logicalthought

Could Investors Be Wrong (Again) About Treasury Bonds (TLT)?

Texpat:

This is a fair question, and I will give you an "outlier" of an answer: Yes, I think that Bernacke will (to use your phrase) "have a change of heart", due both to his own introspection and pressure from the rest of the Fed and wiser heads outside of government (but certainly not from the Dems in Congress-- I'm not THAT naive). I really think that he won't want to go down in history as the guy who destroyed the U.S. dollar, and he will thus force the country to accept the delevering pain we should've already started a while ago.

On Jun 23 08:48 AM texpat wrote:

> Before he became Fed chairman, Bernanke was already on record as
> favoring turning up the printing presses to prevent deflation (what
> became called the "helicopter drop"). And the Fed is currently talking
> about QE to buy Treasury debt. Do you think that all of this is misdirection
> or that they're going to have a sudden change of heart?
>
> On Jun 23 07:07 AM logicalthought wrote:

Could Investors Be Wrong (Again) About Treasury Bonds (TLT)?

I'm all for "expecting the unexpected", but under what realistic scenario could U.S. interest rates stay low, no matter how bad the economy is? (And I do think it will continue to be bad.) When you combine the amount of upcoming Fed issuance with the declining demand from foreigners (due to decreasing U.S. imports), it seems to me that rates will have to stay high in order to attract buyers. And if the Fed monetizes the debt instead, rates will soar due to inflationary fears (which is why I think the Fed won't do it). Thus, I think we'll see what is perhaps the worst of all economic worlds: high rates combined with DE-flation, an environment in which cash will truly be king.