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2% bills and 3-4% bonds are within historical norms with low inflation and
decent economy. TBill rates were under 1.5% for a fair bit of the 50's and
under .5% for most of the 40's while long bonds spent most of the 50's under
2.5%. I did my last major bond work a couple of years ago using monthly
charts and history back to early 30's and the fib work pointed to 5% minimum
target and 3.5-3.8% likely target for long bond and 1.4-1.9% likely target
for bills. So far I have seen nothing which indicates those targets will not
be achieved. The liquidity crisis in the bond market is opening some
interesting opportunities in investment grade debt. We are carrying heavy
laddered bond and bond fund positions in investment accounts and are
beginning to add to those positions during this pullback. The overall
strategy is one of seeking both investment income and gains in bonds into
the early part of the millennium during a period when I expect short term
paper and equities will not offer attractive returns.
It's not that I'm terribly negative on the world's economic prospects,
however the turmoil the world has been going through since Thailand is not
going to be fixed instantly. Nor is there US-style financial disclosure in
Asia or Europe so the unknowns will temper the availability of credit to
feed the growth engine. Further, we have the Y2K issue ahead of us, and
while I think the world will survive, there will be enough economic
disruption to slow things a bit more.
Earl
-----Original Message-----
From: BrentinUtahsDixie <brente@xxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Sunday, October 25, 1998 10:45 AM
Subject: Gen: Bonds?
>RT's,
>
>I've been scratching my head all weekend about the bonds. I just got
>another, the crash is coming next year story in the mail that says that
>bonds are "the" investment(kind of goes along with Prechter's safe haven).
>I'd be lying if I said that I was an experienced hand when it comes to the
>bonds but there are a few things that I know.
>
>I remember interest rates of 4% and I'll bet that Ira remembers lower rates
>than that(my father does). This story I read says that interest rates went
>to a low of 1.5% in the Great D.
>
>So I decided to see what Advanced Get had to say about the bonds. The
>picture I got from it says that we just made a 1.66 level(a #3 within the
>#5) in a large number 5 wave(at the recent high) and that we are now in a
>#4 pull back and that the 2.66 level is out there at about 160.
>
>Since I know that rates have been lower and that lowering rates seems to be
>the preferred cure for the pinch we are in it just might be a good
>investment to go with bonds. Your thoughts appreciated.
>
>Brent
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