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You have no idea if this is true, this is 100% speculation. Rates could rise dramatically, they could rise gradually (which is the most likely scenario), or they can stay at 0% for the next 10 years.

This is why buying a bond fund at a deep discount (these are at 10% discount as we speak) provides a nice cushion for all cases except the catastrophic "yields rise quickly" scenario. If you are worried about that, you should be setting aside some cash to try to time the market.




No, it's not 100% speculation. Although that's an amusing claim, because your own parent post would fall under your same position of being 100% speculation if you were in fact right.

However, your premise requires a world in which nothing can truly be known for certain and all outcomes are equally likely. Such is not the case; not even remotely the case.

Rates cannot stay at 0% for the next 10 years, the math involved won't allow for that scenario. The Fed is already having their hand forced right now, as is easily demonstrated by the huge spike in bond yields, oil being at $100, housing and stock prices skyrocketing due to asset inflation generated intentionally by the Fed (as they openly said they wanted to have happen). It's a repeat of the last asset bubbles they brewed, and for exactly the same reasons, only this time it's 100% intentional. The clock is rapidly running out on their fraudulent game. They're already being wedged between a rock and a hard place; continue the policies of cheap money, and assets go so high they rip the economy apart upon implosion, again; stop the policies, and the economy implodes instantly. Rates skyrocket either way, as the bond buyers begin demanding higher yields to compensate for worsening inflation with continued QE; or rates skyrocket as the Fed stops QE and stops artificially holding down rates.

You might as well claim that rates can stay at 0% forever, or for 1,000 years, or for 100 years. Again, your position requires the premise that all outcomes are equally possible, and that is not true.

It's obvious the era of cheap money is ending. The era of expensive money is about to begin, as it must by the basic laws of economics (which is in fact a science, despite the many witch doctors in the field).


When did I say all possible outcomes are equal? The most likely scenario is not a sudden explosion of yields but a gradual increase in yields. Other possible scenarios are low yields for much longer than you expect, or your "armageddon" scenario where yields jump by a few hundred basis points in a year or something. If you don't believe central banks can keep rates low for another decade in the U.S. see: Japan. (Don't assume I am claiming this is a good idea, I am just explaining the reality of the incredible leverage central banking has.)

If you buy a 10% discounted tax free bond fund (a taxable equivalent of a 9% yield currently) that has medium duration (~6 years) then you are fairly well cushioned from gradually rising yields, as the fund turns over and moves into higher yield bonds your distributions should increase. In other words, all of your fears are not hidden, secret, insider knowledge, but are largely getting priced in at this point.

The biggest risk with long-term CEF muni bond holdings is not interest rate risk (since you don't have to sell them, you have a 10% cushion, they have moderate duration, and a large enough spike in yields to really impair your principal is a pretty low probability outcome. but again: you don't have to sell them.) The real risk is inflation risk. And this is what I said in the Disclaimer:, which you seemed to not read. Also, your viewpoint seems to indicate the best assets to hold are gold and cash, and the cash side of your portfolio is going to be exposed to the same inflation risk as your bond coupons. There's also risk of default, but you can find national funds that are well diversified, etc, so this doesn't seem to serious a concern either.

edit: Also, one thing you are overlooking is that if the shit hits the fan, there is a lot of greedy, borrowed money in equities right now, both people chasing dividend yield and people chasing capital gains now that we're in a bull market, thanks to the Fed's bubble, that will head for the exits. It will go where it always goes: government backed fixed income and money markets. This will cause downward pressure on yields in the scenario where Fed moves cause a panic in the stock market, even though ironically the Fed doesn't even buy equities, it only buys bonds.




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