With Bond yields on the rise. Anyone buying? Will yields fall in y2k?

-- ho deedo (hodeedo1@yahoo.com), May 14, 1999

Answers

ho, This question seems elementary, but I haven't gotten comfortable with a conclusion.

My take this morning, rates will collapse, but so will creditworthiness and opportunity for investment. The risk premium (now pretty much non-existent in my judgment) will reappear in a big way. REAL big. What do you think? Do you have access to Grant's Interest Rate Observer? (Unfortunately, I don't.) He's often wrong, but always insightful.

-- Puddintame (achillesg@hotmail.com), May 14, 1999.

It seems unlikely that, as we near the year 2000, that anyone will want to lend money for 30 years. Hence long term interest rates are likely to be quite high, and bond prices will be quite low.

-- dave (wootendave@hotmail.com), May 14, 1999.

I predict a liquidity crisis of Biblical proportions on or before December. Remember Japan holds oodles of Treasury debt, and at some point will start selling and taking the money home. I expect both long and short rates to skyrocket. The combination of rising long rates and a rapidly falling equity market (today's market was just a small taste) will make surburban real estate drop like a rock. I think it might be worth a gamble to hold a few % of net worth in Treasury zeros, as eventually (months, years?) long rates will drop to lower than where they are now. But I don't think I have the stomach to try this, so I'm sticking to cash equivalents that are guaranteed in some way by the Feds.

-- Tennessean (holladayl@aol.com), May 14, 1999.

This is from Gary North's site. I tend to agree:

"First, find an agency that is woefully inefficient. Second, make sure that it is not y2k-compliant. Third, make sure it has a long tradition of lying. Fourth, be sure its income is dependent on the fractional reserve banking system. Fifth, make sure it has a policy of never paying off its debt, but instead borrows more to pay off earlier investors. That is, make sure it's a Ponzi scheme. Sixth, add to this the threat of martial law, in which everyone's freedoms will disappear. This is the organization to whom you are supposed to hand over most of your life savings now, for safekeeping in 2000.

And the winner is . . . the U.S. government! Cheering. John Koskinen and Alan Greenspan come foreward top accept the award on behalf of the entire team.

This is the state of investment wisdom today.

OK, maybe this will happen in late 1999. Lemmings believe in the government. In 2000, the truth of Franz Pick's warning will be obvious to all: "A government bond is a certificate of guaranteed confiscation." Too late. "

-- Clyde (clydeblalock@hotmail.com), May 14, 1999.