www.sovereignman.com/investing/...-face-a-bleak-future-31198/
"In September 1981, he writes, investors could buy a 10-year US government bond yielding nearly 16%.
Now, inflation was a lot higher in the 1980s than it is today. But even after adjusting for inflation, the average annual yield for any investor who held that 1981 bond to maturity over the next decade would have been 5.7% per year.
Today, that same 10 year bond yields just 1.4%. But the official inflation rate in the United States is also 1.4%. This means that, after adjusting for inflation, your net yield today is ZERO.
Yet simultaneously the Federal Reserve keeps saying that they want to keep interest rates low. And they’re doing their best to push the 10-year yield even lower than 1.4%.
In other words, inflation could go higher, and interest rates lower. So anyone who buys bonds will actually suffer a negative yield after adjusting for inflation.......
This year Buffett summarized his ethos by saying:
“Productive assets such as farms, real estate, and yes, business ownership, produce wealth– lots of it. Most owners of such properties will be rewarded.”
"In September 1981, he writes, investors could buy a 10-year US government bond yielding nearly 16%.
Now, inflation was a lot higher in the 1980s than it is today. But even after adjusting for inflation, the average annual yield for any investor who held that 1981 bond to maturity over the next decade would have been 5.7% per year.
Today, that same 10 year bond yields just 1.4%. But the official inflation rate in the United States is also 1.4%. This means that, after adjusting for inflation, your net yield today is ZERO.
Yet simultaneously the Federal Reserve keeps saying that they want to keep interest rates low. And they’re doing their best to push the 10-year yield even lower than 1.4%.
In other words, inflation could go higher, and interest rates lower. So anyone who buys bonds will actually suffer a negative yield after adjusting for inflation.......
This year Buffett summarized his ethos by saying:
“Productive assets such as farms, real estate, and yes, business ownership, produce wealth– lots of it. Most owners of such properties will be rewarded.”