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Thread: 10yr bond vs equities

  1. #1
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    Default 10yr bond vs equities

    Well, however many of you do not know I figured this deserved its own thread rather than having it buried in the ST/LT investments where not everyone involved in the stockmarket actively reads / participates.

    For however long the 10yr bond has been the benchmark for national performance against the equities markets, and the credit markets are 99% right while the equities markets generally get it wrong. So take this with more than a grain of salt.



    It is a generally accepted rule that when equities out performs bonds, it is only temporary and the stocks are the one who face a pending correctional move.

    This picture is not updated to the very day of this post, but it is recent.

    Discuss, criticize, comment, troll... If I were to play it I would be short both of these markets, especially considering price action of last week on S&P500 closing below that 1290 area. Thats pretty weakish.
    Originally posted by beyond_ban
    What comes after a trillion?
    Originally posted by kvg
    a trillion and one

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    Maybe I'm slow, I fail to understand the comment - "when equities outperform bonds - this is usually only temporary". How so?

    The annualized rate of return over the 50 year period was 9.18 percent for stocks and 6.48 percent for bonds

    Ultimately equity will usually outperform the "return" on bonds simply based on the risk profile (see CAPM). I understand your rational for shorting bonds given the amount of money flowing in right now and driving down yields. What's the rational for shorting equities? They usually move in opposite directions.... *although not always*.
    Last edited by liquid1010; 06-15-2011 at 11:54 AM.

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    If looking for better long-run returns, I reccomend dividend paying equities.

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    The Greek bond pays something like 14%, hehe... 10 years is a long fucking time though and current rates are shit.
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    Originally posted by liquid1010
    Maybe I'm slow, I fail to understand the comment - "when equities outperform bonds - this is usually only temporary". How so?

    The annualized rate of return over the 50 year period was 9.18 percent for stocks and 6.48 percent for bonds

    Ultimately equity will usually outperform the "return" on bonds simply based on the risk profile (see CAPM). I understand your rational for shorting bonds given the amount of money flowing in right now and driving down yields. What's the rational for shorting equities? They usually move in opposite directions.... *although not always*.
    It is bond yield, not price.

    Yes you may see a higher return on equities but yield of bonds and price of equities should generally follow the same track.

    When divergences occur it is generally considered an anomaly where the credit markets (bonds) are correct in their valuation movements and equities are wrong.

    I think extraslow and bite missed the point of this thread lol.
    Originally posted by beyond_ban
    What comes after a trillion?
    Originally posted by kvg
    a trillion and one

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    Well isn't the yield the return? Say you buy a 10 year bond (at premium, discount or face value, doesn't matter) with a 5% return. Isn't that the yield you get from your investment? Kinda like an ROE? So if you buy at the right time, when interest rates are in your favour, then you'll do good (some bonds gave out like 10% 15 years back no?). Given that they are so low-risk, a bond can be a better investment than equities, as we know few people actually beat the index (9% average growth?).
    Porsche 944S2 Cabrio

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    Don't bonds and equities move in the same direction? The market rises due to low intrests rates, and bond prices and yields move in an inverse direction? And the bond market is a leading indicator for stocks...Wait haha I just read it again. That exactly what you are saying.

    Another interesting thing to watch is how the financial and energy sectors are doing vs utilities and service/healthcare. They are signalling a downturn.

    I have been off margin since February, and now mostly in cash. I suck at shorting.

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    >>The annualized rate of return over the 50 year period was 9.18 percent for stocks and 6.48 percent for bonds

    It depends when you pick a start time. Also, using historic stock market index prices are misleading, since theses markets typically drop the big time losers (think Enron, Lehman, GM, Nortel, AIG, Citi, Chrysler, BoA). Its like saying I've got a awesome GPA, so long as I don't need to count all those F's.
    Last edited by MyMan23; 06-18-2011 at 05:53 PM.

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