The Big Bond Selloff
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- เผยแพร่เมื่อ 27 ส.ค. 2024
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The 10-year U.S. Treasury yield closed above 4.9% yesterday, its highest level since July 2007. The bond-market sell-off that's pushing yields higher is starting to eclipse some of the most extreme market meltdowns of past eras.
Losses on Ten Year Treasury Bonds are close to 50% since March 2020, while the 30-year bond had plunged even more.
Those losses are nearly in line with stock-market losses seen during the worst crashes of recent stock market history - when equities slumped 49% after the dot-com bubble burst and 57% in the aftermath of the financial crisis of 2007-2008.
Compared with previous bond-market meltdowns, long-term Treasurys are seeing one of the most extreme collapses in history. The losses are twice as severe as those seen in 1981 when 10-year yields neared 16%.
With prices plunging and yields at decade highs, let's look at who feels the pain from the bond selloff.
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Is it gluten free?
Wheat is a modern poison, especially that foot tall dwarf strain.
I had before.
Fucking hated it. Eat a steak Boyle. You're looking very frail.
Vegan is poison.
Lol. Buy my crap suckers!
He washes it down with Guiness.
An ads appears 10 seconds right after you finish talking about the sponsor?
Something just feels so right about Patrick wearing his full suit and tie, in a spotless, all white and stainless steel kitchen, where the only sign of food is the sponsor. Like this is theoretically how he would prepare a meal if he didn't get all his calories and nutrients from consuming economic data.
😂
Audibly laughed, thanks
Very nice… now let’s see Paul Allen’s all white and stainless steel kitchen, where the only sign of food is the sponsor.
Absolute highlight of the video.
you should ask him on a date
It feels weird seeing Patrick standing up with his legs visible to the camera. This is how I learned that my mental model of Patrick didn't include legs before now.
It's wonderful to hear that you had a mental model of Patrick.
Patrick doesn't have legs. The ones you see were added in post using AI.
He is wearing pants.
I worked in a retail bank as an Investment Advisor and this is what made me leave, the last 3 years we have been selling low risk investors with short term (3-5 years) investment horizons these heavily weighted bond portfolio like it’s 2015, and calling them low risk, while the volatility in these funds is just as high if not higher than our equity/growth funds, but with a near zero rate of recovering any losses in the investors timeframe - REALLY glad to hear you taking the contrarian stance here Patrick compared to most of the market commentators out there, I’ve been harping on about low risk being high risk since 2020 and feeling like a damned Cassandra
Everything’s low risk until it isn’t.
Thank you
@@edpatel6929 no truer words have been spoken...
Thank you @Bright
Clearly it sounds like short term bonds were favored, (*perhaps foreign buyers and faith in globalization?) ~ rather than some bluechip stocks (*domestic?)
I'm a fishmonger. The fact that I'm equally as excited about Patrick's next videos as I am for my football-team's next game is bewildering - yet utterly understandable! Thank you Patrick, I now talk about economics, stock market, bond market, etc, to my customers at the fish store - to their complete astonishment!
Respect for you!
TH-cam is awesome - nice work :)
For all the negatives of social media and the internet, this kind of thing, the ability for regular people to *learn* stuff like this, whatever they're interested in, is truly an amazing part of modern life.
football as in soccer or football as in American? I can't tell where anyone is from on here 😂
@@lowwastehighmelanin Proper football. The kind that Patrick calls football 😉
I am loving your deadpan style of advertising! I can see you've been having Huel for breakfast, lunch and dinner because your kitchen looks like you've never used it!!
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The ad bit was the best part!! Now I want some sponsor that will make Patrick do the lawn in suit and tie
I can't picture Patrick consuming food
I dunno, I can picture him picking at a Cobb salad while browsing the Journal. Sparkling water with a lime in it on the side. But I think I just like sparkling water.
@@Activated_Complex not gonna lie, pretty creepy that it's that specific
I picture him eating lobster 🦞 with his robot manner...😅
Before that ad I couldn't even picture him standing up, much less preparing food.
Take note of the subtly placed bottle of HUEL on his bookshelf ... 😉
This is why you should buy debt based on the terms offered and not to speculate on what other people might pay for it later. It drove people to do stupid things like purchase debt at near 0 interest. This was never a good deal. of course those bonds are nearly worthless, they were always worthless.
I am waiting for my McBride B shares to rise.
Presently I am getting 13p a quarter for thousands of shares. Was 1p, so it's rising fast.
I wouldn't call trading at 50c on the dollar "nearly worthless". If that's your definition of "nearly worthless" then that would apply to Meta when it crashed from 300 to 100.
You want something that's really "nearly worthless"? Go look at Evergrande or Country Garden stocks and bonds. Or AMC stock. Maybe that'll give you some perspective 😂
Who bought long bonds at these low interest rates, they did not have a good historical perspective. I think this was a problem with the SVB failure. Bond funds can burn you, where as actually holding a bond is less risk
They are worth something if there's deflation. Some positive return is better than any negative return on your cash.
Better than whichever poor souls are holding the negative yielding paper issued by the Bundesbank, etc. I dread to think what those are worth now.
PATRICK BOYLE IN DA HOUSE EVERYBODY!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Ok, Charles.
Woop wooooop!
💃🏾💃🏾💃🏾💃🏾💃🏾
People say that still?
That’s plenty from you
I enjoy the occasional video where you keep things totally serious. It's nice to have a mix of your humor and straight takes.
Even if bond yields are rising while stock prices are decreasing,the markets are still a bit skeptical as to whether the federal reserve will stick to its goal to raise interest rates until inflation is under control. Would it be best to sell my $401k worth of equities, what is the best way to profit from the current down market.
It is much more challenging to create a strong financial portfolio therefore it would be wise to get much needed assistance from a real finance professional. You can then receive strategies that are specifically suited to your long term objectives and financial goals.
I completely agree with you.
The best market strategy is working with a standard and seasoned investment coach. I’ve been in touch with a professional for sometime,mostly because I lack the understanding and experience to cope with tough market conditions. During this recession, I racked in almost $700k.
Insightful. I need some advice on how to rebuild my portfolio and develop successful market tactics. Where can I find this professional portfolio manager?
Reading, research, patience and seeking guidance is the best way to approach or break into the market system. I have been inclined with CHRIS RYAN STEWART, a CFA whose experience and expertise speak for itself. I saw his take on risk management a couple of years back and I was amazed.
It's crazy. Portfolios made for risk-averse people actually lost while portfolios made for risk seeking people gained over the last decade. If you think about it, this makes it questionable to actually even try to make a "risk-averse" portfolio because in the end they always perform worse. Even in bad times.
This kind of depends on how you view risk and what the use is of the bonds within your portfolio. If you used ultra-short or short term bonds to lower your volatility to make sure you can extract money in emergencies, then sure, you lost a bit (around 4-8%), but that still protected you against a possible stock market crash (which can easily go down 40% or more).
Yes, risk averse portfolios will make less money than a risky (but widely diversified) portfolio, but that's just common sense.
Like mentioned at 16:50, defensive or low P/E & P/B stocks can play a role as well in risk-averse portfolios, for example IXJ, VDC and CVX versus TLT on the 5Y. I think you can make a case that holding for example only 30Y bonds would be pretty risky even if might not be common to think of it that way.
Could you do a video on why the Federal Reserve doesn't try changing the reserve requirement ratios to fight inflation? They've been 0% since March 2020, and raising them would clearly combat inflation by reducing cash supply.
They can't raise reserve requirements right now because it would create more SVB style bank failures as banks would be forced to sell low value bonds at huge losses to generate those cash reserves.
They should never have dropped the requirements, now raising them is going to have to happen slowly.
They should put out a schedule to increase reserve requirements 5 years out so banks can respond and minimize losses.
Sounds like an interesting topic, yes please!
To the extent they want to incentive banks to hold more money in reserves, they just raise the interest rate on reserves, which is essentially their main policy arm now. The Fed Funds rate just follows the IORB now. In an ample reserves regime, the FFR is no longer the main lever and the reserve ratio is a largely obsolete monetary policy instrument.
Fed increasing the money supply where? If qe doesn't go directly into the economy so I fail to see the dogmatic view that it's inflationary.
Bonds are typically considered a "flight to safety" during recession. But Federal Government revenues decline during recession. During the GFC Federal tax receipts dropped by 18%. If that were to happen again the Federal Treasury would see around a 1 trillion dollar decline in annual revenues. Congress will either have to cut spending (lol) or borrow the difference. What yield will be required for the market to absorb an additional 80 billion per month in UST on top of what is currently being sold? Short of FED QE there is not enough real demand for these securities. I think we could easily see a recession and rising bond yields. Again QE could solve this but that is highly inflationary so the FED may very well hesitate to once again rely heavily on their QE program.
Not sure I'd call QE inflationary. The Fed doubted it in a 2009 white paper when they were dipping their toes into the QE ocean. Japan's nagging deflation (which at that time still had years to play out) left them soured on the idea, and yet... they jumped in. That says a lot about central bankers. But I'm biased: I call the so-called 'GFC' the 'Great Monetary Crisis' and lay blame squarely at the feet of the Fed. In closing, you strike me as the kind of guy who wouldn't lend money to a family member (ie your Uncle Sam) who already owed tens of trillions of $s to the folks all over town. You have smarts. That's what makes the future look quite scary, even if a gimmick like the perpetual bond hits the market. Us, our kids, our children's children, etc. are expected to be dumb enough to pick up after the idiots & assassins for centuries to come? Good luck with that...
QE is not good for the tax payer.
GFC?
@@BrianHeimbuecher QE is inflationary and MMT is the dumbest thing on the planet.. the same morons that argue for these concepts think the treasury can mint a trillion dollar coin and solve all financial problems. These are children with Nobel prizes.
@@platinumsun4632 Great Financial Crisis.
The country needs inflation in order to pay its debt. Everything is going according to plan.
Inflation increases national GDP per capita.
Theres only one way out. We all become millionaires.
@@emptiesterWe'll all be millionaires and a million dollars will pay for a cup of coffee.
I'll fix it for you:
Economic entities require inflation to pay for debt. Everything is going according to the natural course of economic systems which live and die by natural resource extraction.
Also the capitalist class needs to claw back the tiny amount of power the worker class managed to acquire in the last two years. It's absolutely critical that workers never have sufficient power to pick and choose between jobs, or the capitalists might have to start paying them some small part of the productivity gains workers have been cut out of for the last fifty years.
Awesome cliff notes version of what's going on and where we're headed. Real concise yet broad based as only Patrick can produce. Thanks Patrick!
I have decided to start taking notes on these videos.
3rd year of varsity be like
Where to hide with high inflation on consumables...but deflation pressure on assets.
Buy a grocery store?
Real estate rentals and 5% cd ladders.
money market funds
Stocks are pretty unstable at the moment, but if you do the right math, you should be just fine. Bloomberg and other finance media have been recording cases of folks gaining over 250k just in a matter of weeks/couple months, so I think there are a lot of wealth transfer in this downtime if you know where to look.]
Such market uncertainties are the reason I don’t base my market judgements and decisions on rumours and here-says, got the best of me 2020 and had me holding worthless position in the market, I had to revamp my entire portfolio through the aid of an advisor, before I started seeing any significant results happens in my portfolio, been using the same advisor and I’ve scaled up 750k within 2 years.
Having a counsellor is essential for portfolio diversification. My advisor ASHLEY AIRAGAHI who is easily searchable and has extensive knowledge of the financial markets.
Top quality as usual! I believe the following years will be very interesting for the stock market, especially once the Fed begins to cut the rates
Up or down?
Once the fed starts cutting interest, historically the market crashes
@@GinaGenis that because once they decide to finally cut, the higher interest rate environment has already done it’s damage and the fed was too late? I watch a lot of these types of videos with zero finance background, just trying to not be caught with my pants down when it hits the fan.
Before watching the vid, let me just pay compliment to the suit. Dashing!
My normal savings account has a WAY better interest rate than Bonds.... something is way off
If the interest rates fall in the future, that will increase the market value of those bonds but not of your savings account.
@@seneca983 If interest rates fall we have bigger problems, namely a currency crisis. Interest rates aren't even "high" yet.
Not to mention the tax departments plans to scrape the cream off Joe public's savings accounts so how high is the rate you're getting in real terms once the tax raids ramp up...🤔
Plot twist, your savings account is investing in bonds. Duration risk always existed
Yes, because your bank's credit is not the government's
yeah - my bond fund is negative since 2010.
"We have never had an interest rate of 5% with a us debt of 33 trillion..."
Guess what, we've also never had McDonald's workers starting north of $20 an hour. We've also never had seniors cashing out $8000 Veteran's Administration houses for $600k. We've also never had free community college tuition for half the student population. We've also never had the opportunity to knock 200,000 Russian troops out of combat permanently without ever putting a boot on the ground. We've never had a century-level rebuilding of rail and highway infrastructure, we've never put the entire state of California on wind and solar, and we've never had Teslas selling that get the equivalent of a 100mpg.
Now I will admit there are historic parallels. For example, the dollar/yen exchange rate was higher momentarily in 1998, and the US unemployment rate was this low FIFTY YEARS AGO. So take comfort that sometimes history repeats itself.
Patrick did not explain why investors purchased 10 years bonds at near zero interest rate?
A person does not need to have a MBA in Finance to understand that buying long duration bonds at near zero interest rate does not make ant sence !!!
I thought exactly the same. When interest rates were near zero, I stopped buying CDs and moved all of my money into liquid money market savings accounts. Why lock up my money for practically no return? Only recently did I start buying CDs again.
US debt clock :
>Unfunded liabilities< one or two days ago leaped from 194.8 to 210.8 trillion. Additional 16 trillion. - Any idea what is brewing there ?
Bond issues recently. Get USA back to work, type of thing Biden.
@@huwzebediahthomas9193you think the US issued $16T worth of bonds “recently”? 😂
IF pension funds knew that a rise in Treasury rates would bankrupt their bond funds, they may have very well short sold their own treasuries, and that the word on Wall st was short treasuries. That can also be entirely played out, Pension funds have recapitalized when they faced bankruptcy.
Of course their all hedged in interest rate futures who do you think keeps shorting in the hole
Even with all available hedging strategies, you would have bond-swapping going on. I’m hearing US deficit has doubled, this would have to be as a result of bond-swapping.
I’m so happy I didn’t buy a house! Short term bonds, pay for my rent and turn a profit with no risk at all. I’ll be looking at possibly getting a 10 year maybe 7-8% I’m hoping. There’s so much risk in buying a house right now, already with an 8% mortgage it’s more costly to own a house with all of the risk of the property value going down and being underwater. I won’t be buying until they’re below the 2019 levels.
4 out of 10 home buyers are cash buyers, interest rates not relevant in their decision.
@@johng4093 well, I wish them the best of luck. They’re gonna need it. I’d much rather get a safe 5.5% return with no risk of housing prices going down. The question is how big of a return am I gonna get in the future when the Fed can’t get inflation under control and Hass to raise rates like the 80s. I’d be happy with a 16% return on a 10 year bond
Patrick I know this is predominantly a comedy channel like awaken with JP but if the comedy side doesn't work out for you I think you could have a future as an economist.
You seem to have an above average grasp on world economics.
Having said that I would stick with the comedy for now as you are really killing it!
You're great with explaining economic situations. Amazing content. Would you kindly make a video on what the solution might be or where best to invest in case of economic crisis? many thanks in advance
You have fairly stacked up the subscribers bud. I remember telling my cousin to watch your videos when you had around 10k subs and I told him you were going to be big. Could tell how professional you are. All the best bud.
20 minutes to thoroughly, professionally, and calmly tell us we're phuct.
What i don't understand is what benefits do bonds have over cash when interest rates are near zero other than allowing wall street to charge fees?
I think some thought the Federal Reserve might copy Europe and have negative yields. Then the investors could have made money.
Also, the government sells bonds straight to customers over the internet. You can get an account very easily, so no fees need accrue to Wall Street!
@@allbackicelandso you're saying the government will buy back the bond at market price (i.e. higher price when interest rates drop)?
As for negative yields, I know it can happen, but I'm skeptical that it would lead to much upside for bond holders. For one thing, if bonds go negative, they likely would stay near zero. Moreover, going negative isn't just continuing the trend below some arbitrary threshold, it would represent a fundamental difference in incentives structure--essentially being punished for lending and rewarded for taking on debt--that's not sustainable.
@@jon9103bonds were losing money anyway through inflation.
Lets say at 3% inflation binds sit at 0.5%.
If inflation falls to 2%, all else held the same, investors would be willing to take on a -0.5% bond.
Why take those bonds on in the first place?
- As the other guy put it, if bonds fell further your bond would become more desirable and would trade at a premium.
- It may also be cheaper and safer than putting it in a bank. If interest rates continue to fall, deposit costs could fall further
- Certain funds may use it to hedge risk or be forced to buy bonds to satisfy regulations
- Foreign investors can use certain financial derivatives to actually turn a negative yielding bond into a positive one
Yes! A new Patrick Boyle video is just the way to start the day, thank you and good morning from anchorage Alaska!
Hi Patrick, thank you for valuable information. I have learned LT (10Y+) bond yield should reflect supply / demand (QE vs QT, gov. refinancing needs, reserves of other countries), expected economy growth and expected inflation. If that is the case, I do not understand why everybody is talking only about short term FED rate and scenario when FED cuts rates the stock market will explode. If there is a recession and FED is pushed to cut rates to e.g. 2%, there is still a chance 10Y stays at 4% and the environmnent for the government and corporates will not be much easier. What is your opinion?
2% over the short term and 4% over ten years would be a considerably healthier situation than the weird inversion of recent years.
(Typically longer dated debt yields more, due to compounding uncertainties, or just the opportunity cost of tying up funds for longer periods.)
I'm a bit confused as to the direction of your comment, but to answer a small portion of it: the Fed does not "control" the 10-yr yield, the market does; the Fed impacts short term borrowing via the FOMC's target-setting of the Federal Funds rate, which is the rate at which banks can lend their excess reserves to each other.
Fed open market operations, like QE/QT and Operation Twist, certainly do impact longer-term interest rates but to a much lesser extent than the market's actions.
This may explain why you only see people talking about the "short term Fed rate" - short term rates are really the only ones that the Fed actually controls.
Fed's movements in short term rates now affect people's expectations of short term rates in the future. If the Fed keeping rates now high without backing off any time soon convinces people that future short term rates will be higher for longer, then this affects their view of what the 10yr should be.
How to tell someone you're a millionaire without telling them you're a millionaire... drink Huel Ready to Drink
Its not unreasonable in cost!
@@Michael-st9ky I'm just being silly. I've been buying huel powder for nearly a decade now. When I tried to get people at work on it they'd say it was too expensive, but now they're all buying RTD for twice as much.
According to Huel its affordable, I guess at 12 bucks a bottle it’s not expensive but it’s also more than red bull….
@@sunnohh$12!? Wtf, when did they raise prices? It was always comparable to Soylent in price
@@Michael-st9kyit's not affordable for the middle class anymore
Today I learned that Patrick is not in fact a humanoid robot that only exists from the waist up.
It’s staggers me how so called sophisticated investors could buy long dated bonds at close to zero percent interest. By definition there is close to zero upside compared with just holding cash and enormous downside risk in rising rate environments . What on earth were they thinking? It boggles the mind that people could be so stupid.
It’s really simple: buy bonds when you can get a rate you are happy with. Always hold until maturity. Never buy a bond fund. You will never lose money and never have to sweat. If you want to can ladder your bonds with varying maturities and refinance them as they mature. But short terms bonds in rising rate environments and long dated as rates start to fall.
It’s not exactly rocket science is it?
If you buy a long term bond at interest rate X, and rates double for the life of the bond, you DO lose LOTS of money, re REAL dollars.
Claiming you won't lose money is nonsense, as nominal dollars get to be worth MUCH less if there is meaningful inflation.
@@rogergeyer9851 you do not lose money. You are getting a deal you are happy with. Maybe you lose the opportunity to earn more. As I said, if you feel there is a risk of a rising rate environment buy shorter dates bonds
I’m the one suffering. Retirement account was stable value for approx 50%. Moved that to BND December of 2020… at all time high. Fml. 😢
It's an aggregate bond index. It'll catch up to yields over time. In fact, in 2022 it was still collecting yield from bonds bought pre-2020
The primary consideration when purchasing a bond should be the stability of its underlying currency. Central Banks (CBs) have actively devalued fiat currencies, allowing governments to manage their debt more comfortably. This strategy impacts public debt and cash holders adversely. Currently, CBs are employing high interest rates to incentivize investments in government bonds, knowing well that inflation will erode the actual value of these investments. If inflation persists, the real returns on these bonds could turn negative. This will be certainly the case and this is the reason why the US government is willing to pay 5%. They simply know that in real terms they won't be paying anything. In extreme scenarios, like hyperinflation, bondholders risk losing their entire investment. Hence, it's advisable to invest in tangible assets over bonds. Stable business stocks, for example, tend to maintain their real value even amidst inflation.
If they've all devalued fiat currencies, than none have LoL
I think if Sherlock Holmes had a TH-cam channel and got a food sponsorship it would look exactly like this. 🤔
Patrick even wears a suit when meal prepping 😂😂. I cant wait for him to get a motor oil sponsor, he qill also wear a suit while changing his car's oil. Great video, as always Sir!
Great content
Bond funds are horrible. Prefer in individual bonds and cd's
If you bought long term bonds when the Fed rate was at zero you are a silly person.
Patrick always has a wealth of information, but I think my favorite clip is of him making huel in his kitchen in a suit...just as I imagined he would.
Great video Patrick!
Patrick is 🔥 I've just recently joined his FACE:B0K page too :)
The interesting question is what would have been the course of interest rates had central banks not engaged in massive amounts of QE during the Covid outbreak. If there is a lesson in all this it probably is don’t trust that the market prices of assets that central banks are manipulating are “correct”.
They would;ve stayed at the feds target
We can't ignore the potential impact on portfolios. Bonds are often considered a safe haven, and if they crumble, investors like me might scramble. I’ve been investing for 11 yrs and my $1m portfolio has never been this depleted, how i do hedge this?
Great Video Patrick - While Countries like the US who have longer term mortgages are less affected however countries such as Canada where max term on mortgages is 5-7yrs and this is impacting their home market to a far greater level.
Enjoying 2%15 yr FIXED loan in US 😊
Canadian banks are also less negatively impacted vs US banks as they can rollover low interest loans faster
Shocked to see Patrick not wearing his HUEL T-shirt .. I think he needs a fine Italian suit maker as a sponsor.
#8:24 - It is a good thing that I have a 12-year fixed mortgage at 2,1 %, no credit card, and no car.
Fantastic video as always. Thank you for your no bs explanations
I really love the fact he gave what could be a condensed 101 class lecture. Obviously I love the meme episodes and disaster recaps, but this is quite an objective piece of information that 95 % of adults could watch and come away a bit smarter.
LAYMAN QUESTION FROM A HS DROP-OUT
18:10 "In the zero-interest rate environment of a few years ago, a dollar received in ten years, was worth about the same as a dollar received the next day."
As a layman, this sentence makes no sense from an economic and finance perspective. A dollar is always worth less in the future, just because the government says "interest rates are low" by messing around with the currency/economy, this doesn't mean you can violate intrinsic laws of economics. There's either savings to be invested or there isn't, interest rates are defined by the market not the Gov. This would be like the government saying "First law of thermodynamics no longer exists" and expecting a boom in the energy sector.
A better way to put it is that with no interest environment, current consumption is the more valuable choice all other things being equal. That is, interest rates are primarily driven by the fact that consumption today is more valuable than consumption tomorrow and the interest rate serves primarily to pay people enough to make saving/investing the better option.
While the government/fed have some, mostly indirect, say in the matter, interest rates are mostly a natural thing since one function of money is to allow for easy temporal comparison of values.
A positive interest rate isn’t one of the “intrinsic laws of economics”. While it appeals to the human psyche that time should be worth *something*, that’s not necessarily true. Clearly not in a deflationary environment, for example.
Also, the government doesn’t “mess around with interest rates”, it sets them. Maybe I’m misreading the implication, but “mess around with interest rates” implies that there is a “true” interest rate and that - in an effort to accelerate or decelerate the economy - the government departs from that rate. That’s not how it works. The interest rate is what it is because the government said so. Whether the markets respond to that interest rate as intended by the government is another matter entirely.
Hope that was helpful.
Thank you for this video! This is one of the videos that's more directly applicable to all of us, in that it helps us understand what's happening.
To be fair, holding long dated bonds has never been a stable investment and is more stock like.
Buying a 10 year bond at 1 percent interest is pretty dumb. How is that not a high risk low reward investment?
but right now you can buy TLT with return of near 5% for 15 - 20 years, isn't it a good deal ? I don't think inflation would be 5% for 15 years
@@no_name_qwe 100% agreed with you! Be advised though that bond funds work differently than holding a single bond. You'll take advantage of total return of the bonds appreciating in value as interest rates drop and the fund's bonds are sold or mature and are replaced, BUT the interest/yield will also drop as TLT's bonds get replaced with the new lower rate bonds.
Can you imagine the losses in the books of the FED and ECB? They are full of valueless rubbish
Funniest best delivered information presented in 2020’s bar none. Patrick is the best
Powell is angling for the return of 3-6-3 banking. I think he'll get there...eventually.
1980, 2007
Ominous years indeed.
Anyway, Patrick, nice suit.
Damn nice kitchen
Much longer. Rates will stay high for years.
So, if bond prices have dropped by so much, should I be looking at buying bonds then?
I’ve been waiting for your take on the bond rout and you did not disappoint! Love your videos.
Does anyone else find it ironic that Patrick Boyle is trying to sell us gruel?
Currently, my Vanguard money market is paying me 5.29%. I was hoping for at least 4% at retirement so I am well pleased with 5.29%. I will remain in the MM as long as it pays well.
Problem with money market is that they can drop the rate at any time. If you can get 10 yr bonds at 5%. That's your rate for the life of the bond. 2 yr yield is over 5%.
Problem with 5.29% is you just suffered 21% loss due to inflation and it will take time just to break-even.
Tbh, anyone earning leas than the market average rate of return (7.5% before inflation, 11% after). Is basically falling behind.
The bond market is what will force the fed to print whether they do that publicly or in shadow fashion. They cannot risk bond investor fleeing or sending the rate higher and driving debt service to the moon. So the result is inflation to the moon. It seems like some of the market, a small part, are awakening to the reality that hyperinflation is assured.
Thanks Peter Schiff. I was waiting for your yearly prediction that hyperinflation is right around the corner, for the 15th year in a row.
No matter what angle I turn my phone he's still staring at me.
😂
Government debt spending determines long term interest rates. Printing more money without increasing the supply of goods causes inflation. Simple supply and demand, the government competes with consumers capital and interest rates rise. This happened in the 70s and only the same remedy will lower inflation and interest rates.
No big deal for savers who are switching opportunities every time they find something more attractive. But it could be a big headache for the US government if the world started to dump treasuries "en masse". Not because the US government needs to "borrow" its own money in any sense - it doesn't -, but because it needs to keep the the public's desire to hold massive amounts of dollars, so as to create demand for them as the world's currency of choice. Dollar dominance is the name of the game.
Nice Patrick Bateman kitchen
Private equity market should entirely get liquidated and leveraged buyouts should be illegal. The whole business model is low effort and bring absolutely nothing of value.
That’s just silly. Liquid and resilient capital markets are one of America’s major competitive advantages.
@@SKa-tt9nm i never said anything about the capital markets, just the lazy private equity LBO Idiots. For all the crap VCs have done its a much better business model than the PE and actually creates companies of value
Good work Mr. Boyle.
I'll just put my 10M to bonds get 5% no risk, easy
Oh yeah, I skipped step of having 10M
All you need is investment idea and gift to gab.
Name's Bond.. Big Bond
006 and a half%. 😎
Who has lost the most money with these bond funds, isn’t it the normal holder of bond heavy funds - pension funds, is there reckoning coming for pension funds and pensioners.
Hi Patrick, a quick question, presumably LT yields are partly increased because people think that high rates of inflation are expected to persist. If there is going to be inflation, could your losses as a borrower be offset by the fact that you are essentially shorting your currency?
Brookfield uses a ton of non recourse debt relative to other companies. They also are a fundraising machine with management very invested in the company with a long term outlook.
I don't think Trump is the only one overestimating the value of his assets.
‘Huel’ sounds great. And by great I mean like the noise one makes when vomiting. Which is apt given what it looks like.
Coincidence ? Or smart marketing team working the onomatopoeia angle ?
Love your channel
With bond sentiment currently so negative, it would seem to me to be an excellent time to be investing heavily in bonds.
do you think we there is such a thing as an opposite crisis where hyperinflation has the same effect as a massive crash so instead of things going down they crash upwards making everything unbearable for everyone.
The market is starting to price in the risk of systemic failure as strength of US capitalism continues to wane.
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You should make a video on the following shift:
... One of the key features of the present situation, outlined in the report, is the increasing domination of the global economy by giant corporations and finance capital. This has led to the reduction of the labour share of income from 57 percent in 2000 to 53 percent today.
Roughly translated into raw figures, this means that with global GDP at close to $100 trillion, the income flowing to working people today is around $4 trillion less than it would have been had the already depressed share in 2000 been maintained.
In the words of the report: “The declining labour share and the rising profits of [multinationals] point to the key role of large corporations dominating international activities… [and] driving up global functional income inequality.”
(from the WSWS: "UN report says global economy could be heading for systemic crises")
It's more accurate to say that bond traders have lost money not bond investors. If you buy a bond for the long term the main ways to lose money are inflation and the issuer defaulting.
I am not saying it is not painful but the current noise is mostly bond traders suffering buyers remorse. There is no reward without risk.
Some goblin at my HOA management company played rookie investor, and bought a load of garbage rate bonds, no ladders here.
4:35-5:00 can someone please explain? Thank you
Why isn't this the story of the popping of a bubble within the bond market after it was created by manipulation and greed rather than some inverse speculation based on faulty economic assumptions rooted in fears of the FED?
My man cooking in the full suit. Lol.
what bad economists do not get is that the narrative matters more than content. Mr. Boyle is good at both, connecting dots only experts like him can see it.
Exactly. I think this is a huge reason why Trump was “successful” economically as a president. He was the countries and it’s companies biggest cheerleader.
6:51 to skip the ad.
Nice video, however, I do take issue with the comment "So far, their worries have mostly been unfounded, as the economy has shown little sign of buckling".
Highest amount of credit card debt in the US ever.
Automotive repossessions on the rise.
Tens of thousands of layoffs over the past year.
Homelessness on the rise.
People taking on multiple jobs to make ends meet.
And you say "...the economy has shown little sign of buckling"? and the fears have been unfounded? That seems kind of disingenuous to me.
That being said, I did like the information and appreciate the effort put into the presentation.
Thank you for your excellent explanations for the complicated machinery that dominates our world... extremely valuable facts and analysis, thank you!
Seeing the Huel sponsor was strangely funny to me. Didn’t know finance bros needed food, thought they only knew how to work
It appears Patrick is trying to debunk the whole "lunch is for wimps" 🥪🥪🍜🥤 motto from the movie Wall Street (1987).
Thank god I paid off my debt a few years ago
Why would anyone buy a zero bond yield? For 10 years? Let’s hope interest rates stay 5%+ for a decade plus.
What you pay for that dope kitchen?