Just a short post noting that Marc's 50% prediction is in line with what we suggest is a possible valuation adjustment in our July 17th comments on Paul Krugman's Blog - Prophecies of Maestrodamus.
Not a hard one to figure out as it is really just "present value mathematics" whereby if long 30 year bond rates double, then their market value dips by 50%. Very straightforward mathematics that no amount of economic theory nor policy measures can override as it is simply a hard conceptual constraint. Mathematics cannot be persuaded, legislated nor negotiated with - and that should come as no surprise to anyone.
Down the line, looks to be a scary turbulent road ahead.
We will post more comments from this blog later on.
First Financial Insights
July 21, 2013