Treasury Yield Turns Negative

Frankly, I just don't see how things are REALLY melting down under this pressure. It must be the several trillion we've pumped into this sinking ship. Really spooky. Really, really, spooky.

That, my friends, is a sign of a bubble in Treasuries.

It will burst, and then the money will have to find another area to funnel into.

Um... why don't they instead put dollar bills under their mattress for 3 months? Honest question.

A: foreigners are the largest holders.... currency has something to do with it.

I know foreigners are the largest holders. Can't they convert Euros or whatever into dollar bills, and put them under their European mattresses? Presumably they have to convert the currency to dollars anyway, before buying treasuries - no? So its not like they're paying a penny on the dollar just to avoid transaction fees on the currency itself.

You know that retailers pay bank money to get change? Have you tried stuffing 1Billion dollar in mattress... Seriously, it would cost more to actually hire security, get a warehouse etc... to physically "house" money.

Something tells me the Chinese government already has the facilities to house quite a lot of money. I also doubt the cost is 1% to house for 3 months. Or is the 99 cent figure rounded down, and its really something like 99.9997c?

they do have a lot of empty factories...

Zero effect on Manhattan RE...

it closed at 0%. http://www.bloomberg.com/markets/rates/index.html
Where is the negative yield?

elena
(broker)

Oh the bubble in the treasury is just starting MMAfia...

1) We are in deflation and will be for several years. Treasuries are the only asset class that is a winner in deflation as institutions park their money with the safety of the US Government. No one trusts the banks or even money market funds anymore.

2) According to Bernake's last speech, the FOMC is exploring the option of purchasing long term treasuries to push down the yields to spur investment. Too bad this nonsense won't actually spur investment...but it will do wonders if you already own treasuries.

Fear not, the inevitable readoption of the gold standard will save us all

The thing is, we have deflation right, inflation is non existent. So with 0% inflation, the spread to treasuries is kinda normal. Look at 10YR when it was 4.5% and inflation was running at 2%. So the spread was 250 basis points or so.

Now inflation is likely close to zirp. The spread remains about the same. When the fed monetizes the debt and all that printing enters the system, is when we will likely see gold do its thing, dollar dome back, etc.. I think the treasury bubble has more to inflate though before busting.

This is purely technical... the Fed is flooding the system for year end (think Y2K worries). 'The turn' or the few days over year end were priced for dollar hoarding (banks not lending to each other). Fed is making sure that doesn't happen, through various channels, and that funding will remain at target. Stand down.

So urban, would you buy TBT here? with the 30 yr trading at 127 this morning, seems like a pretty easy trade? I know anyone who has shorted the long bond has gotten crushed, but at some point it seems as much a technical move as anything else.

Dear Citizen,

Don't Panic!

We, your friends at the FOMC, are merely offering you a gift for this holiday season - free money.

It comes with no strings attached. No inflationary consequences. We will not, not, come to your house in the dark of night and take your children to work in the mines. We will never nationalize your pension plan (tough luck about those bond funds you had there, we feel for you). Your job, it will not vanish. Maybe it will involve more laying of hot asphalt on frozen ground and less selling luxury shirts, but a job is a job is a job, or it's the governor of Illinois.

Rumors that free money will lead to bankruptcy of sorts... believe what you will, we got the bomb.

Your friendly banker,
BenBer

jgr, Noah,

we're on the same page. still has more to inflate... i know it's tempting to get itchy and start shorting ala jim rogers style, but be patient... remember, bubbles last longer than people think.

looks like Gold has cleared wave 4 of elliott wave supercycle... wave 5 could be on its way next year. it dipped into backwardation (lots of analysis of this online already).

look at what happened to Austria, Spain... their auctions failed even with 0%. wait until the US starts seeing similar behavior as its debt balloons to a point where confidence in its fiat currency begins to wane.

SpecialK - well I had TBT from like 56 originally, went to 65 or so, I only sold like 20%, and held the rest until it hit 53 and I hit it out for a loss. Been watching it. Im kinda tempted to open a small position now, and DCA on the way down from here; but I didnt do it yet. I think the silliness has some more to go so if it falls to mid/high 30s, Ill prob open a small position and dollar cost average as it falls further. There will be a time for this trade, but it may be better to wait it out and buy on the reversal.

I didn't say the gold trade. I said the gold standard for US currency. It'll solve all our problems.

Unsure that a gold standard will solve the human condition- which is ultimately the crux of the problem. Panics and manias occurred under a gold standard as well. History tells us that fiat currencies always ultimately fail, however, I don't think a gold standard (and the implied devaluation of the US$) 'solves all our problems'.

I'm positive it won't solve anything. I'm mocking MMAfia who really does want a gold standard.

tech_guy, you are so off.. cracks me up that you think I care about Ron Paul. I don't. He can disappear from the face of the earth and I wouldn't blink.

Now, you also think that I'm preaching we'll return to the Gold Standard. LMAO.

I'm preaching that to make money (or better yet, to preserve your wealth) in the coming years, you should invest in Gold. That's not the same as saying that we will return to the Gold standard. We don't have to return to the Gold standard in order to make money investing in Gold dear lemming.

Stick to tech, tech_guy and stop getting your arse handed to you by convincing yourself that you know more than other people who are professionals in the finance and real estate industry.

Quoting MMAfia in the thread linked below:

"What many Americans don't realize is how many times this country itself have been on/off the Gold standard [snip history of us going on/off the gold standard] Trust me, it's NOT different this time around people. This will end in the same way as it always has ended in the past. This is not something new. We have gone down this path MANY MANY times already."

"the only recourse is to go back to the form of money that human kind has been using for thousands and thousands of years."

http://www.streeteasy.com/nyc/talk/discussion/5195-cramer-says-to-buy-gold?page=2

Why do you capitalize gold?

You do realize that by denying your support for the gold standard now, you're admitting that you can't debate me on merits and need to lie to get popular support of others (what you've desperately been trying for in various threads as of late). You're also showing that you have such low confidence in your own theories that you can't admit them - you need to hide them.

While I'd obviously prefer if you never resorted to ad hominem attacks after losing the debate, and simply admit defeat, I do have to say that the above is an oddly fulfilling outcome. Keep the ad hominems coming - it makes me feel far less bad exposing your ridiculous extremist politics.

listen little grasshopper, you're trying to quote me out of context:

if you read carefully:

"...Keynesian-based monetary machinations put into place could break down. And when that happens, the only recourse is to go back to the form of money that human kind has been using for thousands and thousands of years."

WHEN that happens, which is the breakdown of trust in fiat, THEN, and ONLY then will we go back to a money standard based on material that is rare.

Again, I have never said that that is going to happen NOW or in the next few years. What I have been saying is that it can most definitely occur, is not something new, and if it does, we would in fact go back to a Gold standard.

So, again, you get schooled young grasshopper. Like I said, stop doing this to yourself and focus on something you ARE an expert on, which is tech.

Trust me, there is no lying by me to get popular support from other posters. Give me a break- I've been posting here for many years now.

Listen kiddo, this is not a popularity contest, nor is it a "who" is right or wrong pissing match.

Just like the arguments I and other vehemently defended amidst the ridicule of others at the time who only though real estate in Manhattan can go up, I am discussing facts based on history and how one can benefit from making proper asset allocations.

You are the perfect example of what I have been preaching on this board NOT to do last year, which is to NOT buy that overpriced 1-bed apartment in Manhattan during the peak of the bubble and become a ball and chain homedebtor.

Watch and learn what that kind of poor decision making will do your stress level as you grow into your 30s young grasshopper.

As for gold, I posted the link. There's a ton of goodness for everybody else to read to see your ridiculous political views. I have no reason to hide context - every single bit supports me.

As for my apartment, ironically your predictions for the future would be quite good for me. Horrible currency debasement and hyperinflation help those with debt at historically low fixed rates. Damned if you win, damned if you lose - I don't envy your debating position at all. Perhaps if you chose not to bring personal ad hominem matters into the debate, you'd be on *slightly* stronger ground?

Stick to your "grasshopper" fantasy, keep capitalizing "Gold" as if it was a religious symbol - fantasies and that sad Gold Religion are really all you have left at this point.

Investing in gold might be a long term moneymaker, but in the next few years it is very risky.

The biggest thing that gives me pause about gold is that the gold-bugs have had every reason in the world to expect gold to shoot past it's historic highs (bailouts, guarantees, Obama's new society projects). And yet it's done nothing but fall 25% since it's peak and sputter in the 700-range. Better than every other commodity, but pitiful in comparison to treasuries - the other safe haven.

I'm solidly in the deflation camp so I believe we'll see $300/oz gold before we see $1000/oz gold again. For now I'm enjoying my 100% move into Treasuries this summer.

> I'm mocking MMAfia who really does want a gold standard.

Why you would be mocking someone about their take on monetary policy when you've admitted you have no such understanding of monetary policy at all?

Its like the high school dropouts making fun of folks who went to "lousy" colleges.

nyc10022: A new low, even for you. I never said any such thing, and it makes me feel quite good about myself to know that this is the only way you can debate me. I challenge you to provide a link to prove otherwise. None exists.

I have said I don't fully understand some aspects of it, which is a far cry from not understanding all of it. Horrors upon horrors. Nobel prize winners in economics debate aspects of monetary policy. Surely you're not so deluded as to believe you understand all aspects of it?

jgr, you do bring up very valid points, and you probably already know about the explanations as to why (i.e. forced liquidation, margin calls, redemptions, yada yada).

i also agree with you that US treasuries will continue to blow into a bubble and that it won't stop in the immediate, or even very near future.

the area where we differ is in the timing... which i am horrible at. like rogers, i am the worst market timer, so instead, i'll play it safe and keep my positions in Gold. i may begin to short US treasuries next year, but that won't happen until i see diminishing demand at the auction windows for them.

"nyc10022: A new low, even for you. I never said any such thing, and it makes me feel quite good about myself to know that this is the only way you can debate me. I challenge you to provide a link to prove otherwise. None exists."

You noted you had no finance training. You taking that back.

And, this is the ONLY way I can debate you? Now thats a lie if I've ever heard one. In just the last couple days of threads, I pointed out that you don't understand deflation in a particular post, you don't understand monetary policy - pretty clear in this post, and you've made several other finance mistakes. I don't need you to explain how you don't understand finance... you do a pretty good job of making it clear yourself.

Then you have the balls to try and mock other folks' finance skills.

"You noted you had no finance training. You taking that back."

Only people with formal financial training are capable of understanding monetary policy? I stand by my statement that its blatant lying to read "I have no formal finance training" and report it to others as "you've admitted you have no such understanding of monetary policy at all". You really expect anyone to believe you have *any* credibility after that one?

I also stand by this statement: it makes me feel quite good about myself to know that this is the only way you can debate me

i think it's time to leave the kiddo alone, he's not worth it anymore. it was fun though, watching him squirm through concepts he claims he understands (of course).

let him babble in his own box till he turns blue. worked for rufus. will work for him. plus he'll be happy to boot thinking he's smarter than all of us here and all of us were wrong.

If you want to hedge your dollar exposure, buy foreign real estate.

Don't think so on the foreign real estate. The bubble here was repeated almost everywhere else. Real estate is not something I'd want to be purchasing at the beginning of a long global recession.

I'm in the Warren Buffett camp on that one too: best long term bet if you expect inflation is stocks. All the inflation hedges basically boil down to the same concept: Hold something with intrinsic value. As the buying power of $1 drops, the intrinsic value of whatever thing you own holds its own, and goes up in nominal terms. Some use real estate, others call that gold (even though it has no real intrinsic value, but thats a discussion for the other thread above).

The means of production is certainly an incredibly valuable thing to own, which you get from stocks.

If you have money denominated in dollars, and you want to diversify your income stream, then you could do worse to be renting out a apartment and getting paid in pounds.

I'm not making any sort of declaration about their housing market, just that their currency is at a multiyear low. If people stop financing our stupid spending, the pound could appreciate more than the 25% it has dropped in the last 6 months. What would hapen to the value of your british real estate? From a currency standpoint, you would be sitting pretty sweet. Again, this is more of an income play, since I spend most of my day telling rich old people what to do with their money.

Tech_guy,
Of course you're in the warren buffet camp. You don't have original ideas. What happens when all of your stocks are demoninated in dollars and the dollar drops like the Krona? No more foreign vacations for you! What else do you have?

"Of course you're in the warren buffet camp. You don't have original ideas."

Says the person who suggested buying foreign real estate. I'm sure you're the very first person who's ever suggested that. The difference between you and me is that I do this as a hobby. Your *profession* doesn't require original thought.

As for foreign exposure, large cap stocks have quite a bit of foreign exposure already. If you want more, buy foreign stock index funds that only buy in developed countries. This is simple stuff - your job is telling old rich people what to do with their money, and need a computer programmer to tell you about foreign currency exposure in various stock index funds?

> i think it's time to leave the kiddo alone, he's not worth it anymore. it was fun though, watching
> him squirm through concepts he claims he understands (of course).

Kinda like the guy who thinks he understands biochemistry because he read Wolverine.

Granted, I don't really have to argue that he doesn't understand any of this... his posts make it quite clear. The one where he tried to explain deflation was the funniest.

> Of course you're in the warren buffet camp. You don't have original ideas.

Saying he's in the warren buffet camp is like saying you're in the movie business because you rented braveheart.

btw, if its no formal training, what's the "informal" training?

He saw Buffett's place on cribs?

Or is it learning by doing... he lost his shirt, so he's "experienced".

Uhhhhh, foreign stock funds are still denominated in....................dollars. Idiot. Admit you know nothing and move in with rufus.

nyc10022: You know you had little credibility with me before, but after such blatant lies above when you weren't even part of the conversation, I've given up all hope. You clearly have an agenda, and you clearly are more interested in making up lies to discredit a bull than engage in rational discussion.

Even if I answer you today, you'll lie about it tomorrow. So you can believe whatever you want. I couldn't possibly care less.

> You know you had little credibility with me before

Yes, because credibility with the person we're making fun of is what I seek and care about.

Nice try, though...

"Uhhhhh, foreign stock funds are still denominated in....................dollars. Idiot."

Wow. The guy who does this for a *living* needs a hobbyist computer programmer to explain basics to him! The mutual fund owns stocks in local currency. When they post the day's mutual fund value, they take the day's stock value in local currency, use the day's conversion rate to dollars, and price accordingly.

Hypothetically if the underlying assets kept the exact same local currency value 2 days in a row, but between those 2 days the dollar's value relative to that local currency halved, the reported price in dollars would double.

You really do this for a living? And don't understand these basics? Remember the other day when I told you that I never doubted that you're good at what you do? That was true then, but isn't true anymore.

> than engage in rational discussion

I don't know if its irrational or not, but mindless discussion from someone who doesn't understand the topic is not "rational discussion".

Take a class (or 20), then come back to us.

Until then, don't pretend you're anything other than a troll.

If anyone is curious why nyc10022 has such an infatuation with me, why he lies so blatantly, here's why. He believes the posts here can actually move the Manhattan real estate market. He believes his posts here can lower it to the level where he can afford to buy, and so he has to stamp out any bullish posters however he can:

"But, RE markets are determined at the margins, so I think the "enlightened" are going to have some impact here." "back to my "margins" comment. You only need a few streeteasy crazies to start the descent down, and once that happens, its a snowball rolling downhill." from this thread: http://www.streeteasy.com/nyc/talk/discussion/5620-the-internets-ability-to-accelerate-price-correction

Tech_guy,
No one has ever doubted how little you know, so don't worry about that. When you sell the fund, you'll get back....dollars. Who cares if the price rose if the currency is worthless. Why do I waste time explaining the world to someone like you? Please go away....

> No one has ever doubted how little you know, so don't worry about that

lol

"When you sell the fund, you'll get back....dollars. Who cares if the price rose if the currency is worthless."

You've never heard of a currency exchange? They used it to convert the underlying asset from euros/pounds to dollars that very same day. You can use that exact same exchange and exact same rate to convert it back to euros/pounds. You're really too stupid to figure this out on your own?

Or do you mean that literally? Dollars are worthless and nobody will exchange them to pounds or euros for you? That's so dumb as to not warrant a response.

Yes tech_guy, the currrency could depreciate to the point of where iceland is right now. When they stop buying our treasuries, we're fucked. This wwas the whole idea of tis post. At the moment, we can't print enough. When they reduce their purchases, all hell will break loose. Again, welcome to the world with tech_guy as the class dunce.

I mention a 50% drop in the dollar's value. That's not enough for you. You think I'm the class dunce because I don't believe its very likely that our currency will be so bad, that currency exchanges will flat out refuse to convert it to euros or pounds. That says a hell of a lot more about your knowledge than mine.

positivecarry, exactly.

For example, just recently, Spain, Belgium and Austria have not been able to sell their debt and have called off the relevant auctions. Finland is having issues too.

They've "run up against the wall" by creating too much debt already. But of course, this is an "impossibility" for the US, a.k.a a "black swan". It can't happen. It's impossible.

Even if the head of S&P is already threatening the US's AAA status. See how the cost of insuring long term US Treasuries going up?

But of course, the "Dr. John's" of the world can't see out of the box and understand that this scenario is an impossible event, a.k.a . a black swan that doesn't exist.

Right. Watch and learn disbelievers. Watch and learn.

I can't believe I'm being debated by a guy who asked in the beginning of this post why countries don't just put money under a mattress. We've already had one currency this year go to zero. To think it can't happen to you is foolish.

S&P said that the US's AAA status is not a god-given right. In other words, they're verifying that when they assign the US a AAA status, its because the US deserves it, not because its magically assumed.

This is a *far* cry from threatening it. Do you have a link to any comments more threatening than the "god given right" comment I mention above?

"To think it can't happen to you is foolish."

You believe I'm foolish because I don't believe the US currency will go to zero. I wear that label with pride, and still maintain that's MUCH more telling about your knowledge than mine.

So did the icelandic people 6 months ago. Why don't you go join them and let us have a reasonable conversation.

"I can't believe I'm being debated by a guy who asked in the beginning of this post why countries don't just put money under a mattress"

ROTFL....

"I can't believe I'm being debated by a guy who asked in the beginning of this post why countries don't just put money under a mattress."

classic

"Unsure that a gold standard will solve the human condition"

The gold standard does nothing except falsely inspire confidence that if something bad were to happen you could get gold. Whoopie. If something bad were to happen, I'd rather have soup.

The gold standard breaks down under stress - viz. 1930's, 1970's - because it is impossible to flood a market with liquidity when money is tied to a finite resource. A resource, BTW, with virtually no applications beyond dentistry, as elemental gold is inert. (Which is why it doesn't rust.)

Why do people debate tech_guy, who insists that the mortgage interest deduction reduces the price of property, when it actually increases it? Take it away and watch home prices fall to the point where the carrying costs exactly equal rents, which they do anyway with the deduction, by increase home prices. You buy the benefit.

So he doesn't even understand the basic economic principle of discounting, and you expect him to understand monetary policy?

But I had to peek: "you need a computer programmer to tell you about foreign currency exposure in various stock index funds?"

No, no one needs a computer programmer for that. Dollar-denominated funds either a) hedge against currency risk; or b) invest in ADR's, or c) both.

"The mutual fund owns stocks in local currency."

You really needed to read the prospectuses. Most own ADR's. You couldn't trade ETF's on the American markets, or offer mutual funds for sale to Americans, unless they meet certain criteria defined by the SEC.

Sorry to disappoint you.

Apparently nobody who is "being debated" by me understands what a sarcastic comment is

steve, I didn't know about ADR's. Thanks for informing, but its hardly material to the discussion:

http://en.wikipedia.org/wiki/Depository_receipt_program

So they act exactly like stocks and are priced exactly like stocks (and exactly like I described, which is pretty pathetic that a man who's job is to sell funds needed me to describe this to him). So?

As for your very immaterial mortgage comment, you realize the people you're talking to agree with me on the mortgage deduction, and not with you?

Who agrees with you that the mortgage deduction isn't priced into the house? Are they also stupid? When you buy a home (well maybe not you, you're retarded), you consider the total cost of ownership - price, interest, taxes, maintenance, income tax breaks, real estate fees, etc.

jgr: don't take anything steve says at face value. I never, ever, EVER said the mortgage deduction isn't priced into the house. Obviously it is. steve horribly twists what other people say to make himself sound right.

Ask him about the tax deduction, and the rent vs buy math, and you'll see how ridiculous he is.

my my my... and the hole tech_guy digs just keeps getting deeper and deeper and deeper... this is getting quite entertaining

but of course, he's living in his own box where everyone else is wrong but he's correct... and as usual, he'll construct his own version of reality where 1+1=3 and will google bits and pieces of information to convince himself that it just... can't....... be equal to 2.

but then of course, when he get's called out, he falls back to the good 'ol "i was just kidding silly" routine... nice. didn't expect anything else.

"Apparently nobody who is "being debated" by me understands what a sarcastic comment is"

please, just stop already. or continue and entertain us at your own expense.

Better yet, jgr, read about it here (I keep bookmarks for a reason):

http://www.streeteasy.com/nyc/talk/discussion/6340-mortgage-interest-deduction-is-illusory

First, you'll see my *very first* sentence on the topic was "Of course its already discounted into the price.". Second, you'll see just how fantastically wrong he is about the mortgage deduction, and see why I can very confidently say nobody else agrees with him.

You're right MMAfia, I was 100% serious when I suggested that China should put a billion dollars under its mattress. Yet again, what you say makes yourself sound far dumber than me.

"why don't they instead put dollar bills under their mattress for 3 months? Honest question"

Oh, so now it's not an honest question? just stop already. really, i'm getting that same feeling when i watch someone on stage screwing up in front of an audience... very cringing. move on already and just drop it.

You've never, EVER heard of anyone refer to "under my mattress" as a joke for hoarding cash? That possibility is less plausible than the country of China literally putting a billion dollars of cash under whatever mattress the nation itself sleeps on?

You REALLY are grasping for straws now.

give it up already tech_guy, with each post, you're making more and more of a fool of yourself.

you've already lost credibility with pretty much everyone on this post. and the funny thing is, we don't even agree with each other on our views, between gold and foreign real estate as you can see in this thread... but one thing we have in common is that we all know that you are so off-based and have shown a severe lack of understanding yet carry an arrogant attitude and self-righteousness. entertaining, but silly.

like i said- in your little world, you are right and everyone else is wrong. there's nothing more to say or argue with someone like that.

so yes, yes, you're right- we're all wrong. move along now. nothing more to see here.

"you've already lost credibility with pretty much everyone on this post"

nyc10022, who believes he can single-handedly move the Manhattan real estate market here
positivecarry, who believes the US dollar will be so worthless banks will refuse to exchange it for Euros at any exchange rate
stevejhx, no further comment needed
you, who wants us to go on a gold standard, then cowardly denies it

I think I'll live if you guys don't think I have any credibility. I'm happy, I'm well off, and I'm optimistic about the future. Naturally that threatens you crazies. Everybody else who's reading will see who has the real credibility :)

"I'm happy, I'm well off, and I'm optimistic about the future."

great, now.. adios!

" the currrency could depreciate to the point of where iceland is right now. When they stop buying our treasuries, we're fucked."

Positive & Mafia:

I am not a finance person, so I appreciate your posts.
Question: Now that cash is king, what do I do to protect my cash if & when the dollar will be (further) devalued? Are we heading towards Weimar, wheel barrels of marks to buy a loaf of bread?

As far as gold, I don't invest in things I don't understand & I don't understand enough about gold, fear I'd be on the wrong side of the deal & lose my shirt.

Thank you

Urban - thanks for your thoughts. This is one of those trades that is just hard to point to a specific catalyst for a reversal. I agree there is no inflation pressures now. But to me, for the 10 and 30yr to be where they are are, we need to be in a sustained deflationary or non-inflationary period over those 10 to 30 years. And that is where i have exception to where they are trading. That implied lack of inflation just doesn't seem realistic to me.

"I never, ever, EVER said the mortgage deduction isn't priced into the house."

Good, tech, then you agree with me. Since the mortgage deduction is priced into the home, it cannot possibly make any difference to your carrying costs.

"Ask him about the tax deduction, and the rent vs buy math, and you'll see how ridiculous he is."

How can you possibly maintain both positions simultaneously? You know not what you speak. You CANNOT simultaneously discount the deduction into the price of the house, and then count the deduction separately. Doesn't work. Can't work. Inherently illogical.

Further, it is a TAX deduction, not a mortgage reduction, or an interest rate reduction, or anything similar. Therefore, its benefit is calculated as a function of total taxes paid.

"see why I can very confidently say nobody else agrees with him."

Who cares who agrees with me on this board? Tax deductions are calculated as a function of taxes. Pay no taxes, get no benefit, yet still pay your mortgage every month.

I am familiar with how ADR's work, but ADR's are traded on the US markets, and in dollars. From your link: "ADRs enable US investors to buy shares in foreign companies without undertaking cross-border transactions. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies."

Just one more thing that you don't know.

"Naturally that threatens you crazies."

"Just one more thing that you don't know."

Only a fool claims to know everything.

"Good, tech, then you agree with me."

Nope. But I'm also not going to debate this with you again. I linked our last debate above - I think it was pretty settled there. I really don't care if you disagree.

wow, tech guy just got bitch-slapped 100 times....

still rotfl...

Dwell,

Tips are getting hammered as oil drops and the recession kicks in (unemployment numbers this morning were freakin car crash awful) so you might want to buy TIP on weakness. Also, I think Rydex funds has some currency plays. Check their website. My main strategy (buying foreign real estate) is posted above.

As for the weimar comment, I'm not here to predict doom and gloom. But remember this:

1 year ago RBS bought ABN Amro for $100 Billion.

For this amount it could now buy:
Citi $22.5bn
Morgan Stanley $10.5bn
Goldman Sachs $21bn
Merrill Lynch $12.3bn
Deutsch Bank $13bn
Barclays $12.7bn

And still have $8bn change, enough to pick up the big three automakers.

Saying this couldn't happen or that is impossible is foolish. Singapore's real estate fell 80% a while back, Iceland's currency has gone to zero this year. It wouldn't hurt to be conservative and hedge your bets.

"Only a fool claims to know everything."

That is true. The corollary is also true: only a fool claims to know what he doesn't know.

You don't know how foreign ETF's and mutual funds work, yet you opine profusely on them. You don't have any clue about the gold standard, yet you opine profusely on it. You insist on holding incompatible positions on the value of a mortgage interest deduction - that it is both discounted into the price AND that it reduces your monthly costs in actual terms - yet you opine profusely on it, and deride longstanding data that prove the ratios between rents and purchase prices.

If there were no mortgage interest deduction, housing prices would fall precisely to the point where carrying costs equaled rent, all other things being equal. Therefore, since such deductions affect the price, you pay for the benefit. How much are you willing to pay for that benefit? Apparently you are willing to pay twice as much for the benefit as it's actually worth, not only because that's the current ratio between housing prices and rents in Manhattan, but because you count the benefit twice: once discounted into the price, and again when you take out your abacus to do the calculation.

"I think it was pretty settled there."

That's your problem. You're happy thinking the unreal.

Time to call out the reinforcements - your alter-ego LICC - to back up your claim.

Don't insult LICC like that...

maybe tech guy is rufus...

interesting... I just noticed that tech guy started ignoring this thread, while posting on others.

Guess he wants to hide the smackdown...

What tech_guy = LICComment do(es)n't seem to understand is that ultimately property prices are correlated directly to incomes, whether you rent the property or buy it. If you rent it there are schemes - free month's rent, for example - that seem to lower your actual rent, but don't. If you buy there are schemes - variable-rate mortgages, low or no down payments, liar's loans, Ninja loans, mortgage interest deductions - that seem to lower your actual costs, but don't.

Because in the case of purchasing, those schemes only work for the first people who use them, and after they're introduced property prices rise precisely to the point where carrying costs equal rent. Only under bubble conditions - where people expect prices to rise forever - will that be ratio be distorted.

That is why the (equivalent) market constraints of 30% PITI = 40x monthly rent are so important. They define the income constraint on housing costs.

It is also why PITI does not include any tax deductions: the cost of housing is the cost of housing. Taxes are taxes.

"Guess he wants to hide the smackdown..."

Nope, you can bump it all day, every day, for years to come and I'd be happy. In fact, this thread joined my bookmarks - I plan to link to it when similar arguments come up again later. I just feel I've beat this to death and no further input is needed.

"I just feel I've beat this to death and no further input is needed."

That is indeed the problem. You feel you've "beat this to death," and you don't even understand it, nor do you understand, if you have included tax benefit into the price of the house, why you can't include it again when calculating your monthly costs.

It's like adding 2 + 2 and getting 8.

stevejhx, exactly which part of "I really don't care if you disagree" confused you most?

"exactly which part of "I really don't care if you disagree" confused you most?"

No part of it.

2 + 2 = 8.

You're a computer programmer. Just run this:

IF 2 <> 2 THEN F*CK!

"I just feel I've beat this to death and no further input is needed."

Uh, yeah...

Well, you did make a pretty convincing argument that you have no idea what you are talking about. Case closed.

"It is also why PITI does not include any tax deductions: the cost of housing is the cost of housing. Taxes are taxes."

Pure nonesense. PITI does not include tax deductions because it is compared against pre-tax income. Would it make sense to divide after-tax PITI by pre-tax income?

For an individual, dividing after-tax PITI by after-tax income gives a better picture of the her own real life situation. But loan officers are not going to do your tax return for you to figure out your taxes, so dividing pre-tax PITI by pre-tax income is much more straightforward for them.

Ok, so now that the class dunce is gone, let's go back to the OP's point...

Since this thread started, this interesting article came out today in Bloomberg...

http://www.bloomberg.com/apps/news?pid=20601087&sid=aBXIqDOGKYP4&refer=home

Some choice quotes:

"...three-month bill rates turned negative for the first time since the U.S. began selling the debt in 1929."

“Treasuries have some bubble characteristics, certainly the Treasury bill does,” said Bill Gross, co-chief investment officer of Newport Beach, California-based Pacific Investment Management Co., which oversees the world’s largest bond fund. “A Treasury bill at zero percent is overvalued. Who could argue with that in terms of the return relative to the risk?” he said in a Bloomberg Television interview yesterday."

"David Rosenberg, the chief North American economist at New York-based Merrill Lynch, said last week that demand for Treasuries had reached the “bubble” phase like in technology stocks in 2000 and real estate six years later."

"Treasuries have “absolutely” entered a bubble, said David Brownlee, who oversees $15 billion as head of fixed income at Sentinel Asset Management in Montpelier, Vermont. “There is very little rationality in my mind to bills trading at zero.”

> In fact, this thread joined my bookmarks - I plan to link to it when similar
> arguments come up again later.

Not exactly sure how this is going to help you win an argument.

"I'm stupid, I SWEAR.... look what I wrote.."

"dividing after-tax PITI by after-tax income gives a better picture of the her own real life situation."

I FULLY agree. Which is why the tax benefit is calculated as a percentage of taxes paid, not as a way to scheme your way into buying a property you can't afford: "LOOK, MA, NO TAXES!"

Thank you for proving my point.

MMAfia, I agree that treasuries are frothy. The problem seems to be that all the banks that got TARP money don't want to lend it out so they're giving it right back to the treasury, while still counting it as capital.

Moreover, although we are now in a period of higher highs and lower lows on the stock market, there is still a lot of fear and risk aversion. This will remain until there is a coherent economic plan, which since there has been nothing coherent about the past 8 years I don't expect will happen until after January 20.

"now that the class dunce is gone."

He'll be back. Either as himself or LICComment.

tech_guy, try this: press the "ignore this person" button next to your name. You will much brighter when you stop reading what you yourself write.

I have to admit, I laughed at that one...

nyc10022, what's funny is that you have ZERO contribution to this thread. All you did is troll insults. No substance, no arguments, just trolling insults. I'm sure you're fantastically proud of that too.

"I FULLY agree. Which is why the tax benefit is calculated as a percentage of taxes paid, not as a way to scheme your way into buying a property you can't afford: "LOOK, MA, NO TAXES!"

Thank you for proving my point."

No Steve, thank YOU for FULLY agreeing with me, including the part about your claim being pure nonsense.

"nyc10022, what's funny is that you have ZERO contribution to this thread. All you did is troll insults. No substance, no arguments, just trolling insults. I'm sure you're fantastically proud of that too."

man, quit while you're only just a laughingstock...

Thanks for confirming :)

"including the part about your claim being pure nonsense."

No. Read what you wrote, do the math.

Pretax income $100,000.

After-tax income $75,000.

Mortgage interest $10,000.

New after-tax income $77,500.

Tax savings $2,500 (25% of $10,000). 10% of $25,000, the former tax bill, not 25%, the marginal tax rate.

Sorry.

"MMAfia, I agree that treasuries are frothy. The problem seems to be that all the banks that got TARP money don't want to lend it out so they're giving it right back to the treasury, while still counting it as capital."

Yes... hence the notion that the Fed is "spitting in the wind".

The question is, once the treasury bubble pops/deflates, where will all the cash go into? Equities? Commodities?

Many people believe commodities. We shall see.