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EScroogeJr (< 20)

I don't understand it.

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January 25, 2008 – Comments (5)

So Bernanke decides to cut rates to zero, and investors react by getting into bonds? I'm not talking about inflation-adjusted bonds, I mean the ordinary bonds that now pay you 3.43% or something of the sort? What kind of idiot wants to invest for 3.43% when inflation was 4.1% before the rate cuts and before the grain prices percolate through the economy? Is there some bond fund investing in 30-year treasury slime so that I could short it?

5 Comments – Post Your Own

#1) On January 25, 2008 at 10:07 AM, xthecritic (51.88) wrote:

Well - people are also investing in bonds that were issued prior to the rate cut.  Those bonds are more valuable with the rate cut since they have coupons worth 4.5% and higher.  While new paper is going to be issues at 3.4%.

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#2) On January 25, 2008 at 10:33 AM, EScroogeJr (< 20) wrote:

That's right, but why would anyone want 3.4%? That's a guaranteed 0.7% loss even if inflation does not rise further. You can't even hold it forever like BRKA without running a tax liability.

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#3) On January 25, 2008 at 10:41 AM, EPS100Momentum (72.39) wrote:

High growth stock TRA is where u should be:

sells: 45% buys: 55%

 

Total Shares of (TRA) Bought and Sold: 1,350,608

- 29 fund managers bought a total of 738,758 shares.

- 17 fund managers sold a total of 611,850 shares.

 

http://www.thebuylist.com/default.aspx?Stock=tra

 
http://moneycentral.msn.com/investor/research/wizards/SRWTarget.asp?Symbol=TRA

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#4) On January 25, 2008 at 11:43 AM, xthecritic (51.88) wrote:

It depends on your outlook for rates in the near term and the long term.  You are not buying a fixed 3.4% yield.  The yield will change based on what macroeconomic conditions do to the price of the bond.

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#5) On January 25, 2008 at 2:35 PM, bendlund (99.74) wrote:

Investors are anticipating that rates will be cut further, and are afraid of equities.

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