I like to follow financial commentary, just to get a feel for psychology.
What I found interesting is that on the recent small climb in rates to 3.50 percent to from 2.70 on the 10-year Treasury bond, many were talking about good value in Treasurys.
While 3.5 percent is better than 2.7 percent in terms of interest, it is still pathetically low from a historical period.
In addition, with the federal government printing money and running up deficits at a record rate, the 3.5 percent is even more unappealing.
However, for some reason, many see this as good value.
Pacific Investment Management Co.’s Bill Gross, the manager of the world’s biggest bond fund, lamented that American politicians and citizens alike have no clear vision of the costs of a seemingly perpetual trillion-dollar annual deficit."
He also referred to deficit spending as “mindless.”
I tend to agree on all accounts.
One day, the Grim Reaper will come calling in the form of the bond vigilantes who will cause rates to spike and the bond market to fall apart under the crushing burden of debt.
Until then, heed the words of myself and Gross: Stay away from long dated U.S. Treasurys — 3.5 percent on your money is not, I repeat, is not
a good return.
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