- Feds target is ZERO (0 to 0.25%) as of yesterday.
- People are paying to own short-term T's.
- T auctions are way oversubscribed due to flee to safety.
Sounds like the perfect place for a contrarian like me. Got some at $31.50. After all, can PST possibly go down from here?
Oh did I forget to mention that there have been about $6T of spending and guarantees issued by our gov in the last few months.
I agree with reasoning, but just remember the market can remain irrational longer than you can remain solvent, so be careful. Personally I think its early and if it starts to take off you have plenty of time. Long-term tips are a better deal. I think this will be a great investment in six months after Obama breaks the bank. good luck
Right now you can get 5% from GNMA funds, compared to 1% or 2% on Treasuries. At some point, these rates should converge. Either treasury prices go down, GNMA prices go up, or some combination--this seems like an arbitrage situation. So what about buying both GNMAs and PST? At some point you have to win, no matter what happens to absolute interest rates, right? In the meantime, you're getting 5% on GNMAs plus some minimal amount on PST.
That's the problem with most - is that possible the Fed would ever be out of bullets?
That's like betting against the house in a casino.
But, of course, if you're simply trade the movement, it's a different story.
I'm waiting to get in. Just because rates are zero, doesn't mean they're going up soon. I'm waiting until the fed is out of bullets.
What else can they do? Plenty. They're totally unaccountable.
I agree with your reasoning and certainly short-term teasuries have hit bottom. I wonder, however, if it might take a little longer for the 7-10 years index, on which PST is based, to drift to its low. If so, PST may still not have bottomed out. If anyone has a feel for this, please provide feedback. I also have the feeling that the FED is not going to reverse policy anytime soon which means that PST might be dead money for sometime. Longer-term, however, I
agree that this has got to be a winner.
The ZIRP was copied from Japan's experience from 1999 to 2004. During the 5 years or so, with zero interest in Japan, the assets devalution continued until 2005.
And the 10-year rate in Japan stayed at the bottom from 1999 to 2004.
I guess the US is really in uncharted water now. Therefore, if there is any rigor in analysis, Japan's experience should be applied here.
Mid term rates, ie, 5-10 year's, will probably STAY at the bottom for longer than you'd expect to survive with your gamble, assuming they're bottomed here.
Dead money would be the best case for the foreseeable future.
I dont think anyone has a definitive answer as it is based on the Fed. Paulson wants to use the rest of the TARP funds that is why Bush is caving on the bailouts as this is leverage to use the rest before O gets in. I assume he is monetizing more bad debt. The million dollar question is how much bad debt is left to monetize? Once this runs out they have to inflate the money supply. The problem with inflation is once it starts hard to control. In ending it is based on the actions of politicians so throw out any kind of rational analysis.
Ya seems like not to many of us here. I just dont see how all this debt cant affect yields in the long run. I think hyperinflation is baked in the cake if you consider O wnats to add more debt. I think all the assets that could be monetized have been so turn on the printing presses.