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Football Fans Refer To This Strategy As A Hail-Mary Pass

A weekend topic starting with KTUV. “Like many homeowners across the country, Santa Claus has benefited from skyrocketing home values, according to Zillow — which values his sprawling North Pole property at more than $1 million. A searing hot housing market this year, fueled by ultra-low mortgage rates, a thin inventory of properties for sale and many would-be buyers’ desire for more living space during the pandemic, led to record U.S. home prices.”

“This apparently carried over to the North Pole, as the online real estate marketplace now values the Clauses home at $1,031,401. Zillow predicts that Santa’s home will appreciate nearly 14% over the next year, which is in line with forecasted home value appreciation across the U.S.”

From KMTR in Oregon. “Heading into the new year, the Lane County housing market continues to see low inventory and high demand. They are going quick and they are going high – the median price in Eugene-Springfield is $421,000. ‘$421,000 here in Eugene is crazy, just crazy,’ exclaimed Marcia Edwards, Principal Broker at Windermere Real Estate.”

The San Mateo Daily Journal in California. “Home prices on the Peninsula were pretty steady for years. You could pick up a decent two- or three-bedroom starter house anywhere from $5,000 to $35,000 from the 1950s to the ’70s. Of course, people made significantly less back then. Don’t believe me? Ask someone who bought one back then. Oh, they’ll tell you. In the 1980s, prices rose a bit, and you could pick up the same house for around $100,000. In the latter part of the 1990s, the prices went up to about $200,000.”

“It was during the dot-com boom that saw prices double, so a house that previously went for $200,000 was now $400,000, or even higher. Up until 2008, such a house would go for $650,000, or even higher. While there was a slight dip during the dot-com bust and recession of the early 2000s, it didn’t take long for the housing bubble to grow. At the same time, the credit default swap market peaked in 2006 with inflationary pressures tweaked through higher interest rates that spurred interest in exotic loan offerings like adjustable rate mortgages with terms as short as seven years.”

“By 2008, people with these loan offerings seeking to benefit from the housing bubble caused market instability when they started defaulting. And we had the crash. Home prices here adjusted lower. So now that house that was $650,000 was $450,000. Some were able to get in on the housing market, but many other homes were bought by banks to hold for when prices were on the rise again.”

“It didn’t take long for that to happen and the new rise began in 2010, with another rush of jobs into the area with the high-tech surge. It took less than a decade for home prices to double from $450,000 for a small starter home to $900,000. And now that same home is $1.1 million, or more.”

“From 2008 to 2012, there were a number of quantitative easing measures put into place by the Federal Reserve to ease the recovery. There was QE 1, QE 2, QE 3 and Operation Twist, which was part of quantitative easing. All that essentially meant the Federal Reserve bought bonds to inject money into the economy. It also meant yield of Treasury bonds stayed low and investor interest in the stock market or other ventures stayed high. This meant there was more venture capital to be spent, and it was spent around here.”

From Philip Pilkington at Newsweek. “In the second week of December, the Federal Reserve Open Market Committee (FOMC) met for the first time since Chairman Jerome Powell conceded that ongoing inflation is unlikely to be transitory. The meeting’s inconsistent conclusions are unlikely to inspire confidence. There is a distinct possibility the Federal Reserve is about to hit a wall, and that its very constitutional underpinnings will soon come into question.”

“In essence, they argue that setting monetary policy is akin to solving an engineering problem—say, calculating how wide the arches on a bridge should be. This supposed objectivity itself depends on a theory known as the ‘equilibrium rate of interest’—known in the economic literature as the R*. The R* is the rate of interest at which the rate of employment is maximized, and the rate of inflation is stable. The R* is to central banks what the crown is to the King—it gives them their authority and their credibility. If the R* is an illusion, then central banks do not have the capacity to ‘objectively’ set the rate of interest.”

“Developments taking place in the economy today, however, may finally threaten its regal hegemony. The reality is that the Fed is between a rock and a hard place. For the past decade, it has maintained extremely low interest rates to try to generate economic growth. These low rates have given rise to manias in multiple markets—from stock markets to bond markets to housing markets. The Fed economists know that if they slam their foot on the brakes, these markets will fall—hard. On the other hand, if they do not raise rates and inflation continues to spiral, they will be blamed for the chaos. By pursuing their policy of choice for the past 40 years—which in practice has meant ever lower interest rates—they have painted themselves into a corner.”

“This brings us back to the hallowed R*. According to the R* theory there is always an obviously correct choice. After all, monetary policy is just an engineering problem, right? And the Fed economists are brain boxes that we trust to solve this giant engineering problem, right? Well, no, it would seem not.”

“If November-Jerome Powell is correct and inflation is not transitory, then the theoretical basis on which the Fed rests its claims to independence is cooked. The FOMC therefore must hope and pray that December-Jerome Powell is correct, and that inflation will die down of its own accord in 2022. I believe that American football fans refer to this sort of strategy as a Hail-Mary pass.”

“As the theoretical basis for monetary policy hollows itself out, expect the public to be livid. Not only will prices rise as pay checks fail to keep pace, but people’s savings will be obliterated. If someone wants to keep some or all of her savings in a simple bank savings account, her wealth will be eroding at a pace of anywhere between 4.5 percent and 6 percent annually. The average Joe will not need to understand the nuances of the R* theory to realize that this situation is absurd. The Fed’s credibility now rests on a punt and a prayer.”

From Spiked. “Recently, it has become standard media gospel that the most ‘progressive’ way to solve the housing crisis in America is to build over the hitherto leafy suburbs of property hotspots with smaller, more tightly-spaced ‘living units’. This is known as ‘urban infill’, or, in a twist that would do political term-coiner-in-chief Frank Luntz proud, ‘upzoning’. In the course of ‘upzoning’, what was once a single-family suburban home could, for example, be subdivided into apartments or reorganised as a ‘co-living’ arrangement with ‘secure bedrooms’ (previously known as ‘a boarding house’), while the backyard could host ‘a tiny… home on wheels’ (previously known as ‘a trailer’) or, under some proposals, a yurt.”

“Unsurprisingly, upzoning turns out to be very easy and very profitable. What is billed as a saintly progressive effort to ‘provide affordable housing’ is also a giveaway to developers rushing to build ’em cheap and stack ’em high on land that was, until recently, off-limits to them, because it was zoned for low-density residential living.”

“Dismayed residents and affordable-housing organisations have been vocal in their condemnation of ‘upzoning’. But, in a consummate example of woke-jacking (that is, subverting woke concepts for one’s own selfish ends), they have been dismissed as racists. The sheer efforts that have been made here, show how much is at stake.”

“So, instead of allowing those properties to meet a natural price point in a market of limited buyers faced with high property and inheritance taxes and preferably cut off from foreign investment, it has been decided that actually immigrants and people of colour love living in cramped, multi-generational households, up to and including ‘affordable’ duplexes built behind these same postwar bungalows that have been transformed into the equivalent of a highway motel for tech workers. By those lights, it’s practically anti-racist to deregulate in a manner that allows multiple families to inhabit the same property previously occupied by one, paying, as they do so, more money to receive less value (according to some calculations up to $919 for a room in a boarding house in Portland).”

“The New York Times  simply referred to America-past as ‘a more middle-class country’ than America-present, accepting social stratification and lifetime unfairness as a given. Perhaps, as the World Economic Forum once infamously and ill-advisedly put it, in the future, ‘you’ll own nothing and be happy’. And if you’re not happy, you’re a racist.”

This Post Has 67 Comments
    1. More than any other federal entity, the Fed claims for itself an absolute independence in its capacity to set U.S. monetary policy.

      What a crock. The Fed and all central banks do the bidding of an evil cabal of banking families that have used their control of our money issuance and the Fed’s “No Billionaire Left Behind” monetary policies to vastly multiply their own wealth and power at the expense of the 99%.

  1. ‘The Fed economists know that if they slam their foot on the brakes, these markets will fall—hard. On the other hand, if they do not raise rates and inflation continues to spiral, they will be blamed for the chaos’

    Chaos and they’ll still have to raise rates, or crawl under a rock and let somebody else do it. IMO what held inflation down for so long was globalism. It exported developed countries inflation in the race to the bottom, using slave labor, destroying the environment, etc. It’s also China that’s hit the wall. Their absurd “business model” appears to finally dawned on pooh bear, or who ever calls the shots.

    If the inflation genie is out of the bottle, we’re back to facing consequences for insane money creation.

  2. ‘Zillow predicts that Santa’s home will appreciate nearly 14% over the next year’

    Ho ho ho zillow, how many a$$ poundings did you receive this past week? Notice the media quit talking about the great steaming pile, except to regurgitate their dumb press releases.

  3. ‘You could pick up a decent two- or three-bedroom starter house anywhere fro $5,000 to $35,000 from the 1950s to the ’70s’

    This was true in every county in the US. To understand the phenomenon, the first question about a housing bubble should be when did it start?

    1. https://www.dailymail.co.uk/news/article-10343019/Joe-Biden-surprises-patients-visiting-Childrens-National-Hospital-Jill.html

      The clip of the exchange got immediate reaction online, with conservative blogger Erick Erickson commenting: ‘Confession: I find it in poor taste to tell the President of the United States “Let’s go Brandon” when the man just wanted to wish you Merry Christmas. Good manners should still matter.’

      The first lady’s spokeman Michael LaRosa answered ‘Yep.’ to Erickson’s tweet.

      ‘I think the let’s go Brandon stuff is harmless and funny, but if you tell someone to go f**k themselves when they are being nice to your kid, you’re just a d**k. Merry Christmas!’ said Tommy Vietor, a former aide to President Barack Obama.

      1. “but if you tell someone to go f**k themselves when they are being nice to your kid, you’re just a d**k.”

        Yes, not like the heartwarming Holiday message Joe Biden sent to the unvaccinated and their families last week.

        “We are looking at a winter of severe illness and death for the unvaccinated — for themselves, their families and the hospitals they’ll soon overwhelm.”

      2. “It is fair to call conservatives “deplorables” and “racists” January through November, but we would NEVER do that around Christmas. Christmas is a holy time, it’s when we make our plans to expand abortion laws in the new year.”

  4. Today is Christmas Day December 25th and COVID is now over. Please resume your lives as normal, because COVID is over.

    1. This is what the New York Times decided to lead with today.

      As Omicron Spreads and Cases Soar, the Unvaccinated Remain Defiant:

      “In the year since the first shots began going into arms, opposition to vaccines has hardened from skepticism and wariness into something approaching an article of faith for the approximately 39 million American adults who have yet to get a single dose.

      Now, health experts say the roughly 15 percent of the adult population that remains stubbornly unvaccinated is at the greatest risk of severe illness and death from the Omicron variant, and could overwhelm hospitals that are already brimming with Covid patients.”

      https://archive.fo/sUVAF

  5. Ok, so Merry Christmas to Mr Jones and all you people that I look forward to your posts, in a World gone haywire. Thanks for putting up with me all year. May 2022 be the year of victory over those that dare to enslave the people of the Globe.

  6. It’s a cratering Christmas my good friends….. it’s a cratering Christmas.

    Reston, VA Housing Prices Crater 21% YOY As Every Northern Virigina Town Registers Falling Prices Year Over Year

    https://www.movoto.com/reston-va/market-trends/

    As one national broker conceded, “I wouldn’t be shocked if prices fell 50% or more. In fact we’re forecasting it.”

  7. “Recently, it has become standard media gospel that the most ‘progressive’ way to solve the housing crisis in America is to build over the hitherto leafy suburbs of property hotspots with smaller, more tightly-spaced ‘living units’.

    This is all about injecting multiculturalism into the suburbs.

    1. The number of Americans in California might be dropping, but the total number of people in California is skyrocketing. And CNN cheers.

  8. In 2022, may every libtard reap the vibrant cultural enrichment and blessings of multiculturalism they have been promoting for the rest of us.

    Shocking video shows woman armed with a PICKAXE shoplifting in broad daylight at a Rite Aid in crime-ridden Los Angeles

    https://www.dailymail.co.uk/news/article-10341919/Woman-armed-PICKAXE-seen-casually-shoplifting-Rite-Aid-crime-ridden-Los-Angeles.html

    A woman carrying a pickaxe in broad daylight casually walked into a Los AngelesRite Aid, stole merchandise and threatened store employees and customers, shocking video shows.

    The bizarre footage captured the moment the unknown woman dragged a basket full of merchandise across the floor of the Rite Aid, in Venice, California, on Thursday morning.

  9. Cracks me up how Putin is giving lectures on the evils of Political correctness and the woke.

    It would no doubt be a threat to Russia if the One World Order Dictorship took over, rather than just your typical rivalry of Countries.
    In other words, Putin doesn’t want the One Word Order Governance of Corporate Monopolies taking over , and what that kind of madness would bring.

    1. In Putin’s Russia, they recognize two genders and the crucial importance to society of the nuclear family. How ironic that the center of global Bolshevism has shifted from Russia to the former “land of the free.”

  10. “Zillow predicts that Santa’s home will appreciate nearly 14% over the next year, which is in line with forecasted home value appreciation across the U.S.”

    I do not have the figure for the U.S.’s total real estate value for 2021 but here it is for 2020, so I will have to go with that:

    It’s a whopping 33.6 TRILLION dollars. Adding 14 percent to this figure would magically create an additional 14.7 TRILLION dollars of, er, wealth.

    U.S. Housing Market’s Combined Value Hits $33.6 Trillion in 2020 – WORLD PROPERTY JOURNAL Global News Center
    https://www.worldpropertyjournal.com/real-estate-news/united-states/los-angeles-real-estate-news/real-estate-news-zillow-housing-data-for-2020-combined-housing-market-value-in-2020-us-gdp-china-gdp-rising-home-value-data-11769.php#:~:text=According%20to%20new%20research%20by,and%20China%20(%2413.6%20trillion).

    The GDP for 2020 was 20.94 TRILLION dollars. If real estate values were to rise by 14 percent, which is 14.7 TRILLION dollars, then that means about seventy percent of the GDP figure would be composed of the rise in real estate values – values that are, at root, a function of prices.

    1. Never mind, my math is wrong (too much Xmas egg nog?).

      A 14% increase of 33.4 trillion dollars is not 14.7 trillion dollars, it is “only” 4.676 trillion dollars.

      So, party on.

    1. OMG, this is horrible. Don’t the vaccinated realize they are being played as the preferred group, in a divide and conquer war strategy, and they will end up screwed in the end.

      1. When the Nazis tried to force occupied Denmark to make the Jews wear the Star of David armbands, the Danish King set a moral example by wearing a Star of David, then asking all his subjects, Jew & gentile, to do the same since all Danes were equal in the eyes of the legitimate law. That kind of courage is lacking in today’s world.

  11. If millions of people can’t afford to pay their electric & gas bills, how will they be able to afford soaring rents?

    20% of Americans couldn’t pay their energy bill in the last year. How to keep costs down

    https://www.cnbc.com/2021/12/23/20percent-of-americans-couldnt-pay-their-energy-bill-in-the-last-year.html

    It’s gearing up to be an expensive winter, especially for those grappling with rising heating costs.

    In the last year, about 20% of Americans struggled to pay their energy bill in full at least once, according to a study by Help Advisor. At the same time, 18% kept their house at a temperature that was either unhealthy or unsafe.

    Even more people went without necessities to make sure they could afford their utilities. More than 28% skipped a basic expense such as food or medicine to pay an energy bill in the last 12 months, according to the study.

    1. This is the “fundamental transformation” that you were promised, this is the Progressive Way.

      “This sucker could go down” — George W. Bush

    2. And, the energy unaffordable factor is going to be even worse in Europe.

      Also, the more I deep dive into the corruption by Dr. Fauci of medical science in the last 35 years , its mindblowing.
      Dr. Fauci was a obvious shill for Big Pharmacy in a Government position of great power and funding capacity.
      He funded what Big Pharmacy wanted, they rigged trials, he shut down ,defunded and discredited valid dispute by real Scientists and went to discredit the Scientists themselves if they didn’t go along with this corruption of real Science.
      And we have any wonder about how Pharmaceutical deaths rose to the third and forth cause of death in the last 20 years. Tax dollars going toward the no liabilty vaccine development, and gain of function research with foreign rival Countries.
      So, now fake vaccines and contrived Pandemics , with forced mandates in lockstep with World Governments. And Fauci with the collusion of Media and corrupted Government, censoring any dispute from Scientists/Drs, with threat or bribery to the Medical system if they don’t push the Fauci/Biden narrative.
      I’m just saying Fauci have been corrupting medical Science for years now by same methodology used for years by this Devil Fauci.
      Joe Biden, A corrupt Puppet and a byproduct of a criminally rigged election to advance the agenda of the Globalists One World Order, in collusion with Big Pharmacy.
      Their narratives are breaking down and becoming more ridicules by the minute , and even the brainwashed are noticing something isn’t adding up . Can they hype Omicron for the new wave of terror, or will it be something else? Are they trying to bring on a Civil War? What is their next move, because everyone knows Covid is dying out.

    3. “20% of Americans couldn’t pay their energy bill in the last year. ”

      What percentage are loan owners?

  12. Good luck with that.

    China’s top real estate regulator vows to tackle property delivery risks – Xinhua

    https://www.reuters.com/markets/rates-bonds/chinas-top-real-estate-regulator-vows-tackle-property-delivery-risks-xinhua-2021-12-25/

    SHANGHAI, Dec 25 (Reuters) – China’s top real estate regulator vowed to resolutely tackle risks stemming from overdue delivery of residential properties by some top developers in a bid to maintain social stability, the official Xinhua News Agency reported on Saturday.

  13. This is just in:

    Rudolph Changes Name To Rolanda, Dominates Female Reindeer Games | The Babylon Bee
    https://babylonbee.com/news/rudolph-changes-name-to-rolanda-dominates-female-reindeer-games/

    NORTH POLE—Rudolph The Red-Nosed Reindeer received praise for taking a stunning and brave stance against outdated binary gender stagnation by changing his name to Rolanda and subsequently dominating every field in the North Pole’s annual Female Reindeer Games.

    “Rolanda is a shining beacon for young, female reindeer in more ways than one,” stated the president of the North Pole Reindeer Games Committee, Bob Chairman. “She has shattered records in every event she has entered, which says so much about the physical potential of all female reindeer.”

    Rolanda The Red-Nosed Reindeer did indeed break records in all events of the Female Reindeer Games, including the Sleigh Pull, Flying, Landing, Oat Bag Toss, Gingerbread House Trampling, and the Giant Slalom.

    She struggled with the final event, Female Reindeer Feminine Ice Dancing, performing far worse than all other female competitors. The judges still awarded her the gold medal for being so stunning and brave.

  14. Merry XMas, all. Everybody wish me well– I’m gearing up for a high stakes battle (aka dinner with in-laws).

    1. “(aka dinner with in-laws).”

      Have they been double vaxed, boosted and tested?

      I wonder how many times people used that to get out of spending time with unwanted guests this year. I know someone who did.

      I’m not saying that’s the case with your in-laws, I’m just sayin’. 🙂

      Anyway, Merry Christmas and I wish you well.

      1. This year’s holiday travel chaos was completely predictable. I’m baffled that so many opted for air travel given the near-certainty of cascading disruptions due to staffing shortages.

        Tens of thousands of Americans face travel chaos as 868 flights are canceled and 520 more delayed on Christmas Day as COVID Omicron surge triggers staff shortages

        https://www.dailymail.co.uk/news/article-10344125/Christmas-Day-airport-misery-thousands-flight-cancelations-climb-quarter-24-hours.html

        The holiday travel nightmare continues for passengers as nearly 868 flights have been cancelled and 520 are delayed on Christmas day after 600 flights were axed yesterday because of crew shortages due to the COVID Omicron surge.

        After a disastrous Christmas Eve that left thousands stranded globally, Christmas day travel appears to be on track to be just as bad if not worse with nearly 2,500 flights cancelled worldwide and thousands more delayed, according to tracking website FlightAware. And more than a third of those cancelations are in the United States.

    2. I had some success yesterday because I finally talked a friend of mind into not getting the booster shot. My friend is finally saying to himself that enough is enough. He thought he was doing the right thing by taking the two shots, but this taking booster shot after booster shot doesn’t exactly ring right to him. This friend is the type that always takes his flu shots yearly, or any kind of vaccine his doctor recommends. So even he is thinking something is awry here.

      1. Thanks, Jeff and HW. I survived. Luckily the dinner was well attended and the presence of additional people helped to dilute the effects of the more problematic ones. Cheers.

      2. Our two children, both young adults, received their Pfizer booster injections yesterday since they both require vaccination cards on University campus, WWU Bellingham and WSU Pullman. My daughter feels okay today, but son feels weak and is nursing a large bottle of Pedialyte.

          1. Yes, he had the hot/cold sweats last time; hopped in bed with all his clothes on; even the sheets were soaked. He’s doing much better this time.

        1. Are these universities requiring boosters now? Wow, even Fedgov isn’t requiring boosters (yet). These boosters are making people sicker than Omicron will.

          1. I recently paid their tuition(s), and the notice to parents regarding the CDC proof of vaccination card was one of the prompts in the step by step acknowledgements although I don’t recall the specific language. They already sent notice that the first week of school would be on-line, again.

            Washington state hospitals are full due to the lack of long term care facilities for the chronically ill; likely not paying their employees enough, IMHO.

  15. 🎄 May the peace and joy of falling housing prices be with you all this Christmas season.🎄

    Bend, OR Housing Prices Crater 15% YOY As Default Rates Soars On Surging Unemployment And Crime

    https://www.movoto.com/bend-or/market-trends/

    As one Bend area broker conceded, “It was appraisal fraud that drove prices. Now prices are falling and all those buyers are screwed.”

  16. I think we’ve established by now that “fully vaccinated” does not equal “protected.”

    U.S. Navy warship sidelined with Covid outbreak

    https://www.politico.com/news/2021/12/24/navy-warship-milwaukee-covid-526138

    WASHINGTON — A U.S. Navy warship has paused its deployment to South America because of a coronavirus outbreak, the Navy said Friday.

    The USS Milwaukee, a littoral combat ship, is staying in port at Naval Station Guantanamo Bay, where it had stopped for a scheduled port visit. It began its deployment from Mayport, Fla., on December 14 and was heading into the U.S. Southern Command region.

  17. Any thoughts on why the Securities and Exchange Commission refuses to support ETFs in scam currencies?

    1. December 23, 2021 5:37 PM PST
      Last Updated 2 days ago
      Funds
      U.S. SEC rejects Valkyrie, Kryptoin bitcoin trusts
      By Hannah Lang and Katanga Johnson
      2 minute read
      A representation of the virtual cryptocurrency Bitcoin is seen in this picture illustration taken October 19, 2021. REUTERS/Edgar Su

      Dec 23 (Reuters) – The U.S. Securities and Exchange Commission vetoed two proposals to offer bitcoin exchange-traded funds, dealing a blow to market participants who had hoped the agency would green light the effort after approving futures-backed bitcoin funds in October.

      In a notice dated Wednesday, the markets regulator said both of the proposals to list and trade shares of Valkyrie Bitcoin Fund and the Kryptoin Bitcoin ETF Trust failed to be approved because they did not meet its standard.

      “(These proposals) do not meet the standard of being designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest,” the SEC said.

      https://www.reuters.com/markets/funds/us-sec-rejects-valkyrie-kryptoin-bitcoin-trusts-2021-12-23/

      1. do not meet the standard of being designed to prevent fraudulent and manipulative acts and practices

        Aww DARN. I was hoping for the crypto equivalent of GLD and SLV.

  18. OT: I clearly have too much time on my hands today, as I was looking for a review of the new Matrix movie and came across this gem on Slate.

    “One line the script does go out of its way to hold, however, is the distinction between what “taking the red pill” means within the Matrix universe (liberation, full engagement in the social and political world, “waking up”) and what the phrase has come to mean after its co-optation by rightwing trolls (handing over one’s critical-thinking skills to social-media-borne lies, fulminating against “wokeness”).”

    That’s some Olympic-level projection. But no medal ceremony for you unless you’ve had your hourly jab, comrade.

  19. Oh dear…if the vibrant cultural enrichment reaches The Hamptons, I suspect the hedge fund suits will be having a come-to-Jesus session with their Democrat-Bolshevik political hirelings.

    One person killed in Hamptons home invasion on Christmas Day

    https://nypost.com/2021/12/25/one-person-killed-in-hamptons-christmas-day-home-invasion/

    One person was killed in a Hamptons home invasion early Christmas morning, Southampton police said.

    Cops responded to a 911 call at approximately 8:46 a.m. to find the victim, who has not been publicly identified, dead of a gunshot wound inside the residence.

    The Suffolk County Police Department’s Homicide Unit is investigating, authorities said.

    No other information was immediately available.

  20. It may be different this time, but a bond market selloff and interest rate spike heralded the Black Monday stock market crash in 1987.

    1. The Financial Times
      Sovereign bonds
      Global bond markets on course for worst year since 1999
      Asset class falls 4.8% in 2021 due to hot inflation and central banks’ efforts to tame price growth
      Bonds’ decline has been largely driven by two periods of heavy selling in government debt © Montage of bar chart overlaying pound note and dollar bill
      Tommy Stubbington yesterday

      Global bond markets are on course for their worst year since 1999 after a global surge in inflation battered an asset class that is typically allergic to rising prices.

      The Barclays global aggregate bond index — a broad benchmark of $68tn of sovereign and corporate debt — has delivered a negative return of 4.8 per cent so far in 2021.

      The decline has been largely driven by two periods of heavy selling in government debt. At the start of the year, investors dumped longer-term government bonds in the so-called “reflation trade” as they bet that the recovery from the pandemic would usher in a period of sustained growth and inflation. Then, in the autumn, shorter-dated debt took a hammering as central banks signalled they were preparing to respond to high levels of inflation with interest rate rises.

      In the US, which comprises more than a third of the index and saw inflation surge to a four-decade high of 6.8 per cent in November, the 10-year US Treasury yield has risen to 1.49 per cent from 0.93 per cent at the start of the year, reflecting falling bond prices. The two-year yield has climbed to 0.65 per cent from 0.12 per cent.

      “We shouldn’t be too surprised that bonds are a bad investment when inflation is running at 6 per cent,” said James Athey, a portfolio manager at Aberdeen Standard Investments. “The bad news for bond investors is that next year looks tricky too. We have the potential for a further shock if central banks move quicker than expected, and I don’t think [riskier bonds] are particularly attractively priced.”

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