Its been put to me many times as to how can the bonds be sliding while the economy is weak and with the tax hike these will kill of any green shoots.
When you first look at the astrology sure there isn’t much support and up or down move at the present time.
Then when you look at the economics of it you see the changes.
Now to some of you this might be hard to see as the US tertiary system no longer teach old fashion economics. Which I don’t understand why as the Treasury and the fed are using old school economics yet we are more concerned about the words they use in there language speeches.
I say the above because the only place in the world that excluded just about everything except wages growth from inflation is the United States.
Power usage, grocery costs, energy, luxury good, clothing all these should be calculated in Inflation yet in America their not. (I’m talking about core inflation).
So what’s old school economics?
When a countries currency is low the first thing you do is write up debt.
The more you write the lower your currency falls, which you want, short term.
In the mean time your country low currency helps exporters gain market, against competitors.
Your companies begin making nice profits and the economy gains as a hole.
That’s the short and sweet of it.
The US hasn’t had the ability to pay any of the debt it’s written up in the last 10 year.
With low tax receipt that was very obvious.
In the current climate where taxes have gone back to 2001 levels and spending cuts have been made it’s a start to what’s to come.
The currency will begin to gain value whipping off 20-30% of the US debt just by appreciating value.
Now I’m not say the US will pay its debt off what I’m saying it will make moves to.
The amount of debt going forward to fund the government will slow down therefore make bond yield pick up.
As a result bond will begin to slide.
Don’t be sucked into the new way of thinking economics as the decision makes are using traditional old fashion methods.
My personal opinion the US has to stop being the worlds sheriff and look at itself.
The US military budget should be cut to a quarter of what it is.
Clinton was the only president that cut defence spending and the US was running economically.
Anyway I hope this answer your question on economic understanding.
This is why I say there is no reason to hold preservation of capital (gold/silver).
I’m sure some more very experience investors like Eric Sprott and other have their reasons behind being massive metals bulls, but my work doesn’t support their views.
Please note that the Sprott investment vehicles are also very interlinked to the price of the metals.
So should the metals fall these investments will also fall.
Please just be open-minded when you read or hear stuff over the net.
In regards to coffee the time is upon us next week so until then just wait.
Reason I’m bullish on coffee this year is that serious weather damage will hit the growing regions.
Copper too looks good for a potential long-term trade but not yet.
Waiting for the astrology to kick in and with news of the ETF to come on line the market will be supportive of the metal.
