Articles by tag - deflation

Understanding Real Returns
Nearly a year ago I talked about the continued devaluation of the dollar since going off the gold standard in 1971. The truth is that politicians around the world will continue to tax citizens through inflation unless they are forced to tie fiat currencies to some sort of hard commodity. One way to see this is to look at the purchasing power of the dollar in 1967 versus the purchasing power of the dollar in 2010. The fact is that if you held had a $1 bill in 1967 and you held it until today, you could now buy $.15 of goods. The dollar has lost 85% of its value and it has served as a 4% annual tax on the US citizen. If you earned $100,000 in 1967 and never got a raise you effectively earn $15,000 today, assuming you are still working.
Posted on September 30, 2010 by
Investing for the Wrong Future
One of the greatest fallacies of investing is the dependence on historical data and returns for the basis of investment decisions. You will often hear investors saying, “over the long-run stocks always beat bonds!” Recently, the opposite has been said because bond returns have trumped stocks in the last 30 years. This must mean that bonds are better investments than stocks right? These are false conclusions. What really matters is what is going to happen in the future, not what happened in the past.
Posted on September 28, 2010 by
Treasuries Fall on Employment Report - Mortgage Rates to Follow
The 10 year Treasury rate fell to 2.82% today, a 16-year low before closing at 2.83%. That means that 30-year mortgage rates will continue to drop, potentially moving under 4.50%.
Posted on August 07, 2010 by
The Story from Interest Rates
The fixed income markets are incredibly large. According to the Bank for International Settlements, as of 2009, the world bond market stood at $82 trillion which was about twice as big as the global equity market. Even though bonds may not seem like sexy instruments, they can relay plenty of information that is often overlooked by equity investors.
Posted on June 29, 2010 by
Income from Equities or Bonds?
Since the fundamental outlook from a top-line revenue perspective still does not look great, companies turn to three alternatives to expansion: 1) share buybacks; 2) higher dividends; and 3) leveraged buyouts. All three of these are bad for bondholders and mostly positive for stockholders.
Posted on March 07, 2010 by
Testing the Interest Rate Barrier
Every few months I draw the spotlight on long-term US interest rates as they approach a long held barrier. Thirty year treasury yields have not been above 4.8% since the fall of 2007 but have tested the 4.7% level about 10 times since then. I consistently draw attention to long-term interest rates because they are intimately tied to housing affordability and the cost of servicing debt. The Federal Reserve can keep short-term interest rates low for prolonged periods of time, but they can only keep longer term interest rates suppressed for finite periods of time. In an economy burdened with debt, the level of interest rates are critical.
Posted on March 10, 2010 by
Positioning for Inflation or Deflation
How do you position your portfolio for such a dichotomy of economic outcomes?
Posted on February 16, 2010 by
Where to Find Yield?
As long as inflation is kept under control (sub 5% annually) and China continues to somewhat peg their currency, then treasury rates can rise and these “yield hunters” will start buying treasuries instead of corporate bonds, preferred stocks, and equities which would keep the rise in long-term treasury rates at a stable growth rate.
Posted on January 17, 2010 by
U.S. Needs More Inflation Say Mankiw, Rogoff
Noted economists Gregory Mankiw, former White House adviser, and Kenneth Rogoff, former Chief Economist at the International Monetary Fund believe the US needs a bit more inflation to get the recovery going.
Posted on May 19, 2009 by
Is Gold a Hedge Against Inflation?
Is gold really a hedge against inflation? The conventional wisdom says yes but the data seems to suggest otherwise. Indeed, the data suggestions that gold is not a hedge against inflation as it is portrayed.
Posted on March 19, 2009 by

Financial Video

Hard Ways to Earn Money: Babysitting Nightmare - Find out the easier way to save and earn more.
Posted on February 17,2012
Municipal Bond Market Review - Feb 2010 (Part I)
Posted on December 16,2010

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