This is pretty straight forward but powerful information when it comes to ranking the relative strength of global government bonds. Click on the chart to be taken to the full article at Bespoke
Archive for the ‘Inflation / Deflation’ Category
AGORACOM Wire – $2,000 Gold; Nixon From The Grave; $USD End Game; Black Box Trading; US Real Estate Doomed
AGORACOM WIRE – MONDAY AUGUST 15, 2011
TOP STORY … OMAGINE 10Q AFTER HOURS FRIDAY REVEALS …
“His Majesty The Sultantan of Oman Is A 25% Owner Of Omagine LLC … We Believe The Final Development Agreement Will Be Signed By September 15, 2011” Full Release
*** OMAG Is A Client … We Own Shares and Options … Go To OMAG HUB
$2,000 GOLD - Bank Of America Makes The Call … Full Story
NIXON FROM THE GRAVE … Today Is The 40th Anniversary Of Nixon Removing $USD From The Gold Standard … Not A Celebration … The Case For $USD Demise … Watch Video
GOLD FOR CASH FOR MORE GOLD : Junior Gold Producers Rising to the OccasionVia Prospecting Journal Full Story
VIDEO: BLACK BOX TRADING: Want To Trade Against Black Boxes … AKA Algorithmic Trading … AKA Skynet? 1 Second Of Trades Stretched To 1 Minute
HOW GEORGE SWING TRADES: See How George Traded 2 Positions In Avalon Ventures Between Wed – Friday AGORACOM Twitter
VIDEO: US REAL ESTATE STILL DOOMED – In Case You Didn’t Believe Geore’s OCT/09 Prediction – Which Has Come True – Here Is More Support From Barry Ritholtz In AUG/11 Watch Video
The biggest news for small-cap investors to digest – by far – is that PIMCO has not only sold all of its US Debt Holdings, it has gone short. Find my comments below via Twitter (reverse chronology) and my follow on comments below on how this plays out (theory vs. practically):
WHAT DOES THIS MEAN – Theoretically?
On it’s surface (I stress SURFACE), Bill Gross, Founder of PIMCO, is telling us that QE3 isn’t coming and nobody will be stepping into to replace US Fed purchases of US Gov’t debt. That will lead to – at the very least – a drop in Debt prices, so he is getting the hell out of Dodge. Simple enough … until you get to my practical comments below.
First, here are the theoretical (I stress THEORETICAL) follow-on effects:
INTEREST RATES – Going higher, just a matter of degree
$USD – Should strengthen with rising rates
EQUITIES – Should weaken for two reasons: A) Corporate expenses rise on higher borrowing rates = lower profits; B) Investors sell stocks to raise cash. Small-cap resource stocks fall in unison.
GOLD / SILVER – Should weaken against the US Dollar at the very least, potentially against most major currencies
US REAL ESTATE – Bombs Away .. my real estate theory since October 2009 remains intact
WHAT DOES THIS MEAN – Practically?
Unfortunately, we have learned over the last decade that economic theory can no longer be relied upon. After all, interest rate easing that began after 9/11 was never intended to crash real estate markets, plunge the planet into a debt crisis and lead to record nominal gold prices … yet here we are despite the “brightest” minds at the US Fed, White House and Central Banks around the world.
What truly happens isn’t so linear because market manipulation has taken the natural ebb and flow out of all markets – debt, equities, commodities, currencies. Prices are no longer determined by value – they are determined by confidence or a lack thereof. As such, what should practically happen is the following:
CONFIDENCE CRISIS – When US Fed purchases of US debt vanishes and isn’t replaced by the market, a crisis of confidence will commence.
INTEREST RATES – Will move incrementally higher, then accelerate as US debt prices free fall
$USD – Will initially strengthen with rising rates and bond nibbling, then drop as investors realize bond/confidence risk is too great. Swiss Franc and Canadian Dollar will do very well.
EQUITIES – Double Dip probability rises dramatically. Small-cap resource stocks take an initial hit, followed by massive rebound on gold, silver moves (see below).
GOLD / SILVER- Will initially weaken by as much as 20% /30% respectively on early $USD strength, then rocket towards all-time inflation adjusted highs of ~ $2,200 and $150 within 12 months
US REAL ESTATE – Bombs Away .. my real estate theory since October 2009 remains intact
AM I A GENIOUS OR WHAT?
I’d like to think so – but I don’t think so for two reasons:
1] Obvious Reason – I could be very wrong and a number of other outcomes could occur. This time, I think I’m right – but see #2 below
2] The Fed / White House / Wall Street Financial Matrix Isn’t Stupid – Despite what many smart people have to say, the powers that be aren’t as stupid as they seem. They just don’t give a damn about your long-term interests. Despite damage to the current and long-term US economy, I firmly believe they have executed their plan perfectly in their best interests – and they’re not finished ….
It’s coming … 100% … only this time it will require the financial pain I have outlined above in order to politically justify it … but as I posted on March 30th, QE3 Will Be Delayed, Not Terminated.
At that point, the game plan resumes … but not before Bill Gross and PIMCO step back into US Debt, go long and make a killing on their cash thanks to rising debt prices, which leads to falling rates, much weaker $USD, stabilized stock markets, MUCH higher gold/silver, MUCH higher junior resource stocks.
Until then, plan accordingly.
Faber on Japan, the Fed and QE ….. For those of you who think Faber is too pessimistic, he does view the current Japanese sell-off as a buying opportunity but says all bets are off if a meltdown takes place.
Further QE means greater inflation, higher gold / silver / commodities, which is bullish for TSX Venture Juniors and the TSX in general.
Despite commodities outperforming stocks by 1,000% over the past decade, the idiots at CNBC Europe speak to Jim Rogers as if he’s a senile old man. Reminiscent of the way CNBC and other media anchors would speak to Peter Schiff before the the world banking industry melted to nothing (only to be saved by Xerox machines at every central bank).
“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.
“This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.”
From the last two paragraphs of Gold and Economic Freedom by Alan Greenspan. 1966.
Good morning to you all. The fiscal crisis at the US Federal level is well-documented but – outside of the most astute readers amongst small-cap investors – many are unaware of the depths of financial despair faced by almost every US State.
Don’t feel left out any longer, we’ve got the following 60 Minutes clip that you need to watch over hot cocoa in these next few days. After watching it, you may have to crank that up to Eggnog.
Most importantly, make sure you take these facts into consideration when planning your finances in 2011 and beyond. Further money printing is going to have an impact on the US financial scene, the price of gold, etc.
Hat-tip to Eric Jackson Via Twitter
You simply have to love the fact that you can’t be at the New Orleans Investment Conference – yet you still have an ability to watch Peter Schiff provide commentary from his hotel room. Here is his latest 10-minute video. Grab a cup of coffee, sit back and watch. Leave me your feedback in the comments section below.
Personally, I gave the article a lot of thought and concluded it made too much sense to be ignored – especially given the fact I am fresh off watching CNBC’s Documentary “House Of Cards“. As with the video, I strongly recommend that you read the article, think about it, discuss it with people smarter than you and then decide your course of action.
To this end, please find enclosed a few bullet point highlights, followed by the entire article. I would love to hear what you think.
- October will report the annual fiscal deficit of 9/30/10 of about $1.5 trillion, a figure thought impossible just 1-1/2 to 2 years ago.
- The sale of Treasuries for the past six months was easy with a strong US dollar caused by a manufactured crisis in Greece and in the euro.
- What the Fed has been approaching since June is a “liquidity trap.” That is when loans are offered to business and they refuse to borrow.
- Gold has gained 15% a year for those last 7 years. This is a secular bull market and cannot be denied. Further, gold has appreciated annually against every currency.
- All we can say is we will never understand how bright people miss the obvious. There is no logic here, only agenda.
- the Fed will sell mortgage backed securities they paid banks $0.70 to $0.80 on the dollar for, back to them for $0.20 on the dollar. This allows the banks to carry this paper on their good books at market value and allows the taxpayer to pay the difference, and the Fed cleans up their books. They do not have to do this, but they are going to do so. The losses will be about $1.2 trillion.
- At the same time inflation will rage. The worst of all investment worlds, except for those in gold and silver related assets. Just as an example, during the period from 1929 to 1936, gold doubled and gold and silver shares rose over 500% in a deflationary period.
- Between 1978 and 1981, during an inflationary recession the average gold and silver share appreciated 40 times the price of gold bullion.
- The high-end market in homes is virtually non-existent. No sales for the past two months. Only 1,000 units priced over $500,000 were sold.
- There you have it, and it is quite a mess. Unfortunately it is going to get worse.
September 1 2010:
Almost two years ago the US Treasury was selling large amounts of short-term Treasury bills to fund bailouts and stimulus. That caused a major increase in debt. Most of that paper was 2-year bills and it is coming due for rollover shortly. While that transpires, October will report the annual fiscal deficit of 9/30/10 of about $1.5 trillion, a figure thought impossible just 1-1/2 to 2 years ago. (more…)