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Quiet Desperation

Most savers and investors are experiencing that quiet desperation of which Thoreau wrote. The inflation of the money supply provided by the central banks almost everywhere across the globe has found its way into into financial assets, including bonds, leading to ultra-low interest rates. Too many savings have been competing for a supply of good assets, or should I say, assets perceived to be good (e.g. Treasurys).

This lack of good investment alternatives is of course a result of massive malinvestments over the prior years and decades associated with a huge amount of money creation by the central authorities. Think, if you will, of the European powers in the age of exploration mounting huge efforts to explore the world and finding almost nothing worthwhile out there. All that effort would have been wasted. This is what has happened in the U. S. as the nation has tried to prosper by consuming without doing much saving.

At least much of the investment in tech the last 15-20 years has helped our productivity. The overinvestment in housing from 1992-2006 or so simply generated consumption assets rather than doing anything much for future production.

So few good growth-oriented investment opportunities appear to exist that long-term Treasury bonds have suddenly become momentum plays for short-term traders.

This is almost “bubbly”, given that the yield on the 30-year T-bond, 3.30%, is below that of the last 12 months CPI rate. Even so, given that the 2-year Treasury yields under 0.20% per year, and with the 12 month T-bill yielding a bit less than the same Japanese security (and in Japan, there has been no net price inflation for many years), it just may be so that the long bond will continue to grind higher in price (lower in yield) over time. But speculators will likely be thrown off the Treasury bull, should it continue as the years (not days or weeks) roll on.


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