Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1261.52 | -1.51 | 0.12% |
| Eurostoxx Index | 2303.7 | 11.42 | 0.50% |
| Oil (WTI) | 98.98 | -0.67 | -0.67% |
| LIBOR | 0.5810 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 80.120 | -0.366 | -0..45% |
| 10 Year Govt Bond Yield | 1.871% | -0.028% |
Last trading day of the year. Should be a very sleepy one. Bond market closes early today, at 2pm est, most desks are operating with skeleton crews, and most books have already been squared/positioned for year end. Not a whole lot going on.
European news seems concentrated on Spain and its deficit cutting. Today the Spanish PM announced 14.9 billion Euros in deficit reduction, made up of both spending cuts and higher taxes.
S&P index is, at the moment, poised to post it’s 3rd straight year of positive gains, although just barely, and it could easily tip negative for the year by the end of the day. Currently up just .38% on the year, it needs to stay above 1257 to post a positive year. At 1262 as I type.
Not a whole lot more to say…although I’m sure john could add some pithy comments even as the markets sputter to a year end close. Here’s to hoping for continued improvement in 2012. Happy New Year, all.
Filed under: Uncategorized |
All Things in Moderation 
Thanks scott, you managed quite nicely. It looks like a boring end but as everyone always says, it could have been worse. Regardless of Presidential primaries and elections, I sure hope next year sees more substantial gains, and I don't mean the market necessarily.Happy New Year to you as well.
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John said the other day ( yesterday) that the economy was recovering. He likened it to turning an aircraft carrier around. I, OTOH just don't see it and think we've been bouncing on the bottom since aught-nine. What do you think Scott? I just don't see any indicators that are pointing to recovery versus status quo.This is for anybody who thinks we are recovering, what indicators can you point to that demonstrate it?
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McWing:A lot of the weekly/monthly economic data is suggesting some recovery to me. To mention just a few, ADP employment has been rising steadily (albeit not spectacularly) since June, factory orders have gone up in most months this year, vehicle sales have also been steadily increasing every month since June.Anecdotally, if you looked at the restaurants in and around my town, you'd think we were in boom times. The local retailers have had a very good fall, although as I mentioned the other day there is some concern about that being largely next year's business brought forward to this year due to sales prices.But overall, although we are hardly in heat-up mode, I'd say that things have almost certainly improved and are improving at least somewhat.
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If I may venture into that territory:–Avg. initial weekly jobless claims are down about 100,000 since Apr. '11–Mfr orders for non-defense capital goods (excl. aircraft) are now near pre-recession highs–Building permits for private housing units were in the 550-580 range in 2010 and clocked in at 680 for Nov. '11–The M2 money supply is up–The Conference Board's Leading economic Indicator is up, as is its Consumer Confidence index.
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I'd be interested in knowing from the experts here how a real negative yield for U.S. Treasuries can translate into a return of 16.7%.U.S. debt was a better investment than gold this year
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jnc:The article is talking about the 30 year bond, which does not have a real negative yield. A 30 year treasury note bought on the last day of 2010 would have had a yield of approximately 4.35%. As of today, the 30yr note is yielding 2.90%. That means that a note purchased last December 31 could be sold today at a much, much, higher price than where it was bought.When speaking of yields on bonds, we are generally speaking about yield to maturity (YTM), ie if you buy the bond and hold it until maturity when principle is repaid at par, you will earn a given yield on the cost of purchasing the original notes. But, of course, if you sell the bond before maturity, you may yield more or less than YTM because of changes in current interest rates and hence changes in the price of the bonds.To be honest, my calc is showing an even higher return than 16%. I get that the present value of a basis point at the end of 2010 on $1mm 30yr notes was $1,750, which means that a drop in yield of 145 basis points was actually worth about $238,000, or a return of nearly 24%.
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Fair enough all, I appreciate the data.
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*begin service alert*Since you all have an internet connection and presumably also file tax returns, please take a moment to review your charitable giving for the year and see if making one or two additional donations makes sense for you. Thank you.*end service alert*
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The S&P closed at 1,257.60 – Happy New Year!
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"The article is talking about the 30 year bond, which does not have a real negative yield. A 30 year treasury note bought on the last day of 2010 would have had a yield of approximately 4.35%. As of today, the 30yr note is yielding 2.90%. That means that a note purchased last December 31 could be sold today at a much, much, higher price than where it was bought."Ok, so this is based on an existing bond holder reselling the bond in the secondary market, not purchasing new Treasuries in auction and holding to maturity?I haven't seen anywhere near 16% returns for mutual funds based on Treasuries that the "average investor" would have access to. Fidelity U.S. Treasury Money Market Fund(FDLXX)
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jnc:Ok, so this is based on an existing bond holder reselling the bond in the secondary market, not purchasing new Treasuries in auction and holding to maturity?Correct. It is looking at the change in value of a 30 yr note from Jan 1, 2011 to Dec 31, 2011. What it is saying is that if you bought $10,000 worth of 30yr notes on Jan 1, you would be able to sell those notes today for about $11,700, or a return of roughly 17%.I haven't seen anywhere near 16% returns for mutual funds based on Treasuries that the "average investor" would have access to.The fund you linked is a "Money Market fund" which means, by definition, it is a fund of short-term securities. Look at the "composition by instrument" under the Composition tab for the fund you linked to. It is composed almost entirely (85%) of US T-bills. T-bills have a maturity of between 1 week and 1 year, which is to say not 30 years, and in fact that particular fund had an average maturity of just 47 days. All those T-bills will have been bought and held to maturity, so they will return nothing more than their YTM, which on short-term T-bills has been pretty close to 0% all year.As an "average investor" you do have access to purchase 30 year notes if you want, but purchasing those notes carries a lot more short-term risk than purchasing T-bills. If rates had gone up by 140 basis points rather than down, then your notes would be worth a whole lot less, and rather than a 16% return, you might actually have lost money. Your fund, as a money market fund, is explicitly designed to avoid this kind of risk, and hence, by implication, that kind of reward.
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