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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

      NOW THE REALITY IS THAT THE ABOVE STILL HOLDS TRUE EXCEPT THE MANIPULATIVE VOTE BUYING government is controlling these rates

      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

      I KNOW YOU KNOW THIS

      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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