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Alliancebernstein Income Fund Message Board

  • anxiousinvestor2 anxiousinvestor2 Mar 22, 2004 10:36 AM Flag

    Airbus

    Hoping your secario of doom and gloom does not come to pass- but in any case where do you see long rates heading?

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    • You're asking the most important question.

      In the "Depression" rates were hiked. In the mess we're in, the long bond will fetch at least 8%, IN A DEFLATIONARY ECONOMY! a DEPRESSION, iow. Again, it's different this time around.

      Take 1% in T-Bills, at least you know that the principal is intact. Never chase yields...eom).

      • 2 Replies to airbus69
      • Let's get some interest rate facts re: the last Depression out there. In 1929, the Treasury Department(then in charge of setting short-term rates prior to the creation of an independent Federal Reserve) raised short-term rates above 5% in an attempt to prick the stock market bubble. They succeeded all too well as we know, just as the Fed "succeeded" with the same strategy in '99-'00.

        However, your statement is misleading in the extreme in terms of both long bond history and long bond forecasting. ^TNX peaked at a little over 4% in 1932 and DECLINED THROUGHOUT the Depression to a final level below 2%(a fact those who say long rates are at a boundary and cannot possibly go lower need to keep in mind). THE FACTS ARE THAT DEPRESSIONS ARE BULLISH FOR BOTH COMMODITIES AND THE INTEREST RATE ENVIRONMENT. I will point out that I am NOT forecasting a depression because I believe the Fed learned the lessons of 1929 and 1999 very well. But I find it ironic that your notion that short rates will rise and lead to a depression is a correct if/then statement, but your advice on how to handle that sequence of events is so wrong it borders on Yahoo! board malpractice if such a thing is possible. Long bond at 8% in a Depression? If the Fed raises short-term rates the yield curve will invert so fast your head will spin.

      • Airbus,

        While I am general agreement across the board on what you say about the economy and Bush, I find it curious that your sole investment seems to be in T-Bills offered by the same government you appear to have such disdain for.

        Comments?

 
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