mathjak's daytrading adventures

[doodle]

The market will determine the 10 and 30 year rates.
Fed can only control the overnight lending rate.

That isn't true. Fed can control rates anywhere along curve.

[buddtholomew]

The market will determine the 10 and 30 year rates.
Fed can only control the overnight lending rate.

That isn't true. Fed can control rates anywhere along curve.

That’s not true; they can try.

[doodle]

The market will determine the 10 and 30 year rates.
Fed can only control the overnight lending rate.

That isn't true. Fed can control rates anywhere along curve.

That’s not true; they can try.

That's not true.

The Fed can choose to purchase bonds anywhere along the curve at a chosen interest rate. If they wanted to target 2 percent on the ten year they could choose to purchase all bonds that hit 2% and let the market purchase anything underneath that ceiling.

[buddtholomew]

Fantasy land...
We can argue this point, but one thing is for sure, the PP is bunk.

[doodle]

Fantasy land...

Why? The Fed is perfectly capable of doing that by expanding balance sheet. And by expanding balance sheet it is that they are really creating money...they are just exchanging zero yielding cash for interest yielding securities.

[buddtholomew]

What are they targeting on the 30-year since you’re convinced they can control yield increases along the curve?

[doodle]

Fantasy land...
We can argue this point, but one thing is for sure, the PP is bunk.

Budd, I've been around this neighborhood long enough to see you shift positions on this more than a handful of times.

[doodle]

What are they targeting on the 30-year since you’re convinced they can control yield increases along the curve?

Aren't they? I guess they don't see any reason to now. Should it's rise begin to materially impact economy they could certainly step in if they so choose.

[buddtholomew]

I’ve explained my positioning and don’t believe in the 4x25 allocation. I’ve stood firm on this since I joined this forum.

I don’t own TLT, own some gold and more stocks.

[buddtholomew]

What are they targeting on the 30-year since you’re convinced they can control yield increases along the curve?

Aren't they? I guess they don't see any reason to now. Should it's rise begin to materially impact economy they could certainly step in if they so choose.

Haha, good luck in believing that one.
If you own TLT you’re a bag holder. Period.
Every morning I wake up and thank god I sold TLT.
Maybe I won’t be so lucky next time.

[doodle]

I think it's helpful just to look at government bonds as government savings accounts and cash as a government checking account. By targeting the long end of the curve the government is essentially just setting the rate of their savings accounts. They could choose to do away with savings accounts entirely if they wanted to.

[mathjak107]

Fantasy land...

Why? The Fed is perfectly capable of doing that by expanding balance sheet. And by expanding balance sheet it is that they are really creating money...they are just exchanging zero yielding cash for interest yielding securities.

The worlds investorshold more treasuries than the govt ..where the investors say rates go they go ..that is why the fed can not control things the other way either and the result is the inverted yield curve.

The fed just counts on the fact that they show they are happy or unhappy with where rates are bid through their actions and hope the saying don’t fight the fed carries through.but there are times investors don’t agree like when the curve inverts

[doodle]

Fantasy land...

Why? The Fed is perfectly capable of doing that by expanding balance sheet. And by expanding balance sheet it is that they are really creating money...they are just exchanging zero yielding cash for interest yielding securities.

The worlds investorshold more treasuries than the govt ..where the investors say rates go they go ..that is why the fed can not control things the other way either and the result is the inverted yield curve.

The fed just counts on the fact that they show they are happy or unhappy with where rates are bid through their actions and hope the saying don’t fight the fed carries through.but there are times investors don’t agree like when the curve inverts

Ahhh the mythological bond vigilantes. They are simply that, a myth. Right now none of this is really a worry as where is the world going to go for safe yield? Europe? Japan?

But should China decide to sell it's bonds into open market the Fed would be happy to convert China's savings account assets into a zero yielding checking account.

[doodle]

Also, if one believes that the long term growth rate of our mature economy is probably sub 2% and that technological advances will continue to drive secular deflation, and demand for labor will remain slack then 3% guaranteed doesn't look all that bad anymore.

[doodle]

I also think it's important to take the pressure off oneself in this environment. This is a fantastically complicated time to be an investor. There are so many forces at work going different directions that it is nearly impossible to conclude which will ultimately win out. One can make strongly plausible cases for just about any economic condition at this point. Frankly I would feel exposed should I be overly vested in any one particular asset class.

[buddtholomew]

I also think it's important to take the pressure off oneself in this environment. This is a fantastically complicated time to be an investor. There are so many forces at work going different directions that it is nearly impossible to conclude which will ultimately win out. One can make strongly plausible cases for just about any economic condition at this point. Frankly I would feel exposed should I be overly vested in any one particular asset class.

Excellent points and I agree.
Just with I could buy and hold all 4 but then this happens and I tell myself...see, you should have sold like you wanted to and beat myself up over that.

[doodle]

Its also very challenging to be invested in a conservative portfolio at the end of the longest bull market in stock market history where every teenage trading genius seems to be making 200% annual returns. It really tests your patience. I should probably just walk away and stop looking but the last few months I have been glued to the market...to my own mental detriment. For anyone here over the age of 65 with millions in the bank I'd make the suggestion that your time at this stage of your life is much more valuable than your money. Why fret away weeks, months, and years over something you have no control over? Life is lived a negative interest rate. Spend it while you can!

[dualstow]

..For anyone here over the age of 65 with millions in the bank I'd make the suggestion that your time at this stage of your life is much more valuable...

Why over 65? How about anyone with millions?

[dualstow]

The market will determine the 10 and 30 year rates.
Fed can only control the overnight lending rate.

This seems to be the general consensus. The market is just too huge.

[doodle]

The market will determine the 10 and 30 year rates.
Fed can only control the overnight lending rate.

This seems to be the general consensus. The market is just too huge.

The general consensus is wrong. The federal reserve absolutely has the ability to do this. They are simply exchanging one asset for another. Cash for securities. Their balance sheet in that regard isn't changing.

[doodle]

Neither is the private sectors for that matter...they are simply exchanging securities for cash. They are transferring assets from a savings account to a checking account in essence

[buddtholomew]

So if that’s the case doodle and the FED announced no rate hikes until 2023 why aren’t they controlling the yield curve accordingly? Seems like the market is saying rates are rising no matter whether you keep the overnight lending rate unchanged.

[doodle]

I guess they feel that it isn't warranted at this point. Rhey aren't totally against markets setting rates...besides they probably prefer rates to rise a bit to give more room to maneuver in downturn and balance the possibility of market overheating.

[dualstow]

I have read articles about how they can indirectly put a "soft cap" on longer terms, but not as easily.

[mathjak107]

All I know is the vaccine rollout stalls , Italy and Germany have issues kicking up and bonds , gold and stocks all fall together