[MrBill]

$this->bbcode_second_pass_quote('LadyRuby', 'I') don't know, I don't trust anything. We don't have much (in retirement funds) but I decided to move some to money market funds instead. I think that may be the best we can do without pulling them out entirely from retirement accounts.

[Doly]

Mr Bill,

What's your opinion on inflation-protected bonds?

[MrBill]

$this->bbcode_second_pass_quote('Doly', 'M')r Bill,

What's your opinion on inflation-protected bonds?

[LadyRuby]

Thank you Mr. Bill and others for the suggestions. I will look more into these other options. I'll have to see if some of these are available through Vanguard, Fidelity, and TIAA-CREF.

In general I'd agree about diversifying our portfolio, but I guess my current mindset is that I want to preserve what we have in the short-term, at least for the next year or two (even at the risk of no growth). I'm concerned about a serious near-term recession, job loss, etc. I may feel more bullish in a couple of years ...

[grabby]

This is opinion so don't do it ever ever because I can't give you advice.
But this is what I do.

First use your money to pay off
1: House
2: Credit cards
3: Debts
4: Relatives houses (get deed)
5: Relatives debts (Get firstborn son)
6: safe deposit boxes are the best places to keep things, but when things go down say goodbye to what is in there. NEVER KEEP INPORTANT JEWELRY around your home (Money or jewels) or you will be forced to get them under duress.
7: Then instead of buying bonds make loans to people you know and take collateral (Sign over house, property and charge them 8 percent for relatives, 12 percent for friends 12 percent, if your good you may make a living like this. if they don't pay back you keep the deed of watever.)
8. Buy something substantial, even if it is only the lot next to your house.
The best collateral is a real vehicle, if they sign the title to you and you put the vehicle in your garage (Make sure you WANT it first act like you don't) make sure you only give them half the value so they pay you back.
if they dont pay you back you could sell it.)

This is the best investment you can make the same interest rates the credit card companies make.

Now if you have IRA funds, you probably just won't get them back, after money problem time. Just think of this as lost money anyway.

[JBinKC]

Absolutely horrible because either the government will raise rates which will force down bond values or they will devalue the dollar by printing money as the dollar becomes replaced as the world's reserve currency which will also impact the real spending power of the investment.

If I were to invest in bonds I would probably be more inclined to buy a foreign bond preferably in countries with natural resource based economy like Russia, Kazakhstan, Brazil or Canada.

[MrBill]

$this->bbcode_second_pass_quote('JBinKC', 'A')bsolutely horrible because either the government will raise rates which will force down bond values or they will devalue the dollar by printing money as the dollar becomes replaced as the world's reserve currency which will also impact the real spending power of the investment.

If I were to invest in bonds I would probably be more inclined to buy a foreign bond preferably in countries with natural resource based economy like Russia, Kazakhstan, Brazil or Canada.

[Pfish]

I know (sort of) the theory behind an inverted bond yield. http://www.treas.gov/offices/domestic-f ... yield.html But it seems to me that the bond market has righted itself since it inverted in January '06.

Question: How long does it have to invert to predict a recession? Or, if it corrects itself over a four month period, does that mean we are not going to see any ill-effects of the market?

Just curious....

[Pique]

The correlation between yield inversion and recession is not an absolute predictor.

Just keep in mind that the nineties saw the largest financial bubble in history*, by almost any measure. A bubble like that isn't followed by a minor recession. There will be a deeper financial reckoning. The reprieve granted by the rise of the housing bubble has just delayed that reckoning, and will make it more severe.

*including the Tulip Mania, Railroad Mania, South Seas, John Law, gilded age, junk bond mania, etc.

[MrBill]

$this->bbcode_second_pass_quote('Pfish', 'I') know (sort of) the theory behind an inverted bond yield. http://www.treas.gov/offices/domestic-f ... yield.html But it seems to me that the bond market has righted itself since it inverted in January '06.

Question: How long does it have to invert to predict a recession? Or, if it corrects itself over a four month period, does that mean we are not going to see any ill-effects of the market?

Just curious....

[jato]

Link to 10y bond yield chart

The ten year bond yield influences mortgage interest rates. The housing market here in SoCal is already flat. High yields (high interest rates) could slaughter the housing market.


How high will the yield go?

Are we headed back to the 1980s 10+% yield?

[parsifal]

I have noticed the bond goes up as the DJ and NASDAQ go down. What does it mean that the bond is yielding more? Is Peak Oil the culprit that is unhinging the markets?

[gego]

Try this for my prediction:

From here (5.228%) we go down to 4.5% this summer, then back up to 5.5% next spring, then down to 3.5% in the spring of 2008.

Then begins the long trend up to 8.5% in the late summer of 2014. This will be the first leg up of a long zig-zag increase that will eventually peak out at 14% around 2026.

[DesertBear2]

$this->bbcode_second_pass_quote('gego', '
')Then begins the long trend up to 8.5% in the late summer of 2014. This will be the first leg up of a long zig-zag increase that will eventually peak out at 14% around 2026.

[Pfish]

As the housing market continues to cool (tank?) in San Diego, I think I have finally found the answer to my question I posed several months ago about bonds. But it leads to one other question. Let me explain.

If consumer "A" buys a home for $500,000 and secures a loan (ARM?) for $450,000, most of the time the loan is bundled with other loans and sold on the secondary market at a discounted rate.

My question several months ago was what happens when "A" defaults on the mortgage and walks away from the property? In California, the loan is secured by the property, not the personal guarantee of the buyer of the residence. So what happens? The loan is further discounted on the market and the owner of the bond is stuck with the bill.

A brilliant ploy in my opinion. The bondholder does not have the right to the property--it is the bank that originally held the deed of trust. So instead of the taxpayer bailing out the S&L's like we did in the 80's, now there is no bail out for the bondholders?

My question is this: In California this is how the RE game works, but does the same scenario play out across the US?

Funny part is I have asked no less than 15 people in the loan and RE business this question. Hard to finally find the answer from somebody who knew bonds.

[gego]

$this->bbcode_second_pass_quote('gego', 'T')ry this for my prediction:

From here (5.228%) we go down to 4.5% this summer, then back up to 5.5% next spring, then down to 3.5% in the spring of 2008.

Then begins the long trend up to 8.5% in the late summer of 2014. This will be the first leg up of a long zig-zag increase that will eventually peak out at 14% around 2026.

[roccman]

FITCH CUTS AMBAC RATING TO AA

[DoubleD]

Yes, this is a big deal and will have quite a ripple effect.

With this rating cut - their core business is done. Lights out. Sadly... the municipalities who in good faith issued debt that they PAID AMBAC (and MBIA) to insure and provide credit enhancement for ... are also going to be downgraded to their unclerlying credit rating or the insurer's new rating (which ever is greater). This will require certain funds that hold these bonds to liquidate - as they can only hold triple A rated debt. Big slosh of investments to be sold in the secondary market and the big players that want only triple A will not be buying.

Ouch.

[Eli]

This is where it gets real bad.

Cities will go broke and will have to rely on local taxes for all projects. Oh there is a storm and the power is knocked out. Too bad sit in the dark there is no money to turn the lights back on.

[Denny]

$this->bbcode_second_pass_quote('Eli', 'T')his is where it gets real bad. Cities will go broke and will have to rely on local taxes for all projects. Oh there is a storm and the power is knocked out. Too bad sit in the dark there is no money to turn the lights back on.