Real Estate vs 10 year notes

The ten year represents return free risk.

A ten year treasury is only "risk free" as to default risk, obviously. It could turn out to be a terrible investment on both a mark to mark and "real" return of principal basis if inflation rises (which would likely trigger a rise in interest rates). Real estate as an investment, which is partially how I look at it, could arguably rsie in tandem with inflation; one can argue that higher interest rates will be bad for real estate but that is far from certain since it may occur because the economy is growing. Personally, I think buying and holding a ten year treasury is quite risky, and real estate less so, even now, but neither is low risk.

given the 20-30% decline in most us real estate over the last two years, years in which inflation has run roughly 1-2%, im confused about what it is that you are saying

regardless of circumstances, i get my principal back when the treasuries i hold mature

at no stage during which you hold real estate, can you be certain that you can sell at cost

that's why treasuries are so well bid these days--prudent investors, en masse, are happily conceding return for certainty that their principal be preserved

treasury market is the only market where you can put 500bln to work, and get it back...that wont change. we are in an environment of return of capital for the sovereigns. the hedgies, thats a different call, as tey search for yield anywhere they can get it. watch out for that

This makes no sense. Owner-occupied real estate is not an "investment." It is a capitalized stream of rent payments - a.k.a. an "expense." You should NOT expect to receive a "return" on this investment; its purpose is to lock in a stream of discounted rent payments by prepaying them.

Even JuiceMan seems to understand this, which means it can't be THAT difficult.

"prudent investors, en masse, are happily conceding return for certainty that their principal be preserved""

REAl return is what matters, so being assured of a return of nominal principal in a bond is by no means assurance that one has made a prudent investment. That is pretty basic economics. Even moderate inflation could make the treasury principal worth way less in ten years.

I have a hard time envisioning any prudent person putting long term bonds into a buy and hold portfolio t these absurdly low rates.

I do not argue that buying RE is risk free (nyc re is still super high priced, but we have seen a lot of evidence of pent up demand that seems to put a floor on prices) , but to argue that buying long term treasuries is low risk or risk free is equally absurd in my view. Given an investment choice, I personally think that NYC RE, held for ten years, is less risky than a 0 year treasury. Time will tell.

treasury market is the only market where you can put 500bln to work, and get it back...that wont change.

--------------
But with new improved Q.E. the 500bln you get back is equivalent to 250bln....
It is no accident that the dollar is tanking against the world's currencies and gold. The only currency it is not tanking against ins the Yuan, which pegs to the dollar at the expense of inflation and bubbles at home(they must keep printing Yuan to keep this going). Basically we are seeing the Fed monetizing our debt with the administration under the mistaken belief that a lower dollar will increase exports and save our economy.

The low dollar policy was tried under Bush with limited results. The problem is our country is not 3'rd world and for the types of products we export exchange rates matter less. Of course a low dollar also is inflationary(a strong dollar keeps inflation low). It's pretty scary how every time the economy tanks the Gov't does the same thing, weak dollar, low interest rates. I think we blamed Greenspan for keeping interest rates too low for too long.

The Fed is like that Chris Rock joke about the poor kid in Harlem who regardless of what ails him he's prescribed some Tussin.

I listen to everything that Riversider says. Then laugh.

Money is created inside of exploding stars. HAHAHAHAHA!

Hmm..
What else would you call the process of the Fed buying Treasuries and paying for them buy simply crediting various customer accounts at the Federal Reserve(The Chinese, Germans, Japanese etc). And if this action had no impact on our money supply then why is the dollar tanking and Gold rising every time the market sees an uptick for this type of behavior?

at the moment the issue is, and will like remain, disinflation or even deflation

you live in tokyo 1995, get it??

my cash has far greater value, at least toward potential real estate purchases, than it did 3, 4 or 5 years ago--it will have even greater value over the next several years--i will be quite happy when i redeem my treasuries and other fixed income securities....at par

who knows what you'll be able to sell your real estate for when you need to

Still believe in deflation. Seems guys like Bill Gross are more than happy to take the other side of that bet. He's more than happy to write an inflation floor contract and sell it to you.

"What else would you call the process of the Fed buying Treasuries and paying for them buy simply crediting various customer accounts at the Federal Reserve(The Chinese, Germans, Japanese etc)."

I'd call that the normal functioning of a central bank. I know that you believe that money must be dug up from the ground and panned for in streams outside of San Francisco, but that is nonsense.

"And if this action had no impact on our money supply"

Of course it has an impact on our money supply. It just doesn't necessarily equate to inflation if there is no velocity to go with it.

"then why is the dollar tanking and Gold rising"

Markets are irrational in the short-term: stocks are up nearly 200 points today AND gold is up to a new high, whereas in the medium- to long-term they move in opposite directions. Always. All technical indicators (candlesticks, stochastics) say the stock market is vastly overbought, yet it still goes up. Why?

No one knows. Short-term market movements are irrational.

"every time the market sees an uptick for this type of behavior?"

You seem to watch too much Larry Kudlow, who believes that anytime anybody says anything that disagrees with him and the market falls, it's the fault of the person who disagrees with him.

As J.P. Morgan once said, the stock market will go up, and it will go down. So will the price of gold. So will the price of copper. Right now they are in the mood to go up even though there seems to be no underlying reason for it. That will change.

ps, I don't know what an "inflation floor contract" is, so you'll have to enlighten me.

Does somebody's floor inflate? (Sounds dangerous.)

This will perhaps give you better perspective, RS:

http://www.cnbc.com/id/39344167

"Who Let the Bulls Back In....?"

I've talked to some traders, they have no explanation for the market right now. Not for gold, not for stocks, except to say that volume for stocks is so low that it might lead to layoffs. No conviction - one day up 200 points, the next day down 150 points, stocks rise with gold, rallies on bad housing and capex numbers - there is no explanation.

The stock market does this sometimes. Look at the run-up through April of this year, and subsequently what happened. Don't put too much stock in your "inflation" theory and try to justify it by the price of gold.

Today or ever - in the short-term.