When?
Bonds are dead. As little as 6 months ago, there were reports just about weekly about how well things went at the Treasury auctions. That news has seemed to be pushed aside by whatever news is happening re: QE3, QE4, QE99350, whatever.
My essay yesterday talked about interest rate swaps and explained why the Feds cannot raise interest rates without imploding the TBTF’s.
http://www.freerepublic.com/focus/f-chat/2930615/posts
That leaves stocks. And that is exactly what is holding up the stock market now, there is practically no alternative that is showing any growth yield.
Treasuries are dead? Really?
Sorry, but I’ve been hearing this for the last few years. It hasn’t been true yet. The Forces-That-Be will engineer UST interest rates lower. MUCH LOWER: to zero or negative. Anyone who believes otherwise is kidding themselves.
He’s one of the worst investment advisors among the Barrons roundtable group.
“Stocks Will Collapse, Gold Will Surge, And The 30-Year Bond Bull Market Is Over”.
I think something approaching the opposite, if not completely opposite, is true. Here’s why I think so.
1) Stocks. If you wanted the major stock market indicators to be rock steady, and you could *invisibly* insert or remove a billion dollars into or out of these indexes at any time, as often as you liked, could you defeat either a bull or a bear market?
Certainly. And the FED can do this, that is, manipulate the stock market *indexes*, invisibly. Why else has the stock market been flat, often with very low trading volume, while the rest of the economy is going into the toilet?
And even when Romney replaces these corrupt cretins, their replacements are going to have to keep doing this, at least for a while, to keep the stock markets from crashing.
2) Gold. Almost all the gold that is available for sale has been sold, and a very large part of that has been to sovereign funds and governments. But the trouble is that the price of gold can only increase when there is someone willing to *sell* as much as someone willing to buy.
Gold owned by sovereign funds and government is not bought to make a profit, but to be a hedge, and that fouls up the market system, because buying or selling has a political, not profit goal.
However, if the price of gold gets too high, they are very capable of sending the price spiraling down, by making the political decision to dump gold, even at a loss. (The last time this happened was when the US Treasury dumped silver to defeat the Hunt brothers attempt to corner the market.)
3) The bond market. The 30 year bond lost favor with the government after 2000, however, it was brought back mostly to give enormous pension funds someplace safe to put their money. And that really hasn’t changed much. The bull market in 30 year bonds is more a sympathetic reaction to the bull market in 10 year bonds, mostly due to a flight to safety.
This is because there has been a “great disgust” with stocks, see #1 above, because the market has been flat
lined for years. You would think that the stock market would actually go down if many billions of dollars had been taken from it and put into bonds. But nope.
Gold surge? I’ll take whatever silver lining out of that possibility I can.. and skip Vegas. back to Alaska.
As the various levels of government continue spending, bonds will be increasingly risky. As government continues to own more of its own treasuries, those will be more fake. The stock market will most likely stall and decline more steeply, after bond yields go up, bond prices plummet, and interest rates skyrocket. Maybe a couple of years. Maybe sooner. And all the while, east Asia and other regions consume more oil—new consumers, manufacturers and commercial transportation.
Currencies are only a means of trading products efficiently, and sometimes, not so wisely. The answer beneath all of the distracting speech about money, is that in the end, we have as much as we produce. Might even have less in the event of war after economic collapse.