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-- Posted Wednesday, 11 February 2009 | Digg This Article | Source: GoldSeek.com
Wall Street was unimpressed by the $500 billion toxic asset control program unveiled by new US Treasury Secretary Tim Geithner yesterday. Stocks dropped by 4.9 per cent while money flowed into treasuries and precious metals. This could be a story of days to come. The Street is gradually realizing that there is no magic bullet to cure the woes of the US economy, and that while bailouts and stimulus plans can take the edge off the worst, things are going to get considerably worse before they get better. Bond crash comingThe next shoe that appears to be dropping before our eyes is the bond market. Yields are up by around 50 per cent since the start of the year which has produced an equal loss in the capital value of bonds, with the most recent investors suffering most. It is only logical that as the US government fuels up public spending that it is going to have to pay more to investors to get them to lend it money. At some point in the not too distant future that will be the trigger for a sell off in the bond market, as existing bond holders are now watching the capital value of their fixed-interest bonds decline. Since the start of the year bond prices have declined by some 3.5 per cent, a terrible performance for what is supposed to be an ultra-safe asset class. Investors will only accept so much before they exit. Safe havenIndeed, the sudden upturn in gold and silver prices suggests that investors have already found their next safe haven. How long will it be before the trickle to exit bonds becomes a flood, and precious metals leap in value? Gold bugs have almost tired of waiting for this day. But the market for precious metals is highly manipulated and under such market conditions it is impossible to know the best entry point. You can only buy and hold and wait for the inevitable. At some point the Federal Reserve and other central banks are going to become so concerned about say a blow-up in the bond market that they take their eye off precious metals, but by then it might be too late to buy a significant position at a reasonable price.
-- Posted Wednesday, 11 February 2009 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
 Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link
 
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Bonds weaken, stocks fall, stimulus fails, gold up
