Gyroscopic Investing

Around 1.82% right now.

Any reason the U.S. can't go there as well?

Looks like we might be on our way.  TLT is skyrocketing today.

Its great watching TLT keep my portfolio afloat!  i remember a few weeks ago the cnbc pundits were talking about inflation.

It's interesting that the nation with the lowest (to my knowledge) long-term bond yields in the world lacks the ability to print money.

Lone Wolf wrote: It's interesting that the nation with the lowest (to my knowledge) long-term bond yields in the world lacks the ability to print money.

I was thinking the same thing... it's one of a few broadly used western currencies (probably step one in helping yield uber-low rates), and with half of Europe in financial ruin and the currency itself relatively strong, there's a huge rush to quality.

I'd add that there IS an ECB, which can print money, and if the strongest economy in the Eurozone ever ends up in crisis mode along with all the others, you can bet there would be expansionary policy in place that the Germans and others are not currently in support of.  So it's maybe not inappropriate to view the strongest few economies in the Eurozone as "printers" in a sense, because if they go down, printing WILL happen.

moda0306 wrote: I'd add that there IS an ECB, which can print money, and if the strongest economy in the Eurozone ever ends up in crisis mode along with all the others, you can bet there would be expansionary policy in place that the Germans and others are not currently in support of.  So it's maybe not inappropriate to view the strongest few economies in the Eurozone as "printers" in a sense, because if they go down, printing WILL happen.

Hard to say.  The memory of the Weimar hyperinflation is still very strong in Germany and they are extremely skeptical of letting money-printing get out of hand.  To me, it's much more likely that the bond market simply senses that in spite of the Euro-related chaos, Germany is keeping its fiscal house in order and will pay its bills.

If things did get so bad that Germany was in trouble, I do imagine that the Central Bank would act in some way to relieve them in some way.

I was under the impression that Germany essentially controls the ECB for all practical purposes. At least, the bond market seems to believe that.

Lone Wolf wrote:Hard to say.  The memory of the Weimar hyperinflation is still very strong in Germany and they are extremely skeptical of letting money-printing get out of hand.  To me, it's much more likely that the bond market simply senses that in spite of the Euro-related chaos, Germany is keeping its fiscal house in order and will pay its bills.

If things did get so bad that Germany was in trouble, I do imagine that the Central Bank would act in some way to relieve them in some way.

I agree. Though, the Bilderberg Group conspiracy theorist inside me wonders if some Eurocrats are purposefully letting things get really bad in other Eurozone countries so that those with money can buy up European real estate, businesses and assets at rock-bottom prices before the liquidity hose is turned on. Hard to believe that's actually true, but if Europe ever fixes its currency problem, I wouldn't be surprised if it plays out that way. I mean, I have to imagine that some of these Eurocrats have extremely wealthy supporters who are encouraging them to put the squeeze on peripheral Eurozone countries. Of course, these are things that can never be proven, but it makes you wonder...

Lone Wolf wrote: It's interesting that the nation with the lowest (to my knowledge) long-term bond yields in the world lacks the ability to print money.

Oh really?

I can't be sure, but I bet in the basement of the Bundesbank, there are many pallets of German marks ready to ship out at a moment's notice.

craigr wrote:

Lone Wolf wrote: It's interesting that the nation with the lowest (to my knowledge) long-term bond yields in the world lacks the ability to print money.

Oh really?

I can't be sure, but I bet in the basement of the Bundesbank, there are many pallets of German marks ready to ship out at a moment's notice.

Ha!  Touché. 

I believe that it was MediumTex that compared the structure of the Euro to a party of rock climbers whose abilities ranged from world-class expert to complete novice and whose temperaments ranged from extremely cautious to extreme daredevil.  The final detail of this picture was to imagine all of these climbers lashed together and told to "go have a good time" on some dangerous mountain.

It's a great image.  I find myself imagining an expert, grizzled German climber named Hans Deutschland who watched his buddy Franz Weimar fall to his death a few years back.  It's hard to imagine that Hans doesn't have his hand on a caribiner ready to unhook himself from this motley crew at a moment's notice!

I think they're all at risk of falling, though, because from what I hear Germany has just as much to lose by breaking off as Greece does.  It would appear they've all gotten themselves in a pickle.  Maybe Hans would cut the rope to those below him... but Atlas Popandopolous has all the tasty Gyros in his bag, and Hans needs sustenance badly.

Lone Wolf wrote: I find myself imagining an expert, grizzled German climber named Hans Deutschland who watched his buddy Franz Weimar fall to his death a few years back.  It's hard to imagine that Hans doesn't have his hand on a caribiner ready to unhook himself from this motley crew at a moment's notice!

Wait a second, are you saying that Hans isn't going to want to stay hooked in with Apollo, Alfredo and Domingo when things start to get hairy?

I still have some German marks at home as souvenirs waiting for action. I wonder if they'll still be good the second time the Deutsche Mark returns?

craigr wrote: I still have some German marks at home as souvenirs waiting for action. I wonder if they'll still be good the second time the Deutsche Mark returns?

Actually, those are no souvenirs. Those marks are still good today:

The Deutsche Bundesbank has guaranteed that all German marks in cash form may be changed into euros indefinitely, and one may do so at any branch of the Bundesbank in Germany. Banknotes can even be sent to the bank by mail.

On 31 December 1998, the European Central Bank (ECB) fixed the irrevocable exchange rate, effective 1 January 1999, for German mark to euros as DM 1.95583 = €1.
Source: http://en.wikipedia.org/wiki/Deutsche_Mark

Gumby wrote:

craigr wrote: I still have some German marks at home as souvenirs waiting for action. I wonder if they'll still be good the second time the Deutsche Mark returns?

Actually, those are no souvenirs. Those marks are still good today:

The Deutsche Bundesbank has guaranteed that all German marks in cash form may be changed into euros indefinitely, and one may do so at any branch of the Bundesbank in Germany. Banknotes can even be sent to the bank by mail.

On 31 December 1998, the European Central Bank (ECB) fixed the irrevocable exchange rate, effective 1 January 1999, for German mark to euros as DM 1.95583 = €1.
Source: http://en.wikipedia.org/wiki/Deutsche_Mark

I thank them for their offer,  but at this point I think I'll keep the deutsche marks and they can keep the euros!

craigr wrote:I thank them for their offer,  but at this point I think I'll keep the deutsche marks and they can keep the euros!

Heh. Well, I think it just points out that marks aren't worthless right now. They could just un-fix the exchange rate and start exchanging them out again.

German bonds now have lower yields than Japan's.

Remember back when Japan looked like a bizarre exception to all of the rules we thought applied to bond markets?  Maybe Japan was just head of the rest of the world by a few years.

MediumTex wrote: German bonds now have lower yields than Japan's.

Remember back when Japan looked like a bizarre exception to all of the rules we thought applied to bond markets?  Maybe Japan was just head of the rest of the world by a few years.

Deleveraging is a beast that can crush bond bears into tiny pieces.

clacy wrote:

MediumTex wrote: German bonds now have lower yields than Japan's.

Remember back when Japan looked like a bizarre exception to all of the rules we thought applied to bond markets?  Maybe Japan was just head of the rest of the world by a few years.

Deleveraging is a beast that can crush bond bears into tiny pieces.

I've heard that "Bond Bear Dust" is an aphrodisiac.

MediumTex wrote:

clacy wrote:

MediumTex wrote: German bonds now have lower yields than Japan's.

Remember back when Japan looked like a bizarre exception to all of the rules we thought applied to bond markets?  Maybe Japan was just head of the rest of the world by a few years.

Deleveraging is a beast that can crush bond bears into tiny pieces.

I've heard that "Bond Bear Dust" is an aphrodisiac.

Maybe this is what motivates Central Bankers

clacy wrote:

MediumTex wrote:

clacy wrote: Deleveraging is a beast that can crush bond bears into tiny pieces.

I've heard that "Bond Bear Dust" is an aphrodisiac.

Maybe this is what motivates Central Bankers

Perhaps in our world Ben Bernanke is to the "Dust" as Paul Atreides is to the "Spice" in the Dune series.

The German 30 year bond is at 1.68% today.

MediumTex wrote: The German 30 year bond is at 1.68% today.

John Mauldin has a nice summary of the arguments for continued deflation and downward movement of Treasury yields for a long time, possibly years, before real secondary inflation can kick in as a result of the Fed's attempts to monetize the debt.  Among other things there is a list of the 17 lowest 10 year government bond yields.  The U.S. is #11.  Switzerland is #1 at 0.48%.

http://www.johnmauldin.com/frontlinetho ... the-timing

As a side note, he talking about buying Swiss bonds as a bet that eventually Switzerland will take the franc off the "euro" standard.  When it does, the franc will immediately jump high as will Swiss bonds in real terms.  Such as the ones held in PRPFX.  We can only hope....