Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

SELLING OUT OF PRECIOUS METALS AND BUYING BITCOIN…. Very Bad Idea
By: Steve St. Angelo

The Bitcoin Bubble Explained in 4 Charts
By: Jake Weber

VXX Sends an Awesome Message from Another Galaxy
By: Rick Ackerman

Asian Metals Market Update: November-22-2017
By: Chintan Karnani, Insignia Consultants

Gold Seeker Closing Report: Gold and Silver Gain With Stocks
By: Chris Mullen, Gold Seeker Report

Ira Epstein's Metals Video 11 21 2017
By: Ira Epstein

Bitcoin, Bail Ins And Bullion
By: Mike Maloney

Tactics For The Gold Bull Era
By: Stewart Thomson

Dow Peaking? The Quick Guide to Diversifying Your Stock Profits
By: Jeff Clark

What History Says for Gold Stocks in 2018-2019
By: Jordan Roy-Byrne CMT, MFTA

 
Search

GoldSeek Web

 
Inflation, Deflation, and Our Very Confident Bet in T-Bonds

By: Rick Ackerman, Rick's Picks

 -- Published: Monday, 13 October 2014 | Print  | Disqus 

I’ve been touting the ongoing bull market in T-Bonds as one of the best investment opportunities of our lifetime – a no-brainer, as far, as I can recommend.  About the only way this bet can lose is if inflation returns with a vengeance. This has never been much of a worry for me, since, on the inspiration of C.V. Myers’ prescient 1976 book, I’ve been writing about the threat of deflation for more than 20 years.  As Myers noted, every penny of very debt must eventually be paid – if not by the borrower, then by the lender. So far, lenders have hung tough on their terms, and although a recklessly expansive monetary policy has cut mortgage debtors in particular some slack, there is no reason to think private lenders will let homeowners skip free when the second stage of the housing collapse that began in 2007 begins anew. Deflation-wise, this is where the rubber will meet the road, drawing irresistible power from the inevitable implosion of the quadrillion dollar Ponzi scheme popularly known as “derivatives.”

I’ll concede that while hyperinflation seems at least possible somewhere down the road, the current state of the global economy could not make it much clearer that we are going to pass through a ruinously deflationary phase first. Even then, a hyperinflation would not be driven by wage pressures or rising prices, or even by a further increase in the money supply, but by the epiphany of the dollar’s worthlessness.  This is fundamentally true even now, as some have long recognized, but it does not seem to be on the minds of most investors. Far more urgent is their dawning realization that the central banks’ main battle, especially in Europe at the moment, is against deflation rather than inflation. Under the circumstances, T-Bonds prices can be expected to keep rising, and yields to keep falling,  if: 1) Europe continues to sink into recession-or-worse; and/or, 2) U.S. stocks have entered a bear market; and/or 3) the U.S. economy slides into recession-or-worse; and/or 4) some horrific geopolitical crisis – Ebola, even – causes capital to flee to the ostensible safety of U.S. Treasury paper.  As readers must surely realize, all of these things could happen more or less simultaneously, making the T-Bond bet even more attractive.

Sentiment to Die for…

How attractive?  Below are the recent observations of my good friend Doug Behnfield, whom I invariably introduce here as, hands-down, “the Smartest Financial Advisor/Guy I Know.”  Although bullish sentiment toward stocks is at very scary extremes, he notes, the opposite holds true for long-term investment grade bonds: “The financial press is overwhelmingly bearish on the bond market and the belief that interest rates have nowhere to go but up is practically universal,” Doug wrote in a recent letter to clients. “The two things that have changed since the beginning of the year are that these extremes in sentiment have expanded significantly and long-term investment grade bonds have significantly outperformed stocks. In fact, large capitalization stocks as measured by the S&P500 were up 8.34% year to date (YTD) ending in September (Q3), and small capitalization stocks as measured by the Russell 2000 were down 4.41%. On the other hand, the UBS Universe of Closed-end Municipal Bond Funds was up 15.2% and 30 year AAA Municipal bonds were up 12.75%. 30 year Treasury Bonds were up 18% and 30 year 0% Coupon Treasury Strips were up 34% (also performance YTD ending in Q3). No sense being smug, considering how much worse bonds performed than stocks last year, but the contrary nature of sentiment seems to have started working at the beginning of this year and if that is the case, this trend could last for quite a while.”

A Simple Strategy

Yes, Doug had a lousy year in 2013, when T-Bonds corrected severely. But the previous five years were stellar, and 2014 could conceivably be his best year yet. For our part, Rick’s Picks has been recommending bullish option spreads in TLT, an ETF vehicle that correlates with price moment in long-term bonds.  The spreads have been easy winners and are simple to do. To further reduce risk, we roll them forward each week, cumulatively harvesting time premium from the short side of the spread.  If you’d like to learn more about this tactic, consider taking a free trial subscription that would give you access to a chat room where you can talk with subscribers who have traded the spreads themselves.  Our original strategy has turned out to have been too conservative, since TLT’s rally has been steeper than we’d anticipated. The initial idea was that the bet would become increasingly lucrative as the global economy slipped into coma. Bearish as we’ve been on the economy, we didn’t see its collapse happening quite yet. But evidence is accumulating that the process may already have begun.  If so, now would be a good time to jump aggressively into Treasuries (and also to bet against junk bonds. The vehicle we are using for this sort trade is an ETF with the symbol JNK.)  To  access the 24/7 virtual room and all of Rick’s trading “touts” and services, click here.


| Digg This Article
 -- Published: Monday, 13 October 2014 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2017



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.