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In other news from New York | 74 comments (74 topical, editorial, 0 hidden)
Re: There's also been (4.00 / 2)
Lots of asset managers are already going into equities, precisely because it is the only kind of assets that has the slimest chance of offering returns close to (real) inflation (the one even TIPS won't beat).

Because least-indebted global fortune 500 companies with pricing power will be able to inflate their revenue as fast as, or faster than, general inflation. Of course, there may still be a temporary downturn in the near term, but when you're just price-averaging your rebalancing from bonds to equity, now is still a good moment to start.

I'd be wary of bonds, of all flavors, mortgage, corporate, sovereign, municipals: basis risk is demonstrably terrible. spreads might swing in any direction any time because of a deleveraging of some obscure player anywhere in the world. And remember: the market can remain irrational longer than you can stay solvent.

Pierre

by Pierre on Tue Mar 11th, 2008 at 06:16:03 PM EST
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Re: There's also been (none / 1)
Yup.

The other ones - relatively new - are infrastructure and stuff like ETF's, but even there some of the players have over-done the gearing...

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Tue Mar 11th, 2008 at 06:21:21 PM EST
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Re: There's also been (none / 0)
Well, just consider the Italian 10 year bond which suddenly has a spread of 60 bp compared to German ones. According to the article, the reason the spread suddenly exploded was due to a flight to quality, or rather to liquidity. As an ordinary saver, you don't really need liquidity, at least if the duration is a bit shorter than 10 years. (I missed the duration in my last comment which kind of reduced the relevance of my comment, but anyway.) If the spread on 1 year bonds exploded too, that might be really interesting, as a private person should have no solvency problems holding on to a bond for a year without having to sell it on the market. At least if the minimum value of an Italian bond is the same as a Swedish, almost €3000.

I might have completely misunderstood what we are talking about here though.

By the way, why wouldn't TIPS give a real return against inflation? They are linked to the CPI, so that's exactly what they are supposed to do.

Or is the "core inflation" ghost around?

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Tue Mar 11th, 2008 at 08:51:26 PM EST
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Re: There's also been (none / 0)
Pierre:
And remember: the market can remain irrational longer than you can stay solvent.
Great line - and scary thought.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Carrie (migeru at eurotrib dot com) on Thu Mar 20th, 2008 at 09:43:30 AM EST
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In other news from New York | 74 comments (74 topical, 0 editorial, 0 hidden)
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