The Pink Elephant in the Room

Discussion of the Bond portion of the Permanent Portfolio

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MachineGhost
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The Pink Elephant in the Room

Post by MachineGhost » Thu Jun 11, 2015 7:38 pm

So, how much capital gains losses would you theoretically have after buying a negative yielding 30-years Bund now that its just cleared 1%?
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

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dualstow
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Re: The Pink Elephant in the Room

Post by dualstow » Thu Jun 11, 2015 7:42 pm

Why pink elephant? I'm too distracted by this that I have to know before I get to the question at hand.
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Re: The Pink Elephant in the Room

Post by MediumTex » Thu Jun 11, 2015 7:47 pm

Bloomberg says the 30 year bund is at 1.58%

Is that not right?
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Re: The Pink Elephant in the Room

Post by MachineGhost » Thu Jun 11, 2015 8:50 pm

dualstow wrote: Why pink elephant? I'm too distracted by this that I have to know before I get to the question at hand.
Good question!

When are you gonna answer in the other thread about the newsletter?  It's twice now you've ducked the issue. >:(
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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Re: The Pink Elephant in the Room

Post by MachineGhost » Thu Jun 11, 2015 8:53 pm

MediumTex wrote: Bloomberg says the 30 year bund is at 1.58%

Is that not right?
Yes, thats right.  How much of a loss was it from the lowest point (I guess 30yr didn't go negative) to 1.58%?  I want an early little taste of the masochism we have coming at us.

EDIT: 30yr yield has skyrocketed from .434% to 1.546%.  -28% loss?
Last edited by MachineGhost on Thu Jun 11, 2015 8:58 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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dualstow
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Re: The Pink Elephant in the Room

Post by dualstow » Thu Jun 11, 2015 9:11 pm

MachineGhost wrote:
dualstow wrote: Why pink elephant? I'm too distracted by this that I have to know before I get to the question at hand.
Good question!

When are you gonna answer in the other thread about the newsletter?  It's twice now you've ducked the issue. >:(
Which thread? All apologies. I read some threads methodically but skip through others. Let me know and I'll answer right away.
Edit: I think you're asking about the stock newsletter. If so, that would be Louis Navellier. 3 of them, actually: emerging growth, blue chip growth, and family trust.

Feel free to PM me if I blow off a question in the future. I never do it on purpose.
Last edited by dualstow on Thu Jun 11, 2015 9:14 pm, edited 1 time in total.
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Re: The Pink Elephant in the Room

Post by barrett » Thu Jun 11, 2015 9:42 pm

MachineGhost wrote: Yes, thats right.  How much of a loss was it from the lowest point (I guess 30yr didn't go negative) to 1.58%?  I want an early little taste of the masochism we have coming at us.

EDIT: 30yr yield has skyrocketed from .434% to 1.546%.  -28% loss?
Well, minus interest payments, US long bonds lost 17.8% of their value from January 30 to June 10. We don't have to look overseas to feel the pain.
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Re: The Pink Elephant in the Room

Post by MediumTex » Thu Jun 11, 2015 9:49 pm

Regardless of the loss (which the PP is always experiencing in at least one asset), I would say that going from .5% to 1.5% suggests that people are feeling better about the overall economy, so that's good, right?
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Re: The Pink Elephant in the Room

Post by MachineGhost » Thu Jun 11, 2015 10:22 pm

MediumTex wrote: Regardless of the loss (which the PP is always experiencing in at least one asset), I would say that going from .5% to 1.5% suggests that people are feeling better about the overall economy, so that's good, right?
Or a loss of confidence in the EU which is bad, right?  Deflation only works up to a point.  Would you buy 30-year Greek bonds now yielding 8.23% per annum?  ;)
Last edited by MachineGhost on Thu Jun 11, 2015 10:25 pm, edited 1 time in total.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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Re: The Pink Elephant in the Room

Post by Introvert » Fri Jun 12, 2015 3:53 am

A bond incorporates different types of risk. When I see a 30 year german bond yielding 1,5% (or something like that), maybe it has more to do with an expectation of increasing interest rates or inflation then with actual credit risk.
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Re: The Pink Elephant in the Room

Post by barrett » Fri Jun 12, 2015 6:23 am

MediumTex wrote: Regardless of the loss (which the PP is always experiencing in at least one asset), I would say that going from .5% to 1.5% suggests that people are feeling better about the overall economy, so that's good, right?
C'mon, MT. We're trying to get bummed out here! I don't actually know if rising rates are good or bad for European bonds holders. I mean, it's definitely bad in the short term if that is all you are holding. But with a balanced approach, if bonds lose half their value (or more) then it probably means cash will yield more and maybe another asset will do well in that environment. Plenty of folks would love to be able to re-load at a later date with higher yielding bonds.

And I'm with Dualstow on this one... why is the elephant pink? Is this a trick pachyderm question? Is the answer "Because there are no pink elephants"?
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Re: The Pink Elephant in the Room

Post by sophie » Fri Jun 12, 2015 7:41 am

dualstow wrote: Why pink elephant? I'm too distracted by this that I have to know before I get to the question at hand.
Got you to read the thread now didn't it?

Holding a bond that has gone down in value by 30% and pays no interest has got to be pretty painful.  I must say that if the US 30 year Treasury ever got down to negative yields, I would not be buying them and I'd probably cash out.  The problem is, where would I put the cash?  Bank savings account vs under the mattress would be the only options other than plowing the money into stocks and gold.

As to why the jump in bond yields...don't think it's too complicated really.  It's everyone finally getting around to having faith in the stock market and general economic health, so they expect interest rates to increase in the near future.
"Democracy is two wolves and a lamb voting on what to have for lunch." -- Benjamin Franklin
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