Well, the bond market has sold off quite considerably over the last couple of weeks. The treasury keeps flooding the market with new paper to fund government's giant budget for this year. It appears now that yields are getting attractive enough for the stock investors to lock in their profits and move into the "safe" inestment of us treasuries. Commodity investors will also probably lock in their profits from over the last couple of months in the short term and move into treasuries as well. This should give the treasury market a little bit of relief over the short term, but it wont get it out of the woods.
The dollar continued to drop this week falling heavily against all major currencies. From a charting stand point, there have been some major techinical breakouts by several different currencies versus th dollar. This weakness is finally starting to cause have an effect on commodity prices like gold and oil. Clearly looking through the charts, one can see that we are due for a relief rally in the dollar which should put pressure on commodities.
The currencies that I like are the New Zealand Dollar, Australian Dollar, Canadian Dollar. I do not know a lot about those currencies, but the charts look great. I do personally own the Norwegian Krone, it is my favorite, due to the fact that Norway has no national debt, and its currency is backed by oil. You can invest in foriegn currencies through a bank called Everbank. Just do an internet search and it will show up. They also let you invest in paper gold and silver.
Gold hit 975 by friday afternoon, and oil closed at 66$ a barrel. These charts are looking very toppy, silver also has nearly retraced to an old support area which should act as resistance. Having said all of this, everything is pretty much in place for a sell everything commodity and stock based and move the money into cash and treasuries, and go and enjoy your summer if you were lucky enough to buy into these things in feb/march.
My forcast for the rest of the year is for a sell of in the stock market/commodity markets over the next month to month and a half and then the rally should resume and work its way up to the levels that they currently at. They may push a little higher but I would not bet on it. The new forclosures in the commercial real estate market will start to show up negatively on banks balance sheets later in the year, and that will probably give us another potential crash scenario like we had last fall.
It will be very interesting to watch the bond market over the course of the year as the treasury auctions more debt onto the open market. This week was scary at times how quickly rates moved up. But now that the rates are higher, it should draw new money back into treasuries for a while.
Overall, despite the rally we will surely get over the short term in bonds, we are still in the early stages of a securlar bear market for U.S. bonds, and things are going to get a lot worse over the next couple of years. Interest rates are going to go through the roof. The only way for things to turn around for the bond market is if the government would finally gain some kind of fiscal responsibility, cut the budget, raise taxes (nobody is a fan of this one), and to move away from the consumer based economy that we have become, and become a producer once again. The government is trying to avoid this route because it is the painful one, and politicians will lose their popularity because of it.
I had a lot on my mind, sorry for being so long winded.
Cash21
Friday, May 29, 2009
Wednesday, May 13, 2009
Bonds showing strength, for now.
Today, the bond market strengthened which is expected due to the sell off in the equity markets, as I talked about last week. I expect another day of weakness in stocks, and than the perma-bulls will give it another attmempt to push prices up higher. The key is to watch whether or not the major indexes will push through their highs. If so, then the bond market will resume its fall, pushing rates up higher and commodities higher as well.
I want to repeat, that the status quo of higher stocks=lower bond prices, and lower stocks=higher bond prices, is only a sure bet if the economy as a whole is expected to have a normal recession, with a normal recovery, and that the government keeps its spending in check, which none of these is the case.
Remember, that from January 1st till the beginning of March, stocks and bonds were both selling off, allmost in tandem.
Now this is the death spiral that we are afraid of: All of the pundits on the business news, all of the politicians, and all of the experts on wall street have been saying that the economy has hit bottom, and that now is the time to be buying stocks. This same thing happened throughout all of last year, but on a smaller scale. After the Bear Stearns debacle, everyone signaled the all clear horn that the worst was passed, the market rallied, and then more bad news trickled in only to have another big sell off. Everyone on the t.v. would be saying the they expected next quarter, or maybe two quarters things would be getting better. That is the same thing that is going on right now. Everyone is banking on the 3rd and 4th quarters things to turn around.
Let me tell you this. This notion that the economy is going to turn around late this year or maybe early in 2010 is the only thing holding our fragile economy together. The false hope that somehow foreclosures are going to stop, the commercial real estate bubble doesn't pop, job growth will begin to grow, and that the consumer will start to spend again is what gives current U.S. Treasury holders hope that our government will be able to bring in the tax dollars to begin to pay back the debt.
Now I do believe that the largest U.S. debt holders are not buying into this false hope, but they are in a bind because if they were to start to dump large amount of our debt, they wouldn't be able to sell it quick enough to keep from destroying the worth of what they had left. So my theory is that the big debt holders like China, Russia, etc.. will divest out of U.S. debt, putting constant pressure on bond prices, pushing interest rates up higher. Now if you have been paying attention to the news, you should now that the federal reserve has made a commitment to purchase treasuries, in an effort to drive down interest rates to help in the recovery effort. Now if the Fed is purchasing Treasury Debt, and China and the rest of the world is selling it, the fed is going to be forced to purchase at a higher rate if they want to artificially keep down interest rates.
Do you see the vicious cycle we are going into. I am not a pessimist, I am a realist. You cannot create an oversupply of anything, and expect the value of it to remain strong.
I could go on and on about this and I do not have a higher education, and your telling me the people running our monetary system and the people running our government dont know what they are doing?
please comment
Cash21
I want to repeat, that the status quo of higher stocks=lower bond prices, and lower stocks=higher bond prices, is only a sure bet if the economy as a whole is expected to have a normal recession, with a normal recovery, and that the government keeps its spending in check, which none of these is the case.
Remember, that from January 1st till the beginning of March, stocks and bonds were both selling off, allmost in tandem.
Now this is the death spiral that we are afraid of: All of the pundits on the business news, all of the politicians, and all of the experts on wall street have been saying that the economy has hit bottom, and that now is the time to be buying stocks. This same thing happened throughout all of last year, but on a smaller scale. After the Bear Stearns debacle, everyone signaled the all clear horn that the worst was passed, the market rallied, and then more bad news trickled in only to have another big sell off. Everyone on the t.v. would be saying the they expected next quarter, or maybe two quarters things would be getting better. That is the same thing that is going on right now. Everyone is banking on the 3rd and 4th quarters things to turn around.
Let me tell you this. This notion that the economy is going to turn around late this year or maybe early in 2010 is the only thing holding our fragile economy together. The false hope that somehow foreclosures are going to stop, the commercial real estate bubble doesn't pop, job growth will begin to grow, and that the consumer will start to spend again is what gives current U.S. Treasury holders hope that our government will be able to bring in the tax dollars to begin to pay back the debt.
Now I do believe that the largest U.S. debt holders are not buying into this false hope, but they are in a bind because if they were to start to dump large amount of our debt, they wouldn't be able to sell it quick enough to keep from destroying the worth of what they had left. So my theory is that the big debt holders like China, Russia, etc.. will divest out of U.S. debt, putting constant pressure on bond prices, pushing interest rates up higher. Now if you have been paying attention to the news, you should now that the federal reserve has made a commitment to purchase treasuries, in an effort to drive down interest rates to help in the recovery effort. Now if the Fed is purchasing Treasury Debt, and China and the rest of the world is selling it, the fed is going to be forced to purchase at a higher rate if they want to artificially keep down interest rates.
Do you see the vicious cycle we are going into. I am not a pessimist, I am a realist. You cannot create an oversupply of anything, and expect the value of it to remain strong.
I could go on and on about this and I do not have a higher education, and your telling me the people running our monetary system and the people running our government dont know what they are doing?
please comment
Cash21
Tuesday, May 12, 2009
Dollar taking it on the chin?
Today I wanted to draw some attention to the currencies markets. There is some definite weakening in the dollar over the past couple of weeks. From a charts perspective, the Canadian dollar has been very strong putting in higher highs, and higher lows. The Yen is breaking out against the dollar, it is very close to a major breakout. The Euro has broken a trendline and is now pushing up against some resistance. The Pound has a messy reverse head and shoulders pattern. The Australian dollar has put in a textbook double bottome in, and is heading higher. And the New Zealand dollar is about to break out of a beautiful reverse head and shoulders pattern.
Now this blog is mainly focused on the fundumentals of our economy, but these charts are disturbing. This may just be a precurser to the to what we will be seeing later in the year, but if we keep heading in this direction, it could cause major problems with U.S. Treasuries.
What does a weak dollar do to U.S. Treasuries? I'm glad you asked!
1. A weak dollar decreases the intrinsic value of treasuries. Basically if you loaned somebody a hundred dollars when you could buy a new tire for your car with it, after the currency is weakened, you get payed back and now you can only buy a tire for you kids tricycle. Granted, U.S. Bond holders are getting paid a small yield, but it is not enough of a return to make up for the loss due to inflation. So just as the dollar deflates, debt deflates, this is why it is far better to be a borrower of money right now than a lender, providing you have a secure means of paying your debt.
2. Due to #1, holders of U.S. treasuries will look for better places to invest their money. They will sell their U.S. treasuries and seek out better investments like commodities, multinational companies, and foriegn currencies. This will cause the Bond prices to fall, just like stock prices fall. Once other bond holders, that were ignorant of the weakening dollar, realize that they are losing money on their "safe" investment, they too will liquidate their positions. And due to the 11trillion$ oversupply of debt, there is only one direction that bond prices can go, and that is down.
3. Because of the money flowing out of treasuries, those dollars will flow into other asset classes like commodities, multinationals, and foriegn currencies, causing the value of those mentioned to rise. This will put more pressure on the remaining U.S. Treasury holders to liquidate their positions, causing more pressure on the value of the bonds.
4. This will cause more and more pressure on the dollar, which will bring us full circle again.
If there is somebody that maybe has an education that could please give me a scenario where we will not have to face this kind of death spiral, I would appreciate it.
Here is another problem that is brewing, and remember, the key word is "delinquincies", being delinquint is what happens just prior to foreclosure. Did the stress tests figure in the possibility of a commercial real estate bubble popping in the form of mass foreclosures?
http://www.msnbc.msn.com/id/30701874
I have much more to say on these issues.
Please comment,
Cash21
Now this blog is mainly focused on the fundumentals of our economy, but these charts are disturbing. This may just be a precurser to the to what we will be seeing later in the year, but if we keep heading in this direction, it could cause major problems with U.S. Treasuries.
What does a weak dollar do to U.S. Treasuries? I'm glad you asked!
1. A weak dollar decreases the intrinsic value of treasuries. Basically if you loaned somebody a hundred dollars when you could buy a new tire for your car with it, after the currency is weakened, you get payed back and now you can only buy a tire for you kids tricycle. Granted, U.S. Bond holders are getting paid a small yield, but it is not enough of a return to make up for the loss due to inflation. So just as the dollar deflates, debt deflates, this is why it is far better to be a borrower of money right now than a lender, providing you have a secure means of paying your debt.
2. Due to #1, holders of U.S. treasuries will look for better places to invest their money. They will sell their U.S. treasuries and seek out better investments like commodities, multinational companies, and foriegn currencies. This will cause the Bond prices to fall, just like stock prices fall. Once other bond holders, that were ignorant of the weakening dollar, realize that they are losing money on their "safe" investment, they too will liquidate their positions. And due to the 11trillion$ oversupply of debt, there is only one direction that bond prices can go, and that is down.
3. Because of the money flowing out of treasuries, those dollars will flow into other asset classes like commodities, multinationals, and foriegn currencies, causing the value of those mentioned to rise. This will put more pressure on the remaining U.S. Treasury holders to liquidate their positions, causing more pressure on the value of the bonds.
4. This will cause more and more pressure on the dollar, which will bring us full circle again.
If there is somebody that maybe has an education that could please give me a scenario where we will not have to face this kind of death spiral, I would appreciate it.
Here is another problem that is brewing, and remember, the key word is "delinquincies", being delinquint is what happens just prior to foreclosure. Did the stress tests figure in the possibility of a commercial real estate bubble popping in the form of mass foreclosures?
http://www.msnbc.msn.com/id/30701874
I have much more to say on these issues.
Please comment,
Cash21
Friday, May 8, 2009
Summer Season=better jobs numbers
The better than expected jobs numbers, although its bodes well as a headline, is probably due to the spring and summer seasons where seasonal jobs begin due to the warmer climate. The numbers for Febuary and March were revised downward, and the unemployment rate hit 8.9%. I wonder how those people are going to make their credit card payments and house payments, and auto loans, etc...
Bonds look like they are going to retrace upwards a little, as the stock market starts to pull back. The traditional "flight to quality" will take its course, maybe. Generally, when the stock market sells off, those dollars go into "safe" investments like U.S. Treasuries. But if you overlay a chart of the 30year treasury and the Dow Jones Industrial Average, you will see that while the Dow was hitting its lows in March, there was also a sell off going on in the treasury market. This, to me, says that the investors were both selling american stocks and U.S. Bonds, I see this as long term very bearish for our economy.
Treasurys will rally initially when the stock market begins to fall again but if the market continues to fall, I believe that you will see the Bond market and stock market begin to fall together in tandem, just like the bonds and share prices of Lehman and Bear Stearns.
Yesterdays sell off was partially due to the lack of interest in the 30year treasury auction, and the sell off in treasuries that ensued. Classic over supply conditions in the treasury market.
Cash21
Bonds look like they are going to retrace upwards a little, as the stock market starts to pull back. The traditional "flight to quality" will take its course, maybe. Generally, when the stock market sells off, those dollars go into "safe" investments like U.S. Treasuries. But if you overlay a chart of the 30year treasury and the Dow Jones Industrial Average, you will see that while the Dow was hitting its lows in March, there was also a sell off going on in the treasury market. This, to me, says that the investors were both selling american stocks and U.S. Bonds, I see this as long term very bearish for our economy.
Treasurys will rally initially when the stock market begins to fall again but if the market continues to fall, I believe that you will see the Bond market and stock market begin to fall together in tandem, just like the bonds and share prices of Lehman and Bear Stearns.
Yesterdays sell off was partially due to the lack of interest in the 30year treasury auction, and the sell off in treasuries that ensued. Classic over supply conditions in the treasury market.
Cash21
Thursday, May 7, 2009
The beginning
This is the begginning of a Blog that I thought that I would start because of a uncompromising conviction on the direction that I feel that our country is heading. I know that this is a blog so I am not going to write an essay but all of the things that are on my mind, no, I will try to keep it down to one post a day on my thoughts on political, economical, and religious issues that we here about each day.
Obviously, because of the title that I chose for the blog, I have been focusing a tremendous amount of my time lately studying charts, news, current events, and commentary on the US treasury bond market.
It is my belief that the 11 trillion dollar worth of U.S. Debt is the biggest finacial bubble on the planet. And just like the tech bubble, housing bubble, oil bubble, and the credit bubble, it too will soon fall the the same fate as the afore mentioned. I believe that the result of the U.S. economy will be like that of Lehman Brothers or Bear Stearns, when the bond holders of those companies realized that they were not going to be paid back, they began to dump the paper causing a clear sell signal to the sharesholders and short sellers. When the rest of the world realizes that the U.S. is not going to make good on their debt, what do you think that the bond holders of U.S. debt are goin to do?
I do not lean toward the idea of an apocolyptic day when the bond market will completely crater causing skyrocketing interest rates. I more lean toward the gradual divesting of money out of the treasuries causing rates to continuously, day after day, rising to unheard of levels. I think that it will be more like the the way that gas prices went up as a result of the surging oil prices. Every week it seemed like prices would go up 10cents at the pump. Allthough, I do think that it is going to be gradual, I also believe that the treasury crash will pick up steam as is craters day after day.
I try to talk to people about the treasury market, but not many around me know much about it or seem to care. My goal for this blog is to give my daily thoughts on the bond market. Give readers ideas on creative ways to hedge themselves from rising interest rates, a falling dollar, and, surging inflation. I also hope to gain knowledge from the readers comments, because after all, you have to have an intelligent mind to give a hoot about the bond market.
I will warn you, I am not a scholar, I only have a highschool education. I do not claim to be a prophet, but I do have a strong conviction in my heart about the catastrophic direction that our leaders our leading us. I do feel called to be a "voice calling out in the wilderness" about the coming collapse.
Regards,
Cash21
Obviously, because of the title that I chose for the blog, I have been focusing a tremendous amount of my time lately studying charts, news, current events, and commentary on the US treasury bond market.
It is my belief that the 11 trillion dollar worth of U.S. Debt is the biggest finacial bubble on the planet. And just like the tech bubble, housing bubble, oil bubble, and the credit bubble, it too will soon fall the the same fate as the afore mentioned. I believe that the result of the U.S. economy will be like that of Lehman Brothers or Bear Stearns, when the bond holders of those companies realized that they were not going to be paid back, they began to dump the paper causing a clear sell signal to the sharesholders and short sellers. When the rest of the world realizes that the U.S. is not going to make good on their debt, what do you think that the bond holders of U.S. debt are goin to do?
I do not lean toward the idea of an apocolyptic day when the bond market will completely crater causing skyrocketing interest rates. I more lean toward the gradual divesting of money out of the treasuries causing rates to continuously, day after day, rising to unheard of levels. I think that it will be more like the the way that gas prices went up as a result of the surging oil prices. Every week it seemed like prices would go up 10cents at the pump. Allthough, I do think that it is going to be gradual, I also believe that the treasury crash will pick up steam as is craters day after day.
I try to talk to people about the treasury market, but not many around me know much about it or seem to care. My goal for this blog is to give my daily thoughts on the bond market. Give readers ideas on creative ways to hedge themselves from rising interest rates, a falling dollar, and, surging inflation. I also hope to gain knowledge from the readers comments, because after all, you have to have an intelligent mind to give a hoot about the bond market.
I will warn you, I am not a scholar, I only have a highschool education. I do not claim to be a prophet, but I do have a strong conviction in my heart about the catastrophic direction that our leaders our leading us. I do feel called to be a "voice calling out in the wilderness" about the coming collapse.
Regards,
Cash21
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