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iShares 20+ Year Treasury Bond Message Board

  • merenkov merenkov Aug 21, 2013 11:21 AM Flag

    Let's talk inflation

    For the past 140 years, the yield on the 30-year bond has averaged 4.1%, while inflation has averaged 2.1%. Whether you agree with the official CPI calculation or not, this has been a fairly consistent historical relationship.

    Inflation y/y has averaged only 1.60% for the last six months, but has been trending upwards lately (1.36% in May, 1.75% in June, and 1.96% in July). With no pricing power (see Wal-Mart and Macy’s earnings calls) and no wage pressure (part-time job anyone?), it’s hard to imagine inflation being in a sustainable uptrend. On the other hand, MIT’s Billion Prices Project has been showing inflation running at 2.6% the past few months, an unusual divergence from the official rate. So what is your best guess for inflation going forward, and why?

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    • Thought it was a good time to revisit this topic. Since the original post, we’ve seen the CPI slow to a crawl: 1.52% in August; 1.18% in September; 0.96% in October. Indeed, the average YoY inflation rate for the past six months is now 1.46%. I just took a look at MIT’s billion prices project chart, and can now see that the divergence we saw in the summer was temporary, as it has crashed to below 2%. This is negative for the economy and positive for bonds. We are in a Japan-style lost decade (or two).

    • Federal Reserve has reporting methods to bury real inflation.
      Look at the cost of one gallon of gasoline for a gauge of inflation.

      Sentiment: Sell

    • Lets say it was a free market

      banks were competitive and no allegiance to the gov

      So they are generally charging 12% for home loans but only have a few takers

      so it,the rate, trends down as it gets lower people start to take out loans and the rates after a while inch upwards and rinse and repeat

      now most have bought and rates come down way low ~~3% people from the lower class jump on it and the rates creep higher , rinse and repeat


      all that false money slogging around and when the rate creeps up , instead of the market dictating , the gov does

      inflation kept at bay by false means

      like any type of oppression
      the longer and deeper its held down the more it will explode upwards


      but I just wanted to have another chance to give the finger to the leftists

      inflation to 19% within 5 years and if not ,,, full blown depression

      sign the old song :

      no wheres to run baby no wheres to hide

      looking for nannys apron strings

    • Sorry my friend but inflation is a symptom, not the illness. The most critical determinant of long term interest rates will be how long the Federal Reserve uses Monetary Policy as a substitute for a Congressional Fiscal Policy. No matter how much money we print to finance the here and now it isn't inflationary if it burdens our children with insurmountable debt.

    • Really? No opinions on inflation? Over the longer term, this is the most critical determinant of long-term interest rates. The taper talk is just noise, creating short-term volatility and confusion.

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