Comments on: Mortgage Delinquency

By: rosocecasita

rosocecasita — Fri, 20 Nov 2009 05:41:43 +0000

So, to get a negative ror on cash, inflation must be high/ dollar losing value, check.

But if you get 0 or less yield, that is subtracting further from your losing value?

I mean, your subtracting profit from a negative/losing position at zero or below ? So your willing to pay for protection?

There can only be one kind of protection, FDIC only insures 250K, so if you have way more then that in any institution, the only piece of paper that has that kind of guarantee is treasury bills right?

I can only see one condition to purchasing negative yield Treasury bonds: If your cash *it self* is at risk? Otherwise you could just be in cash, with no other exposure.

By: chartsandcoffee

chartsandcoffee — Fri, 20 Nov 2009 05:29:04 +0000

Well, if you believe cash is providing a negative rate of return than a 0 or slightly negative return might actually be a good return. Or, if you're afraid to keep money in a bank or in a money market fund the short term treasury might have appeal. As you go up the curve, you take on risk that the bonds will go down in value if you want to sell.

By: rosocecasita

rosocecasita — Fri, 20 Nov 2009 05:19:39 +0000

Exactly, someone is willing to pay money via negative yield to go from cash to treasury, that doesn't even make sense in my head!

If your already in cash, wouldn't it be better NOT to buy a negative yield treasury?

I mean, your paying money to keep your cash, in a cash equivalent vehicle right?

By: chartsandcoffee

chartsandcoffee — Fri, 20 Nov 2009 04:29:37 +0000

I just noticed the drop on the treasuries when I looked at the TED spread. The TED spread is up but it is not because there is an uptick in interest rates. LIBOR has actually been ticking down a bit. However, the yield on short term treasuries (1 and 3 month) is near 0. So basically, to calculate the TED spread you just use 3 month LIBOR since short term treasuries are at 0.

I suppose this is evidence of deflation and/or major risk aversion as money is willing to take a 0% yield in exchange for the safety of being in treasuries. Perhaps it also means money wants flexibility instead of being stuck in longer term treasuries that might lose value (so perhaps that is an argument for inflation expectations).

I don't know the right conclusion. But to me it sounds like price instability and risk aversion which doesn't seem like a good sign for the stock market.

By: rosocecasita

rosocecasita — Fri, 20 Nov 2009 03:41:03 +0000

The 1 month, 3 month treasuries went negative? According to Zero Hedge that is.

I updated the links page to include Advancing / Declining issues on NYSE & Nasdaq

Also has Treasuries now.

By: chartsandcoffee

chartsandcoffee — Fri, 20 Nov 2009 00:56:27 +0000

Good catch. I'll make the correction. Thank you.

By: tony61

tony61 — Fri, 20 Nov 2009 00:38:01 +0000

“So picture a room of 50 homeowners. 7 people in the room…”

Not to nitpick, but it's “homeowners with a mortgage”… nearly half do not have a mortgage.

I happen to agree with the conclusion of the article, just trying to be accurate.

By: rosocecasita

rosocecasita — Thu, 19 Nov 2009 23:41:43 +0000

By: chartsandcoffee

chartsandcoffee — Thu, 19 Nov 2009 23:29:04 +0000

By: rosocecasita

rosocecasita — Thu, 19 Nov 2009 23:19:39 +0000