3.7% for 30? – No thanks Ben
On Tuesday after the close of trading we sent our pals a chart and some reasons as to why we wouldn’t own 30 year bonds. In the face of 30′s making a run a new post-crisis highs and equities only half of their initial crisis decline we weren’t met with much favor.
Here’s what we said:
30 years is a long long time
There is no way as an investor I am moving into 30 year paper at these levels.
Byron’s (Wien) div discount model (now with banks half capitalized) makes a very strong argument – actually –for selling your bonds here….
1) Note the cyclical nature of the move
2) Note the duration of the move
3) Even though you’ve eliminated 2yr and in it doesn’t eliminate the trade off in asset type return or productivity. There a lot of things to do with your money… owning a piece of paper for 3.5% a year for 30 years is not one of them.
Since that time we basically had a failed auction with one of the worst bid to cover ratios in the history of the offering and we are left wondering if bond buyers are losing that loving feeling for Tim’s Treasury offering.
Abort!
Yes we know its the world largest and deepest and liquid market – so was the British Pound Sterling at one point and those round gold coins my son is picking up at the archaeological dig in Rome this week…
Even in deflationary and debt based deflationary environments we believe that there are much better places for investors to be putting money.
In fact, the mattress may end up yielding you more if you account for the price and eventual “inflation” you are likely to see over the next 30 years.
Shoot, even Japan has 10 years left before they run out of hope for inflation!
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