1. BOJ: Its balance sheet is currently 30% of Japan's GDP and is sitting on $100bn losses. If US dollar depreciates more, if US inflates away a large part of the debt (which I think it's certain), then the Japanese taxpayers will be left holding the bag. 2. Buffet: Please do your homework before hitting the reply key. Go to BRK homepage and read his report for 3Q04 (actually nothing has changed much in >1yr of quarterly reports) Buffet is sitting on cash (other than his long time stock positions in CocaCola, Gilette etc), and has hedged most of his US dollar exposure. He thinks the US will be tempted to inflate away the debt (see his 10-Jan-2005 interview in Forbes). I won[t even go into the repercussions of the dynamic hedges by GSEs or the unwind of the carry trade. Anyway, the broad picture is aimed at "value investors". In my opinion, buying long bonds in this environment is no different than the speculator who buys TZOO. Because you know it's very possible that the US long bond will lose 30% of its value within weeks. It can happen today, next month or next year. Or perhaps never.
Weeeeeeeeeeeeeeeeeeeeeeeeeeee! Down goes long term rates after Q4 GDP hits 3.1% vs expectations of 3.5%. I think its time some journalists came out and talked about fictitious selling of US debt by China again so bond shorts don't get squeezed.
Down down the yield on the 10 yield goes, where is stops, no one knows. 4.05% as of midday Friday after payrolls came in at 146k vs expectation of 189k and higher. Gosh, are we still in a "rising rate environment" that everyone talks about?
As a matter of fact we are still in a rising rate environment. But as the saying goes. "Don't argue with a fool ..." Welcome to my ignore list.
Is that because the difference between short term and long term interest rate? The long term may not go in the same direction as the short term. I need to spend some time to learn how yield is calculated.
True. Sometimes its hard to accurately take into account the fundamentals of a sector. For example, there was an article in my paper the other day about growing demand for custom made homes. There is no organization that tracks the custom home building business but contractors are saying they are in boom times. Now all the doom and gloomers out there have been negative on homes for awhile yet there is real demand even in areas no one tracks.