Chinese are dumping our bonds
Have you noticed that the Chinese are dumping our bonds, they must know something about the impending doom that the Fed will rain down on the economy through their artificial management of the money supply and interest rates? But if the V V’s are able to elect Hillary, she promised in the debate the other night that she would not raise the debt 1 penny—
I missed that Hillary’s 1 penny opera. The dumb broad knows nothing, she mouths memorized lines given to her by her flimflam campaign designers, or the Keynesian gurus of her Party. After doubling the national debt to dangerous, unattainable levels with the TARP and the Obama deficit spending the deficit now continues to add some $300 billion PA to debt. The Fed’s QE, buying Treasury bonds with counterfeit fiat dollars soaked up much of the debt, new and old (as rollovers at maturities occur). Now the Fed balance sheet possesses trillions of Treasuries and they are receiving interest coupons on the bonds (at their suppressed rates of today) which it gifts to the Treasury. It is truly amazing: Government spends money it does not have, issuing debt instruments to fund deficit spending, the Fed prints counterfeit money and buys some of the Treasuries in the market for the purpose of not only financing government but to depress interest rates to “make the economy grow”, then the interest the Fed earns on the bonds it bought with counterfeit money, it delivers to the U.S. Treasury. I don’t think Americans have any clue of the funny money scam going on. But it cannot go on forever and some day the fall out will be unpleasant and people will wonder wha’ happened?
To your point, I follow the charts and news of the bond markets (Treasuries, general corporate and junk segments) and I have been waiting for a few years for the Fed funny money ponzi to blow up, or should I say collapse. There will have to come the time to short the long maturities very profitably. I have run out of hair to turn grey, waiting. The Chinese (holding $3 trillion last I saw) and others (Japan and Germany in line after China) are watching too and as you say the Chinese have lightened up, not buying new issues and not rolling over all the maturing issues. Some day it will become harder and harder to roll over maturing issues (Treasury has stupidly not been issuing long maturities like 20 years, locking in todays low rates for a while, but has done mostly short and mid maturities to benefit from the fictitious low rates engineered by the Fed) and harder to auction new issues at todays low rates. The Fed will lose control over the longer end of the bond market as markets/investors do not buy them unless they auction at higher rates. Only at higher rates will roll overs of debt and sale of new issues be sold into the markets. Some of the guys who I pay attention to believe the end of the game is near and the explosion of rates must occur soon. The foreign holders like the Chinese are savvy and lighten up now, rolling over less of the maturing, holding back on new additions to portfolio. Also their capability is being reduced by their declining trade surplus (and the outlook is not so good as they run big excess capacities which can’t be converted into export sales these days, so less dollars accumulate in China reserves to buy bonds with (most Chinese exporters’ dollar balances must be sold to the government for RNB). I’m depending on you to ring the bell to tell me when the collapse of the U.S. long term bond market is nigh. Here are some short charts (daily) and long charts for Treasury bonds (longer maturities) with some technical indicators I like to use. The longer charts (weekly or monthly) should detect change in long term trend…..the daily and shorter charts are more volatile for long term decision making.
This ETF shorts the long bonds with 2x leverage. Some day rates go back to only normal (5%-7%) and this baby has to return to 100 right? And if the bond market collapses and rates go to highs like we have seen in past, who knows?
Stockman has been predicting collapse for several years.
Reagan Budget Director David Stockman warns that the nation will plunge into a recession, even though Hillary Clinton will win the presidential election.
While many analysts believe the stock market will rally in the wake of a Clinton victory, the author of “Trumped! A Nation on the Brink of Ruin” believes the economy is doomed regardless of the result.
The former director of the Office of Management and Budget predicts Congress will be “totally dysfunctional” once Clinton is in office.
“Lawmakers may not be able to come together and work out solutions leading to economic growth given how many divisions the election has caused,” CNBC explained.
“I think it’s going to be so contentious in the House because [Paul] Ryan has moved to protect his House majority, that it’s very likely that investigations will begin immediately,” the Newsmax Finance Insider told CNBC. “And within any kind of excuse, they will try to impeach Hillary Clinton barely after she gets in office,” he said.
“When the stock market stumbles and the economy begins to actually register negative growth, which I think is coming if not next quarter certainly in the first half of next year, there’s going to be nothing below and the market is going to go through a massive contraction,” said Stockman. “I think it’s going to be a very nasty time in the year ahead,” he added.
Aside from the political hijinx, the economy itself is actually staggering more than most financial gurus will publicly admit.
“Growth over the last four quarters has averaged 1.3 percent, that’s barely stall speed [and] we have inventories building up,” Stockman told CNBC. “If you look at concurrent indicators of the economy such as freight shipments and so forth, they’re weak and negative. Capital spending is down double digits and exports are down and so forth,” he said.
Stockman isn’t alone in his dire predictions of market chaos after the election. But other financial gurus think GOP presidential nominee Donald Trump winning the White House would cause a stock-market collapse.
Billionaire investor Mark Cuban says he has his “Trump hedge on.” In a recent interview on Fox Business Network anchor Neil Cavuto’s show “Coast to Coast,” the “Sharktank” reality TV personality warned: “In the event Donald wins, I have no doubt in my mind the market tanks.”
But not all gurus are as pessimistic as Cuban and Stockman. Wells Capital Management’s Jim Paulsen predicts that the stock market will literally end the year with a bang as it charges into 2017. “I think we’re going to maybe find out we are finally turning northward on earnings momentum,” Paulsen, Wells’ chief investment strategist, told CNBC.