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Interest rates

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    I was just listening the morning star long view podcast today and just learned something interesting. From about 1940-1980, interest rates rose. From about 1980-2020, interest rates fell. Obviously the past does not predict the future, but these are very long trend lines and indicate that you cannot just invest in something and expect that over time, things will revert back to the mean (ie it may revert back, but it may not do so until after you are deceased). If interest rates are going to rise for 20-40 years, I wonder what proportion of bonds those of us in our middle/late career should have invested in bonds. A 22-27 year cycle is as long as some people's careers.

  • #2
    Does everyone have a podcast now? Next theres gonna be a lego podcast or an anorexia podcast


    • #3
      Originally posted by Craigslist View Post
      Does everyone have a podcast now? Next theres gonna be a lego podcast or an anorexia podcast
      1. The Long View isn't the best podcast to pick on. They've done 160 episodes dating back to 2019 and some of them are very good.
      2. Lego podcast with daily episodes: and ten best eating disorder podcasts:
      3. Yes, everyone has a podcast now. I'll cover this phenomenon and more in my upcoming podcast series, "Inside the Spaceship with SpacemanSpiff".


      • #4
        “I wonder what proportion of bonds those of us in our middle/late career should have invested in bonds.”

        Bonds are not an investment. They serve two purposes:
        • Decrease a portfolio’s volatility (equity is more volatile than bonds historically-different risks).
        • Assets invested for a purpose, getting some yield but basically holding the principal adjusted for moderate inflation. (say $200k now and $200k in 5 years adjusted for inflation). A bucket approach.

        ”If interest rates are going to rise for 20-40 years”
        Can you tell me equity returns and inflation for 20-40 years and I might guess. Might be wrong at year 30.


        • #5
          Interest rates 5, 10, 20 years from now could be anything.

          Make a plan that works unless the world ends.

          If the world ends, failing plans become irrelevant.


          • #6
            Longview is excellent podcast.


            • #7
              There is no guarantee whatsoever interest rates will rise.

              We are a debtor nation. We need new money to service our debts and to keep propping up a struggling economy. We canNOT have deflation. We print/create well over 100mil USD per day at present.

              Interest rates are rock bottom. Each time they try to tip the dial a bit, it causes problems. Far too many people and businesses have spent money they haven't earned or produced yet.

              The zero and low interest rates (effectively negative with inflation) keep being tried since the GFC (well, since shortly after the end of the gold standard, actually). Stimulus monies are tried again and again (in rapidly increasing amounts and frequency since gold standard ended). They aren't working.

              Negative interest rates is almost unprecedented - here or anywhere. It's a last gasp, hail mary, grasp at straws, etc. It is an economy throwing PVCs, guys. It is not a fundamentally sound move to force cash into people's hands with negative interest and hope they use it to increase production (as opposed to just wasting it). Those people are obviously trying to save or pay their debts since they can't figure out how to produce or are already drowning in debts. When you unmask negative interest, we are trying to prop our own GDP and also to lower the bond yields of the UST bonds we trade for oil, crops, goods, favors, etc.

              At the end of the day, the world is getting sick of taking our newly-printed money for their real goods they must farm, mine, assemble, or invent.
              They are less and less interested in bonds we give them... and then we simply print up more money so their bonds are worth less and less.
              They don't like that the bond rates are low... because we our economy sputters every time we creep rates back up (and we canNOT have deflation).

              ...So, those are the game rules. Gentlemen, place your bets:
              -USA chugs along, many other world nations grumble but accept our printings since we have the guns
              -USA manages to transition into a different currency (that they control)... digital US dollars, IMF notes, etc
              -USD continues to implode itself with low/no interest rate, supply exploding, world reserve currency changes to yuan, euro, yen, etc

              But heck no, just because Fed interest rates have gone down doesn't mean it can't go to zero, neg... fail. Big mistake to assume that.