It is getting more and more likely that we are headed into far deeper trouble than most are letting on.
New homes drop this does not bode well.
Anyone not realizing the significant factor that Real Estate plays on our economy has a rude awaking coming. It is probably too late to short the housing sector but not the bonds. Those are next.
For those that do not understand the significance of MBIA et al being downgraded need to read up on this. Municipalities relied on these guys to offer assurances to investors that the muni's would be investment grade. Now that they cannot perform themselves being lowered credit, the muni's are at risk of defaulting or at least many percentage points higher for gov entities to make payments. On top of a tax base shrinking both receipts and property taxes.
Not looking good at all IMHO!
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6 comments:
Are you talking about TLT or TBT, when referring to the bond market going down?
TLT, while TBT is a ultra short meaning that it is supposed to move twice as fast as the fund, it does not have options. So there is not the leverage I like.
Nice comment
Hi Dell, do you know why the bonds are moving in the same direction as the stocks lately?
Actually what most do not realize is that low interest is good for the economy. So too for bonds. So when you get higher interest rates you get slower ecomony and lower bonds.
Contrary to most opinions, the two go hand in hand. Sometimes I use bonds as a gauge to where stocks will go since there is typically smarter money following bonds (not always)
Does the yield have a relationship to the interest rate?
If the stock market will eventually pick up, wouldn't bonds follow the same path?
Please see my next post to answer this.
The yields are in direct relation. If you own a 5% bond for face value (1,000) and interest rates go up, no one wants to buy your bond yielding 5% when the going market is higher so you will have to sell at a discount. If rates drop, then your 5% yield will now be more attractive and you can sell for a premium.
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