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Can Bernanke Avoid A Meltdown In The Bond Market?

Tuesday, June 11, 2013 - 10:01 PM
The past few weeks have given us a hint of what might happen when the Federal Reserve starts to reverse its super-easy monetary policy. Expect turbulence in financial markets, especially for assets that have moved far above normal or reasonable valuations.

A return to normality eventually implies a benchmark 10-year Treasury yield of 4 percent or more. It won’t happen all at once, but that’s where we’re heading. With yields at roughly 2.2 percent, there’s a long way to go. This transition will mark a recovery of the equity culture and the cooling of investors’ protracted love affair with bonds.

Can Bernanke Avoid a Meltdown in the Bond Market? - Bloomberg

Perhaps the bond vigilantes are finally coming out of the shadows.
9
ShorebreakShorebreak2,670 posts since
Apr 6, 2010
Rep Points: 14,473
1. Tuesday, June 11, 2013 - 11:26 PM
The past few weeks have given us a hint of what might happen when the Federal Reserve starts to reverse its super-easy monetary policy. Expect turbulence in financial markets, especially for assets that have moved far above normal or reasonable valuations.

A return to normality eventually implies a benchmark 10-year Treasury yield of 4 percent or more. It won’t happen all at once, but that’s where we’re heading. With yields at roughly 2.2 percent, there’s a long way to go. This transition will mark a recovery of the equity culture and the cooling of investors’ protracted love affair with bonds.

Can Bernanke Avoid a Meltdown in the Bond Market? - Bloomberg

Perhaps the bond vigilantes are finally coming out of the shadows.

 

"Bond vigilantes"? Don't you mean "bond ghouls"?

The beer's not going to be strong enough. Now where do I keep that bottle of brandy?

And I think in the morning I'm going to have to run out to get a pack of Camel Non-Filters.
 

 
4
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,285
2. Wednesday, June 12, 2013 - 7:35 AM
Wil:  "Non-Filters"??  It's really going to be that bad?  That's ok.  I have a batch of my Burgundy Meatmeals ready for eating.  I'll be watching these posts so I can know when to over-indulge. :)  Seriouslly, this could really be a roller-coaster ride when it finally starts to see how it affects the rest of us.
1
paoli2paoli21,398 posts since
Aug 10, 2011
Rep Points: 6,127
3. Wednesday, June 12, 2013 - 7:44 AM
Wil:  "Non-Filters"??  It's really going to be that bad?  That's ok.  I have a batch of my Burgundy Meatmeals ready for eating.  I'll be watching these posts so I can know when to over-indulge. :)  Seriouslly, this could really be a roller-coaster ride when it finally starts to see how it affects the rest of us.


Paoli2: After Shorebreak's multiple ghoulish posts yesterday evening, the filtered cigs aren't going to be strong enough to calm my frazzled nerves! It's either that or give me some of your Mylanta. I'd rather have the non-filters than the Mylanta!

Seriously, while bonds are not normally as volatile as stocks, there are times when the bottom can drop out of them as well. Shorebreak's warnings are worrisome that the thirty-years bond bull market may be ending and we could be in for a bond bear market. The abnormally low rates from QE ad infinitum means, as Shorebreak has said, that rates have a long way to go once the pattern is reversed and they start rise. That could spur panic selling, and that could be bad. A panic in the bond market could spill over into the stock market as weill.
1
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,285
4. Wednesday, June 12, 2013 - 8:21 AM
OK, everybody just calm down for a minute. Everything is fine today. No need for Mylanta, washed-down with brandy and topped-off with a pack of Camel non-filters. I seriously doubt we are at a stage of a "meltdown in the bond market", yet. There is a ways to go. Just be able to endure the turbulence and volatility in the markets (bond and stock) as high-speed trading programs react, and over-react to economic news around the world, particularly Japan. Now back to my nice green tea.
6
ShorebreakShorebreak2,670 posts since
Apr 6, 2010
Rep Points: 14,473
5. Wednesday, June 12, 2013 - 8:29 AM
Shorebreak,

You're having green tea? Right now, I'm having my usual morning tea, a Flowery Broken Orange Pekoe imported from Sri Lanka (I only use loose tea -- I'm even more a connoisseur with tea than with wine). And, you probably guessed it, smoking a cigarette while drinking it. I realize that much of the volatility in markets is due to overreaction, but the sheer number of your ghoulish posts about the bond market yesterday was a little unnerving. But they prompted some entertaining light-hearted banter.
5
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,285
6. Wednesday, June 12, 2013 - 10:58 AM
"Normality means a reversal in the popularity of the two main asset classes: As people fall out of love with bonds, they’ll fall back in love with equities."

1. No, there is no normality in the near term, expecting winding down of QEs.

2. No, people who fall out of love with bonds will most likely fall back to cold cash; not equities.

Cheers. 

BTW, green tea is really good for health.
3
51hh51hh1,476 posts since
Jan 16, 2010
Rep Points: 6,427
7. Wednesday, June 12, 2013 - 4:46 PM
Wil, you would make a good experiment.  Can they anti-oxident properties of Tea ward of the cancer causing risks of cigs?  Interesting, very interesting.  :O)
3
ChrisCDChrisCD70 posts since
Nov 18, 2010
Rep Points: 457
8. Wednesday, June 12, 2013 - 6:50 PM
Chris:  I think the most fantastic thing to come out of that experiment is if Wil can stop smoking long enough to actually drink more than two cups of  the tea.   :)   I bet he is the only human who can eat and smoke at the same time.  Just kidding with you Wil!  I'm sure you don't eat much anyway since you seem to be ageless.  :)
1
paoli2paoli21,398 posts since
Aug 10, 2011
Rep Points: 6,127
9. Wednesday, June 12, 2013 - 8:05 PM
Wil, you would make a good experiment.  Can they anti-oxident properties of Tea ward of the cancer causing risks of cigs?  Interesting, very interesting.  :O)

 

Chris,

I might not make that good of a study subject. Of the 13 smokers in my family's generation before me (i.e. uncles and aunts), none got lung cancer. Only one had cancer of any kind, liver cancer, in which a lifetime of heavy drinking was the culprit. Two out of those 13, currently 77 and 82, are still living (and the 77 yr. old, the youngest of that generation, has been a heavy smoker). So my heredity may render me cancer resistant. Besides, you don't need me. Japan has a lower per capita incidence of lung cancer than the U.S., despite having a much higher rate of smoking prevalence. Tea consumption has already been credited for the difference.

Paoli,

I know you are just kidding, after all, you said so. But to answer your question, I do not smoke while eating ... though I can remember back when my extended family would be together on the holidays, having these all-day multi-course meals that lasted about eight hours, and smoking in between the courses at the long dining room table. That almost seems like a lifetime ago!

Oh, before I forget to ask, Burgundy meatballs? That would be meatballs flavored with Burgundy wine? Sound intriguing . . . I suppose you use the wine to help bind the ground meat and bread crumbs together when mixing, instead of water or milk? You must still use an egg, I'm sure. Does the wine contribute noticeably to the flavor? Or, by Burgundy meatballs do you mean more or less standard meatballs coated in a wine-based sauce? Tell us more about your meatballs!



1
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,285
10. Wednesday, June 12, 2013 - 9:43 PM
 
4
paoli2paoli21,398 posts since
Aug 10, 2011
Rep Points: 6,127
11. Wednesday, June 12, 2013 - 10:49 PM
Paoli: I guess I'll have to share a traditional French-Canadian recipe in return (I only hope Grandma isn't rolling in her grave at my giving this recipe to Anglophones - just joking).

Tarte au Sucre (Sugar Pie)

Ingredients (pie dough): 1 & 1/3 cups of all-purpose flour, 1/2 tsp. salt, 1/2 (1 stick) cold unsalted butter (diced), 1/4 cup ice water, or as needed. Or you can use a 9 & 1/2 inch "premade" unbaked tart shell.

Ingredients (filling): 1 & 1/2 cups brown sugar, 2 tbsp. flour, 1/8 tsp. salt, 1 tsp. vanilla, 1/3 cup heavy cream.

I'm going to assume you know how to prepare and roll pie dough. Preheat oven to 350 degrees Fahrenheit. Combine brown sugar flour, and salt in a mixing bowl. Pick out and discard any hard particles of brown sugar. Sprinke mixture over bottom of pie shell. Add vanilla and heavy cream and pour over mixture, spreading lightly with an offset spatula. Bake approximately 35 minutes, or until pastry is golden brown and filling is dark and bubbling. Cool on a rack. Serve either slightly warm or at room temperature with whipped cream. It is best when eaten the day it is baked. Store leftover pie covered with a paper towel and wax paper in the refrigerator. Important: pie is bottom shell only, like pumpkin pie.

This is the national dessert of Quebec. Its caramelized sugar taste is representative of French-Canadian sweets. A common variation: same filling stuffed inside a dessert crepe, with caramel sauce drizzled over it, served with whipped cream and French Vanilla ice cream. Warning: Not Recommended for Diabetics!
3
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,285
12. Thursday, June 13, 2013 - 8:29 AM
W
3
paoli2paoli21,398 posts since
Aug 10, 2011
Rep Points: 6,127
13. Thursday, June 13, 2013 - 1:15 PM
Paoli,

Although I am American-born, yes, I am of French-Canadian ancestry. And from a very old French-Canadian family. In the direct patrilineal line, my ancestor arrived in Quebec in 1656 on the "Royal Judith," which set sail from the port of La Rochelle in France. I even have ancestors, through the marriage lines, who were in Quebec as early as 1617. I am a direct descendant of the first European baby born in North America, Helene Desportes (born in 1623 in Quebec City). I am also a direct descendant of Samuel de Champlain's botanist, Louis Hebert, a Parisian apothecary who brought his family to the new colony at Quebec City in 1617. Through my paternal grandmother, who was Acadian French, I am partly Mi'kmaq Indian. From my great-grandmother's family came over 150 priests and nuns in Quebec . . . in every generation there was at least one priest and one nun. And that familly's grant of land was a gift from the first Catholic bishop in Canada, Bishop Francois de Laval, in appeciation of the services rendered to the Church by its immigrant ancestor, Nicolas Audet-Lapointe.

Paoli: don't hold your breath looking for a "rate miracle" -- have you been letting your Mylanta go to your head?
3
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,285
14. Thursday, June 13, 2013 - 3:22 PM
W
1
paoli2paoli21,398 posts since
Aug 10, 2011
Rep Points: 6,127
15. Thursday, June 13, 2013 - 4:00 PM
Wil:  YOU have a nun and priest in your family??  Did you copy all that stuff from off the web just to start up with me again.  Am I really to believe that is really your ancestry?  Now "I" need the beer and cigs!!  And Napoleon was my father and Marie Antoinette my mom.  I just don't want everyone to know so keep that between us.  I'm 300 years old but I have great genes so I don't look my age.  Gee, I LOVE bantering with the King of all Banters. :)  King, meet the Queen!

I do not appreciate the implication that I am a liar. I have spent years on genealogical research, and am a member of the two main French-Canadian cultural and genealogical societies in the U.S., the American-French Genealogical Society of Woonsocket, Rhode Island and the American-Canadian Genealogical Society of Manchester, New Hampshire. For your information, French-Canadians have a very small gene pool. Population growth was the result of a nearly 400 years of prodigious birth rates. Until the 1960s Quebec had the highest birth rate in the world. So actually many people of French-Canadian descent can make similar claims. If you really don't believe me, I am perfectly willing to give you online access to my research on Family Tree Maker. All I would need is your e-mail address (you can PM me) to send you the "guest" invitation to view my family tree, and then you will see that there are no gaps in the family lines. And my great-grandmother was an Audet, and everything I stated about the Audet family is true. Check the website of the Association of the Descendants of Nicolas Audet dit Lapointe (of which I am a card-carrying member, and membership is limited to those able to prove their descent). It's www.audetditlapointe.ca 
2
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,285
16. Thursday, June 13, 2013 - 4:17 PM
Wil:  I apologize to you if I offended you.  I thought this was supposed to be "bantering" so how am I to know where the joking ends and reality begins?.  If that is truly your ancestry, you have a right to be very proud of it and I don't need more proof from you now that I know you are being serious.  This is the way it always happens.  I just have a problem knowing where the kidding ends and the truth begins many times.  I really enjoy taking part with you and others but I can see that I need to withdraw if I am going to unknowingly hurt feelings of people I respect.  I think very highly of you and I would never purposely offend you.  If you decide never to post to me again, I will understand and make sure I don't respond to your posts since you are offended by me.  Thank you so much for the enjoyment we did have before I crossed the line with you. 

Paoli
1
paoli2paoli21,398 posts since
Aug 10, 2011
Rep Points: 6,127
17. Thursday, June 13, 2013 - 6:43 PM
Paoli,

Yes, that is truly my ancestry, and yes, you inadvertently crossed the line. Although we had spent the last day "bantering," and were having some fun doing so, I think the tone of my comment #13 was serious rather than joking. It was prompted by your question as to whether I was Canadian, and was a factual response. Nevertheless, I can see how you might have thought it was just more banter. I became offended because your comment #14 seemed to be calling me a fake on a public forum. Even when I was bantering, at most I may have exaggerated a little, but didn't say anything that was outright false. I can even understand why you doubted my claims in my comment #13. Most people descended from European immigrants don't know their family history beyond their great-grandparents. And for good reason, vital records in Europe have been destroyed because of wars, fires, and the like. But Canada is different. The Catholic parish priests kept very detailed vital records, and those have survived intact because most of the events that would destroy such records didn't happen in Canada. So Canadians can trace their family history all the way back to the 17th century. Furthermore, because of the relatively small number of colonists (although France had a population greater than England and Spain combined, French colonization in North America was a mere trickle compared to English colonization of the 13 colonies), the same families kept intermarrying generation after generation, so genealogical research only has to deal with a comparatively small number of family lines (thus making the research fairly easy). Okay, I didn't intend this to be a thesis on Canadian genealogy, but it helps explain things. I suppose that my mistake was in divulging too many factually true details about myself on a public forum. I'm just too long-winded at times and often add more than is necessary. Since you withdrew the offending comment, which proves your sincerity, and that you now believe me, I accept your apology.

P.S. Why did you remove your comments #10 and #12? They had nothing to do with this.
2
WilWil242 posts since
Feb 26, 2010
Rep Points: 1,285
18. Thursday, June 13, 2013 - 8:04 PM
Wil:  Thank you so much for accepting my apology.
I hope we have resolved this problem between us now.  I decided I needed to remove practically all my posts since they were mainly "off-topic".  I thought my bantering with you and others was ok because we were doing it as a group.  However when the incident occurred and you got upset with me in your post, I did not want to bring more problems upon myself here so I felt all of my posts needed to be deleted.  I may try to post anonymously in the future or just read for awhile to make sure I don't cross the line again.  Maybe I need to take a "how to post without making people mad at you" course.  In real life people seem to love my personality but on the internet it sure comes off unlike the real me.  Once again, my thanks and appreciation for your understanding.  
1
paoli2paoli21,398 posts since
Aug 10, 2011
Rep Points: 6,127
19. Friday, June 14, 2013 - 10:18 AM
Forums have the same problem as texting and email.  You can't see the person to look for visual cues as to their seriousness or sillyness or even if they are angry or not.  So I guess it is always probably best to take things at face value unless it is obvious that they are not or you have your own evidence to the contrary.  For instance the post I did about a current scam out there.  Trust, but verify.  In this case, you had know way of really verifying Wils claims so should have taken them as the truth. 

It looks like you two have ironed it out which is also good.  And as long as people are willing to own up to their mistakes (which you did), you should feel fine about moving forward and not having to slink into the shawdows.  I think that would be a very sad outcome. 

Let's hope we can find some good CD rates and move this into a different direction.

cd :O)
2
ChrisCDChrisCD70 posts since
Nov 18, 2010
Rep Points: 457
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