Reader Walter has asked an important question on the recent actions of Goldman Sachs and Warren Buffett. Link here.
These investing behemoths are locking in long term debt at low, low rates and retiring variable rate loans.
Goldman's strategic 50 year move in the bond market at a hair over 6% is fascinating.
Who can possibly predict yields 50 years on the future?
In my view, yields on the 10 year rate will soon skyrocket.
The timing will depend on several factors, including the rollover of debt in Europe (Spain, Ireland and Italy are on my radar), and the cooperation in Congress on controlling Federal spending.
In my estimate, we will see the 10 year rate at close to 5% or higher by year end with steady increases into 2012.
I suspect that GS and WB have analysts that have also reached this conclusion which explains their actions. (more)
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