http://bloomberg.com/apps/news?pid=20601087&sid=atoWMChc12ww&pos=3
I don’t understand why there’s such a demand for bonds that pay interest in dollars when the dollar is being devalued as we speak. Things like this truly boggle my mind.
“Patriotism”, “being a real American”, “supporting your country”, etc.
Would it be fair to paraphrase your [lack of] understanding as:
“I do not understand why, in a period of great economic uncertainty , many persons have apparently chosen to hold more cash , and / or to hold more fully liquid cash substitutes such as US Treasury securities, than they should[ in my opinion]” ?
Well, when I buy bonds, I look for a return that can at least match inflation. In my mind, there’s no reason to be buying bonds that obviously aren’t going to keep pace with inflation and are denominated in a currency that’s being devalued by the central bank through “quantitative easing.” What I’m saying is that these people are exchanging purchasing power for the appearance of security. The problem is that the US is already so deep in debt that, in all likelihood, the interest on these bonds will either be paid through selling more debt or monetizing. Either way, the returns are incredibly subpar. I’ve been buying gold for the past 6 months and I’ve been able to…increase the nominal value of my portfolio, but more importantly, I actually hold something that has intrinsic value. So I haven’t lost too much purchasing power even while the Fed is inflating the currency. These bondholders are fools, imo.
I totally agree with bloomj31
For capital gains.
“These bondholders are fools, imo.”
What you personally think of bond holders or others whose view of the economic future differs from your own is irrelevant, as far as I can see, as is their opinion of your strategy- surely?
Don’t you need all of those contrary opinions [those “fools”] to bet against, as much as they need you?
Bottom line: if you are so sure that your economic forecast is right and theirs are wrong , why not simply put “your money where your mouth is”?
Time will tell if you were right :-), or wrong :- (, or they were.
Good luck with your speculation(s)
Technically, I’d make more money if everyone else bought what I was buying and pushed the value of my assets higher.
But you’re right, to be able to buy gold (and other commodities, foreign bonds, currencies and stocks), someone had to sell me theirs. And likewise, for me to sell eventually, someone has to buy.
I was just commenting on how…illogical I thought it was for people to be buying government debt right now. But obviously the choice is theirs to make, not mine.
You’re right though, all I can do is play the game based on my personal forecasts and see what happens. Hopefully, I’m right.
I understand, though, that much of what’s being said right now by the American political left about the expansion of the US government and its budget is contingent on the ability of the treasury to be able to continue selling all this debt. So…if people were suddenly unwilling to buy anymore of it, Geithner would probably have a much harder time selling the idea of raising the debt ceiling to Congress which would, in turn, likely limit Obama’s ability to take on ever increasing fiscal responsibilities and perhaps this healthcare/insurance and cap and trade nonsense could be sidestepped and delayed until the 2010 elections. It seems that there are a lot of Democratic incumbents who are very precariously placed and if some of them could be ousted by Republicans, it’s much more likely that the right would have the voting power to end this movement by the left to take over major areas of the economy.
In a sense, my response to this news of treasury debt selling is both an economic and political reaction. But take that for what it’s worth as well, I suppose. In the end I’m just one guy making bets.
I’d say Fear.
After a few banks have failed, people need a safe place to put their money. Bonds is one place.
A quote from Mark twain comes to mind:
[:)]
I suppose that’s as good an explanation as any.