast that the Dow would reach 20,000 at the end of 2015. The index ended that year at 17,425.“. Does that mean he is famous because he was so wrong?
People have been calling end of bond bull market since Rates went low(2009/2010). Yet here we are. Just look at Japan.
I feel that the decision not go for depression style cleanup has meant a long drawn period of slow cleanup. The later is bad for savers but good for people with lots of debt. Unintended consequence is that Corporates are highly leveraged now. So that has to be cleaned up at some point.
A question for the uninformed, or merely a thought experiment. We kick the can for so long, eventually it catches up to individuals and you eventually have a reconning of pain during a period you get your financials in order and pay it back - or you dont and lose your house and/or go bankrupt.
How does this work for governments who can continue to print and borrow almost indefinately? Can they stay indebted forever and continue to devalue money until the debt is nil? Obviously we’ve heard of countries that turn for the worse. The situation becomes bad when you have to bring a fist full of cash or a wheelbarrow of it to buy a loaf of bread so to speak.
It’s the security of the taxpayers and the economic output that need to be able to sustain the debt burden and so far in this great country taxes have been very low considering. Maybe after this last few months we should expect a raise in taxes once the economy eventually becomes stabilized. It’s not the politically popular thing to do but it should be the responsible one. But the real question is which politician will ever do the sensible thing if it means shooting themselves in the foot?
We’ve yet to find out.
I don’t think we’ve had a situation to test it.
I doubt any country could borrow and print forever. At some point the debt becomes too high to allow the nation to support itself and keep borrowing. So it all just collapses… eventually.
The USA is in a unique position because we’re the richest nation, have the strongest economy and the US dollar is the world reserve standard. That last one is very significant advantage other countries don’t get.
We’ve been borrowing and spending and printing for about 80 years and we started out with a debt level after WWII that was worse than it is now. So who knows how long we can go… But eventually it may likely collapse. Might not be a sudden collapse like Greece but may be more like a decades long dwindle like the fading of the British Empire in the 19-20th centuries.
We’ll see a long overdue tax hike on the rich once the Democrats are back in charge. Bet on it.
Oh, another point in the LONG run you see inflation water down the debt level.
That giant load of crushing debt we had after WWII was just $269 billion and equated to ~119% of GDP at the time. We never paid it off.
While he may be right the graveyard is filled with bodies that bet that treasury yields would go up. The market can stay irrational longer than you can stay solvent.
I personally think we are reaching the end of the road for the current US dollar based fiat currency system. We are abusing our power as the issuer of the world’s reserve currency. We flood the world with dollars and treasuries in order to live beyond our means which allows us to consume things that we do not produce.
Other countries have to live below their means by exporting goods and loaning money to the USA so that we can live beyond our means. The system is showing too many signs of not functioning properly such as negative interest rates, multitrillion dollar deficits, and huge trade imbalances. In my mind the only question is when and what will replace it.
I think the prudent approach could be a basket a currencies so that not one economy can be nearly unaccountable and all others dependent on it.
My bet is on oil going that route first by pegging the price of crude oil to an index mix of currencies of the highest GDP countries such as Pound-Euro-USD-Yen-Yuan.
When I have no idea though. It’d definitely shake the system up and not in our favor I think.
How about gold? I’m really surprised given all the printing that’s going on that hasn’t run up already
I don’t think the world is going to make the mistake of replacing one fiat currency with another. I think it would have to be gold or silver but not bimetalism.