15% + 32(QEx3) = 2.65%
Buy Bonds from this man at 15%? Maybe not such an easy answer back in 1981 or '82. At the time, the economy was in deep recession; then-Fed Chairman Paul Volcker had squeezed short-term interest rates to 20% to fight double-digit inflation, while unemployment soared to 10.8%.
So, in light of those extraordinary times characterized by dismal investor sentiment, it would have taken a discerning investor to see great value in owning long-term bonds. Now 32 years later, after a great bull run in interest rates capped off by multiple rounds of Fed bond buying (QEx3), we find ourselves with near zero T-bill rates, inflation at 1.5%, 10-year Treasury yields at 2.65%, declining unemployment at 6.6%, and new all-time highs for the S&P 500.
These two polar opposite periods in both Fed policy and interest rates serve as a backdrop for a survey of popular