Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next
Author: EliasFardo Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 212570  
Subject: Re: bond risk to OIns industry- comments? Date: 2/18/2013 11:31 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 16
I think one, me anyway, needs to have some capital sitting at .25%, sitting awaiting for grand opportunities in select insurance companies.

Comments, please, other views, ideas re this topic?


I agree completely, except I don’t know if I am necessarily holding my capital at .25% waiting for opportunities in insurance companies. I don’t know what companies will be the most attractive at that point.

I just can’t get away from the idea that interest rates must go up – at some point. I don’t know when or what will trigger it, but does anyone believe that these low rates are a permanent fixture?

Currently the Fed is financing a huge portion of the federal government’s borrowing. Can that go on forever? I can get real stubborn with this, but I just don’t see how we can continue to print money without consequences.

There was a post earlier on this board about hyperinflation. It does not need to be hyperinflation to be ruinous. Just 10% a year will do quite nicely.

I can also be real stubborn in thinking that we are in bubble territory in many assets. Certainly bonds. Probably farmland. Probably stocks. At some point prices get so high that people are going to decide that they are not receiving enough reward potential for the risk they are assuming.

Munger once described the two types of assets. One type are assets that deprive their value based upon their underlying economic utility. This would include stocks, bonds, real estate – things like that. Another type of assets are basically collectibles such as rare coins, rare stamps, art, and vintage automobiles. Their market value is based upon the expected price someone else will pay for them.

The Fed’s money printing press is distorting the market pricing on the first group of assets. They are being priced less on their underlying economic prospects ( is the economic value of a 30 year Treasury really 3 percent? ) and more and more like the assets in the second group. When economic assets are being priced not on their economics but on what someone else may pay for them it is called Greater Fool Investing.

So, yes, hold on to that .25% return and lose purchasing power every day. Many people like to think of themselves as contrarians. The most contrary position today is cash.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (9) | Ignore Thread Prev | Next

Announcements

Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Value Hounds

Back to the Future Buffalo Wild Wings
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement