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Bonds Are 'Housing' All Over Again

As German bond yields breach unthinkable levels, BK was struck by a chart from Deutsche Bank – it is a chart of German yields since 1807.

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Take a moment to reflect on this chart – in over 200 years, German bond yields have never been lower. This period of time includes such notable and notorious events as:

  • US Civil War
  • The British Railway Mania Bubble
  • The Panic of 1873 and The Long Global Depression
  • Industrial Revolution
  • Thomas Edison’s Invention of Electric Light
  • Invention of the Automobile
  • Stock Market Panic of 1907
  • World War I
  • 1929 Stock Market Crash
  • The Depression of the 1930’s
  • World War II
  • Japan’s Real Estate Bubble and Crash
  • The Dot-Com Bubble
  • 1987 US Stock Market Crash
  • 1997 Asian Currency Crisis
  • 1998 Russian Default and Long…

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The Market Will Always Come Back? Do They?

Your hear the reassuring echos all of the time.  "Don't worry! The market will always come back."  But do they?  What about dividend reinvesting and adjusted for inflation?  Given the data, one can easily see why smart money continues to invest in bonds, annuities, universal life, etc.  Merely my .02 cents but remember, charts don't lie - people do.

Consider these two overlays — one with the nominal price, excluding dividends, and the other with the price adjusted for inflation based on the Consumer Price Index for Urban Consumers (which I usually just refer to as the CPI). The charts below have been updated through today's close.

The Big Three
The Big…

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TGIF Reads

  • This day in 1896: The Dow Jones Industrial Average is first published. Its 12 initial members are the great industrial giants of the time: American Cotton Oil, American Sugar, American Tobacco, Chicago Gas, Distilling & Cattle Feeding, General Electric, Laclede Gas, National Lead, North American, Tennessee Coal & Iron, U.S. Leather, and U.S. Rubber. The index’s value that day: 40.94.  Source: Phyllis S. Pierce, ed., The Dow Jones Averages 1885-1980 (DowJones Irwin, Homewood, IL, 1982), introduction, not paginated; http://averages.dowjones.com and JasonZweig

  • Very odd the move in treasury yields today on the better than expected NFP number.  Maybe "smart money" is telling us the economy is not as strong…

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More On Why Raising Rates Matters

It's not just about big business being able to borrow and refinance debt at low (ZIRP) rates.  It also impacts home buying affordability, consumer spending, higher chargecard APRs for the little guy who can barely afford it and yes, yield for the big dogs.  From an investment standpoint, large investors will pay attention.  As an example the 10 year yield is now at 2.15.  Yesterday, it crossed the dividend yield of the S&P 500. This means it is now more profitable to buy bonds than to invest in the stock market.  An interesting perspective.  Check it out at…

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