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Thread: US Treasury Bonds

  1. #1

    US Treasury Bonds

    I'd like to address the idea that we are spending our way to the poor house... "We are Broke" as boehner says.

    Right now the US debt is trading at record low interest rates. That means the market believes it is a safe bet (Higher interest rates = higher risk of default). the USA also has a AAA bond rating and it's not even close to being changed. The bond market is always lively there is alot of demand for these things, especially as the stock and commodities market get volatile (which they have been almost non-stop for about 2 years).

    there are two facts that deficit-hawks tend to skirt right by 1) under Reagan the deficit more than doubled 2) investors know that tax burden on citizens are at a 60 year low.

    So the money is there. And Deficits do not equal death.

    Taxes just have to be raised... and that will happen, regardless if there's a GOP president or a LIbertarian or anyone else. Taxes will be raised after 2012, they have to be.

  2. #2
    So let see if I understand the "Bitonti Platform" of Political Thought:

    -Debt is Good. Spending is good
    -Entitlements will never be cut, and **** anyone who doesn't like it.
    -Taxes will be raised, and **** anyone who doesn't like it.
    -Illegals will not be stopped, and **** anyone who doesn't like it.
    -The only reason people are against Illegals or disagree with Obama is racism.
    -War under Obama is good, War under an (R) is evil worthy of thousands of forum posts of protest.

    Pay attention Independants, this is the Democrat Platform too. Spend beyond our means, welfare to at least 50% (so they'll vote (D)), War's just like under an (R), no end or enforcement to illegal immigration, anyone who objects called a hateful racist, sexist, inhuman fiend before the debate even starts, and the pushthrough of a very specific agenda of Social Welfare, rampant waseful spending, no oversight, and taxation at the rate THEY want as long as it helps them politically.

    Thats what your vote for a (D) is buying. More illegals, more pork spending, more entitlements for more poeple who don;t need them, more taxation (ask yourself what % of your labor you owe the State) and more War, but less coverage of said Wars.

    And once the number of entitlement dependant and illegals gets over 50% of voters, a lock on future elections and policy, a one-side system of Governance, with the Consitution an afterthought of a "living (no specific meaning) document".

    Best of luck with that USA folks.

  3. #3
    [QUOTE=bitonti;3983213]I'd like to address the idea that we are spending our way to the poor house... "We are Broke" as boehner says.

    Right now the US debt is trading at record low interest rates. That means the market believes it is a safe bet (Higher interest rates = higher risk of default). the USA also has a AAA bond rating and it's not even close to being changed. The bond market is always lively there is alot of demand for these things, especially as the stock and commodities market get volatile (which they have been almost non-stop for about 2 years).

    there are two facts that deficit-hawks tend to skirt right by 1) under Reagan the deficit more than doubled 2) investors know that tax burden on citizens are at a 60 year low.

    So the money is there. And Deficits do not equal death.

    Taxes just have to be raised... and that will happen, regardless if there's a GOP president or a LIbertarian or anyone else. Taxes will be raised after 2012, they have to be.[/QUOTE]

    Very shallow points..........

    1) You realize that the worlds GREATEST bond investor, Bill Gross, sold out of ALL his US Treasuries last month.

    2) Your above commentary, while generally understood, is not going to last much longer. What I would say is that just a 2 percent interest rate will DOUBLE the debt service cost.

    3) The fact that the bond market activity is good, that simply tells us that there is little confidence in the economy and that people will run to safety and take NO RISK and NO RETURN rather than invest in corporate bonds or equities.

    4) With rates like these, with market returns like these. There will be NO, NONE, NADA growth and then accordingly, the pressure on public pensions will grow ten fold. We need market growth to help fund pesnions both public and private.

  4. #4
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    [QUOTE=bitonti;3983213]I'd like to address the idea that we are spending our way to the poor house... "We are Broke" as boehner says.

    Right now the US debt is trading at record low interest rates. That means the market believes it is a safe bet (Higher interest rates = higher risk of default). the USA also has a AAA bond rating and it's not even close to being changed. The bond market is always lively there is alot of demand for these things, especially as the stock and commodities market get volatile (which they have been almost non-stop for about 2 years).

    there are two facts that deficit-hawks tend to skirt right by 1) under Reagan the deficit more than doubled 2) investors know that tax burden on citizens are at a 60 year low.

    So the money is there. And Deficits do not equal death.

    Taxes just have to be raised... and that will happen, regardless if there's a GOP president or a LIbertarian or anyone else. Taxes will be raised after 2012, they have to be.[/QUOTE]

    LOL.....You are failing to look at the levels of the deficit and forecasted debt. Deficits are not always bad...yes. But the deficits we are accumulating as % of GDP is alarming to say the least. If you think our triple A rating isnt in jeopardy...think again.

    We do not have a revenue problem in this country...we have a spending problem. Why do taxes have to raised as you say??? How about we address the spending?

  5. #5
    When the Federal reserve stops buying US treasuries we will get a better idea of what our debt is likelyt to cost us. Inflation was running at 6% annually last month hard to see rates stay this low without Fed intervention or an economic slow down which will further erode incoming taxes.

  6. #6
    [QUOTE=southparkcpa;3983263]
    1) You realize that the worlds GREATEST bond investor, Bill Gross, sold out of ALL his US Treasuries last month.
    [/QUOTE]

    I cant speak on what 1 guy does. there is truth in this post but none of it adds up to "we are broke" as Boehner says. We aren't even close to broke, if we were, people wouldn't buy our debt. It's that simple. If the interest rates rise 2% we can talk about it then. put it another way if Boehner said "if we continue on this road, we might be in trouble" that's a more reasonable statement. but we as a nation are not even close to broke.


    [quote=sec.101row23]
    LOL.....You are failing to look at the levels of the deficit and forecasted debt. Deficits are not always bad...yes. But the deficits we are accumulating as % of GDP is alarming to say the least. If you think our triple A rating isnt in jeopardy...think again. [/quote]

    this is not the highest it's been. the highest level of debt to GDP was shortly after WWII.

    [quote=Winstonbiggs]When the Federal reserve stops buying US treasuries we will get a better idea of what our debt is likelyt to cost us.[/quote]

    ok and when is that going to happen? after Ron paul ends the fed?

    like i said before if we want to say the trends are troubling ok but we aren't even close to broke. It's a shame that the right wing wants to pretend we are broke for political reasons but it's not the reality on the street.

  7. #7
    [QUOTE=bitonti;3983287]

    ok and when is that going to happen? after Ron paul ends the fed?

    [/QUOTE]

    QE2 runs through June. If the combination of Japan and ME instability continues the economy is likely to go back into recession which would keep rates low. It will also reduce tax revenue and increase the need for another stimulus package creating an even bigger debt burden.

    If inflation continues to run at the current 6% level and the ME stabilizes oil prices moderate and Japan starts a massive rebuild I suspect US debt is going to cost lots more then it does today.
    Last edited by Winstonbiggs; 03-18-2011 at 02:47 PM.

  8. #8
    [QUOTE=bitonti;3983287]I cant speak on what 1 guy does. there is truth in this post but none of it adds up to "we are broke" as Boehner says. We aren't even close to broke, if we were, people wouldn't buy our debt. It's that simple. If the interest rates rise 2% we can talk about it then. put it another way if Boehner said "if we continue on this road, we might be in trouble" that's a more reasonable statement. but we as a nation are not even close to broke.




    this is not the highest it's been. the highest level of debt to GDP was shortly after WWII.



    ok and when is that going to happen? after Ron paul ends the fed?

    like i said before if we want to say the trends are troubling ok but we aren't even close to broke. It's a shame that the right wing wants to pretend we are broke for political reasons but it's not the reality on the street.[/QUOTE]

    UNBELIEVEABLE...WHAT DOES "DEFICIT" MEAN IF not BROKE? WE ARE BROKE. WE BORROW every year TO FUND OUR COUNTRY.

  9. #9
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    [QUOTE=bitonti;3983287]I cant speak on what 1 guy does. there is truth in this post but none of it adds up to "we are broke" as Boehner says. We aren't even close to broke, if we were, people wouldn't buy our debt. It's that simple. If the interest rates rise 2% we can talk about it then. put it another way if Boehner said "if we continue on this road, we might be in trouble" that's a more reasonable statement. but we as a nation are not even close to broke.




    [B]this is not the highest it's been. the highest level of debt to GDP was shortly after WWII. [/B]


    ok and when is that going to happen? after Ron paul ends the fed?

    like i said before if we want to say the trends are troubling ok but we aren't even close to broke. It's a shame that the right wing wants to pretend we are broke for political reasons but it's not the reality on the street.[/QUOTE]

    Ok...so whats your point? The fact remains that we are on a very dangerous path as to the debt we are accumulating....also comparing the level of debt to GDP right after WWII is kind of comical.

    If we do not address spending and entitlements..there are certain programs that WILL be broke. You just cant say we need to raise taxes and ignore all the spending and debt. Look at what we are paying in just interest on our debt right now. Because everyone in the country is not waiting on bread lines....doesnt mean we have a healthy economy.

  10. #10
    [QUOTE=bitonti;3983213]Right now the US debt is trading at record low interest rates. That means the market believes it is a safe bet (Higher interest rates = higher risk of default). the USA also has a AAA bond rating and it's not even close to being changed. The bond market is always lively there is alot of demand for these things, especially as the stock and commodities market get volatile (which they have been almost non-stop for about 2 years).[/QUOTE]

    Dude, what are you talking about?
    1) Investors "in the market" don't know ****...they do what their advisers tell them to do which is what their bosses tell them to do...I worked at the retail finance level, and trust me when I told you how disgusted I was that advisers and their bosses are nothing more than sales people who are being fed information from the elite traders. They know what they're talking about, but only what they're talking about. If you ask them questions about simple things like expense ratios or the possibility of dilution, they won't have a clue as to what they mean, let alone trying to explain it to a would-be investor.

    2) Record low rates as you say, and yet we have incredibly high trading in these default risk-less securities? How do you take anything positive away from that? It just goes to show that investors don't know or care about generating alpha or even keeping up with inflation...they just want to preserve capital because they are ****-scared of what's happening right now in the equity/AA markets as you've pointed out. Even Gates has rid himself of treasuries, and it wasn't too long ago when "the market" was picking up Buffet's bonds over treasuries, even though the treasuries had a higher return for a lower level of risk.

    [QUOTE]
    So the money is there. And Deficits do not equal death.
    [/QUOTE]

    It is. In the private sector. Where the gov't can't get their hands on it. Which is precisely the issue.
    No one is claiming it's not there, but the government doesn't have access to it, which is why they need to add quantitative easement into our system to flush out the money that's hiding in savings and CDs.

    [QUOTE]Taxes just have to be raised... and that will happen, regardless if there's a GOP president or a LIbertarian or anyone else. [/QUOTE]

    It's simple enough to say. Tell us, how do you expect people who don't have money or jobs to make money, to pay higher taxes?

  11. #11
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    [QUOTE=greenwichjetfan;3983313]It's simple enough to say. Tell us, how do you expect people who don't have money or jobs to make money, to pay higher taxes?[/QUOTE]

    Welfare, which is awesome. :rolleyes:

  12. #12

    spending cut AND taxes raised

    the US Spends 3.7T it takes in 2.2T, these are the grim numbers

    they might be able to get it down to 3.3T and that would be a tremendous achievement.

    they aren't getting 3.7T down to 2.2T. Never ever neever nurver. It won't happen.

    taxes will rise. I hate to let the secret out but they have to rise. It's not even up for debate. It will happen.

    and after they do we won't be "broke" anymore.

  13. #13
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    [QUOTE=bitonti;3983339]the US Spends 3.7T it takes in 2.2T, these are the grim numbers

    they might be able to get it down to 3.3T and that would be a tremendous achievement.

    they aren't getting 3.7T down to 2.2T. Never ever neever nurver. It won't happen.

    taxes will rise. I hate to let the secret out but they have to rise. It's not even up for debate. It will happen.

    and after they do we won't be "broke" anymore.[/QUOTE]

    I am so glad you are not in charge of our economy.

  14. #14
    [QUOTE=greenwichjetfan;3983313]Dude, what are you talking about?
    1) Investors "in the market" don't know ****...they do what their advisers tell them to do which is what their bosses tell them to do...[/quote]

    that is the market. The market prices these things, just like it prices oil and stocks and everything else. If I start a post saying Bond prices are X and they pay out Y that's the price. If and when that changes we can cry about it or cheer but the market moves near perfectly in these situations.


    [QUOTE=greenwichjetfan;3983313]
    It is. In the private sector. Where the gov't can't get their hands on it. Which is precisely the issue.
    No one is claiming it's not there, but the government doesn't have access to it, which is why they need to add quantitative easement into our system to flush out the money that's hiding in savings and CDs. [/quote]

    I don't exactly know what that means and too lazy to look it up but is that the gov't forcing people to save?


    [QUOTE=greenwichjetfan;3983313]
    It's simple enough to say. Tell us, how do you expect people who don't have money or jobs to make money, to pay higher taxes?[/QUOTE]

    leaning on the unemployed is not going to solve the budget situation. the middle class , rich, and super rich will. the point here is that it will get solved and that's why bonds are looked at as relatively safe.

  15. #15
    [QUOTE=sec.101row23;3983344]I am so glad you are not in charge of our economy.[/QUOTE]

    so what does that mean, you think that 2.2 in revenues will equal 2.2 in spending? that congress can cut that much of the budget? it's fun to talk about it but unlikely.

  16. #16
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    [QUOTE=bitonti;3983345]that is the market. The market prices these things, just like it prices oil and stocks and everything else. If I start a post saying Bond prices are X and they pay out Y that's the price. If and when that changes we can cry about it or cheer but the market moves near perfectly in these situations.




    [B]I don't exactly know what that means and too lazy to look it up but is that the gov't forcing people to save? [/B]



    [B]leaning on the unemployed is not going to solve the budget situation. the middle class , rich, and super rich will. the point here is that it will get solved and that's why bonds are looked at as relatively safe.[/QUOTE][/B]

    Wow...just wow....LOL.

  17. #17
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    [QUOTE=bitonti;3983348]so what does that mean, you think that 2.2 in revenues will equal 2.2 in spending? that congress can cut that much of the budget? it's fun to talk about it but unlikely.[/QUOTE]

    What it means is that most of what you have posted makes no sense at all. You claim that there is no problem with the levels of deficit we are running at...because we can just raise taxes to pay for them. Thats why I am glad you are not running our economy.

  18. #18
    [QUOTE=bitonti;3983339]the US Spends 3.7T it takes in 2.2T, these are the grim numbers

    they might be able to get it down to 3.3T and that would be a tremendous achievement.

    they aren't getting 3.7T down to 2.2T. Never ever neever nurver. It won't happen.

    taxes will rise. I hate to let the secret out but they have to rise. It's not even up for debate. It will happen.

    and after they do we won't be "broke" anymore.[/QUOTE]

    This is a joke right???? This government spends money so foolishy. You can say we can't cut this, can't cut that but that's BS. We got along fine for 200 years.

    Dept of energy, education, most of TSA are TOTAL waste and that's off my head. Talk medicare? Half the employees aren't working more than 25 hrs a week. They get paid for 40 sure ....but these are civil servants mind you.


    You know.... takes 3 of them to do a full time job.:yes:

  19. #19
    [QUOTE=bitonti;3983345]that is the market. The market prices these things, just like it prices oil and stocks and everything else. If I start a post saying Bond prices are X and they pay out Y that's the price. If and when that changes we can cry about it or cheer but the market moves near perfectly in these situations.




    [/QUOTE]

    Bit if people are willing to buy debt paying 3% when inflation is running 6% people are either willing to take an outright loss or they believe the economy is going to slide.

    Low rates are a result of fear or market manipulation by the Fed. Either way that ain't good.

  20. #20
    [QUOTE=bitonti;3983345]that is the market. The market prices these things, just like it prices oil and stocks and everything else. If I start a post saying Bond prices are X and they pay out Y that's the price. If and when that changes we can cry about it or cheer but the market moves near perfectly in these situations. [/QUOTE]

    Bit, that is not how the treasury market is priced. You're right that the treasury market runs on basic equilibrium seeking supply and demand, just as all other markets, but it is priced differently in that it has a completely different risk element to anything else. It is practically guaranteed default-free (or so we all hope to believe).

    I'm still young in the econ/finance field, and I don't work with treasuries, so I'm not 100% sure how it works. Therefore, I won't claim to know more about it than you do, other than what's posted above. I do know that there are separate considerations in pricing treasuries, and the inefficiencies are where alot of pricing differences are found.

    [QUOTE]I don't exactly know what that means and too lazy to look it up but is that the gov't forcing people to save? [/QUOTE]

    Quite the contrary, it's the government trying to get people OUT of their comfortable treasuries and guaranteed products like savings and cds.

    QE (quant. easing) is basically just the government printing cash backed by nothing but the strength of our accounting system (though they'll have you believe it's based on the strength of the US's balance sheet in accordance to the world's balance sheet).

    The reason for QE is because right now, everyone with money is saving it. They're scared of the future and they want to make sure that they'll have money in the event of a problem. The economy can't function in this way, because it needs circulation (the only way to make money is if you spend it...common sense dictates that if you buy more products, those companies make more money which they use to make more products which requires more workers. When these workers are hired, they are now earning money, with which they can go out and buy more products).

    So, when people are off saving their money, the dollar bill isn't being circulated which leads to job losses and stagnant economies. So what does the fed do? They cut rates across the board. The rate cuts that Big Ben (not the rapist) has been announcing, is an effort to get people to say: "crap those rates are so ****ty i'm better off investing my money or actually using it to lead a better lifestyle."

    However, that didn't take with the US economy, because people are so scared of disaster that they'd much rather take the ****ty rates that don't even keep up with the CPI (which is another disaster in and of itself), than risk losing whatever capital they have.

    When rates couldn't be cut anymore, the only other way to introduce cash flow into the system is through an injection of money into the economy; i.e., quantitative easing.

    QE is what's driving inflation (which is measured by the CPI which is a terrible index because it continuously recalibrates itself to make the output lower), and it is what drove Warren to pay a lower rate on his bonds a few months ago than treasuries, even though they had more systematic risk.

    This is why claiming that the US economy is not in shambles, is a mistake.

    EDIT: BTW, I just reread my post and it seems like I'm arguing with you that it won't be fixed.
    I know that we'll fix it, and I know there are directors and officials out there with the smarts to fix it, but I just don't know if any of them have the balls to do it. And raising taxes on the wealthy 10% of america isn't the way to do it, because all that's going to do is invite more egregious govt spending on bull**** causes...

    [QUOTE]leaning on the unemployed is not going to solve the budget situation. the middle class , rich, and super rich will. the point here is that it will get solved and that's why bonds are looked at as relatively safe.
    [/QUOTE]

    Again, you're right that the unemployed won't save america, but again, who's going to give away 40% of their earned income to indirectly subsidize the rest of the country? It's easy to say...
    Last edited by greenwichjetfan; 03-18-2011 at 05:04 PM.

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