Inflation and fixed income

Discussion in 'Economics' started by smilingsynic, Mar 3, 2008.

  1. If inflation is on its way up, then why is fixed income yielding so little?

    I have my own ideas here, but I am interested in hearing other contrary points of view. Many thanks.
  2. if that wasn't the case, then inflation wouldn't be much of a worry would it (at least not for the 'average joe'), cause everything would go up together
  3. Its probably more about risk aversion than anything else. Its possible to argue deflation its possible to argue stagflation. Since august when risk appetite realy started to decrease both fixed income and gold/oil have done pretty well. Must be some kind of safe haven premium.
  4. Wouldn't the ongoing parabolic moves in many commodities (Minneapolis wheat, anyone?) suggest that inflation, and not deflation, is more likely?

    If deflation is in the cards, then one should short the commodities etfs like DBA right?

    If inflation is in the cards, then one should sell bonds and notes, because only a sucker would lock in 3.5% or so for the next ten years in an inflationary environment, right?
  5. A EURODOLLAR spread would probably be a good play in both of those cases with a much lower risk profile than an outright directional play.
  6. lol what a crazy move this DBA etf has had.

    I agree with ur conclusions but I find most markets to act in a rather insane way these days, this might continue a bit longer but I don’t think bonds or commodities are good long term plays, if bought at these prices. I will probably sell bonds or gold stocks if I feel the need to reduce leverage. Its all momentum everywhere I look, just find it hard to believe this can continue much longer.
  7. There's too much, derivatives-related, speculation on the long-side of the market that "supports" current values too. Money moves markets, not opinion.
  8. Fundamentals are working strongly in favor of some commodities (wheat, copper, etc.). These could keep going up for years unless global demand falls off a cliff. Right now all the money not in stocks has to go somewhere, but I suspect that overall leverage in the system needs to come down, and will do so over the next few quarters. Gold and the more elastic industrial and ags might get hit with a steep pullback.