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Home > Forums > The Open Forum
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So walk me through this

Author: Mark (865 Posts - Joined: Jul 23, 2015)
Posted at 1:57 pm on Sep 11, 2019
View All

In the US, we have low interest rates engineered by the Fed (1.7 percent on the 10-year T-bill, the last I looked). The low yield would seem to suggest that people seeking income would not purchase government bonds -- right? Instead, they would be likely to purchase equities, particularly equities with a decent yield. But if income investors are forsaking government bonds for equities, wouldn't that have the effect of driving up the price of equities, under simple supply-and-demand principles? Add in fund managers who, I think, don't want to be caught with high-priced, low-yield bonds in their portfolios, because a 1.7 percent return doesn't look very good. Again, it would seem they would be inclined to put money into equities, again increasing demand (and price). Wouldn't it follow, then, that ultra-low interest rates are fueling a stock market bubble? If that's the case, how long can it go on? I'm not a hedge fund manager or an economist or anyone else with any sense at all when it comes to macroeconomics, but it seems to me that ultra-low interest rates for extended periods of time could be dangerous.

What about European central banks with negative interest rates? What are, for example, German income investors and fund managers doing with their money right now? Are they investing in German bonds? US Treasuries, for the better yield? Or do they also think 1.7 percent is not sufficient, and therefore gravitate toward equities? I really don't know, so I throw out these questions to the board.


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Replies to: "So walk me through this"

  • Can you smell 27000? Can you smell what the Trumpster is cooking? [IMAGE] - BaronVonZemo - 11:14am 9/11/19 (36) [View All]
    • I thought we smelled this two months ago. - LehighND - 9:22pm 9/11/19
      • Ooooh, that smell... - TakethetrainKnute - 11:37am 9/12/19
      • Take a heapin' helpin' of seconds! There's lots to go around! [NT] - BaronVonZemo - 10:27pm 9/11/19
    • Dude, stop - Nigel Tufnel - 1:28pm 9/11/19
      • Nigel..... - BaronVonZemo - 2:05pm 9/11/19
        • Might as well while we can. The Dems will have us in rail cars soon. [NT] - NedoftheHill - 2:41pm 9/11/19
    • A Trumpster fire, you say? [NT] - Chris94 - 12:20pm 9/11/19
      • There you go! - BaronVonZemo - 2:05pm 9/11/19
    • Meth? - AlbanyIRISH - 11:37am 9/11/19
      • Yeah much like Obama had and the $18 trillion global debt at negative rates. Do you know what that - PBHangingChad - 11:39am 9/11/19
        • I actually think it went from 10 to 20 trillion with Obama when interest rates were having a much - THEISMANCARR - 9:27am 9/12/19
          • You should probably stop posting about these things. - LehighND - 2:45pm 9/12/19
        • So walk me through this - Mark - 1:57pm 9/11/19
          • The Fed auctions off treasuries to meet our debt requirement. They are sold domestically and - PBHangingChad - 6:08pm 9/11/19
            • That's all well and good, but... [NT] [IMAGE] - NedoftheHill - 6:33pm 9/11/19
          • I'm not an expert, but... - NedoftheHill - 2:21pm 9/11/19
            • Rates and yields - Iggle - 4:33pm 9/11/19
              • Well said [NT] - PBHangingChad - 6:11pm 9/11/19
            • About bubbles being bad...really only if you sell. Look if you hung on in 2000 or 2008 - - BaronVonZemo - 2:24pm 9/11/19
              • Agreed. I was thinking more about US business operations. - NedoftheHill - 2:27pm 9/11/19
    • Trump is cooking nothing. The economy drives itself... unless restrained unnaturally. [NT] - Curly1918 - 11:27am 9/11/19
      • Tax cuts work, baby. Every time. [NT] - BaronVonZemo - 2:07pm 9/11/19
        • So cut them to zero... [NT] - LehighND - 9:26pm 9/11/19
          • Oh, I never said no taxes, but after liberals have control, there is always cut backs to be made. [NT] - BaronVonZemo - 10:28pm 9/11/19
        • How's that deficit looking? Oops. Forgot. Obama gone. [NT] - golfernot - 4:30pm 9/11/19
          • See above for debt analysis. Also slow your swing and pose at the finish to help your golf game. [NT] - THEISMANCARR - 9:30am 9/12/19
          • Oops. Forgot. You don't actually care about the deficit. [NT] - NedoftheHill - 5:27pm 9/11/19
            • I think I do and I think you don't. [NT] - golfernot - 10:22pm 9/11/19
              • Oh, I care about it more than any one else on this board. - NedoftheHill - 10:27pm 9/11/19
                • My issue is that the deficit only mattered to conservatives when Obama was Prez. - golfernot - 12:58pm 9/12/19
                  • And my issue is that the deficit only matters to liberals when the GOP has the presidency. - NedoftheHill - 1:22pm 9/12/19
      • Maybe his tax returns... - TakethetrainKnute - 12:12pm 9/11/19
      • How was it restrained during the mortgage meltdown? All those involved in that now criticize Trump - PBHangingChad - 11:35am 9/11/19
        • Requiring banks to lend to poor folk was a form of economic restraint - Curly1918 - 11:52am 9/11/19
          • That took almost 16 years to totally undo the US economy. - NedoftheHill - 2:42pm 9/11/19
    • That’s not important America is focused on sharpies. Come on stay on the important stuff [NT] - PBHangingChad - 11:25am 9/11/19
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