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Bond Yields on the Rise - the end of Gold and Silver.

10K views 80 replies 31 participants last post by  Crackshot 
#1 ·
It's happening sooner then I thought. If the move in the yields is not a head fake it spells a big trouble for PM's, Real Estate and even, in the short-term, Stocks.

Keep an eye the yields and take it very seriously.
 
#4 ·
Very true, it's what we've seen in the past. But on the other hand, I believe we've entered into an economic twilight zone with QE.x, etc. Faith in the system, it would seem to me, is at an all time low. Sometime interest rates raise to cool the economy a bit, but we have no economy to cool. I'm thinking we are pretty much in a wait and see what the longer term implications will actually be. We live in interesting times.
 
#6 ·
We are in uncharted territory. Nothing in the last 30,50 or 200 years can be of any indication of where trends are going in the future.

Globalization is still underway and it's a scenario that has never been studied because it has no precedent on which to base any opinions or theory of what might happen in the future because what we are facing is new.

6.8 billion people, governments in debt to their eyeballs, religious and social unrest.

The closest thing I can think of to what we are experiencing today is the Roman Empire, right before it failed.
 
#7 ·
Plantguy, we are entering very scary times. I can't put my finger on it yet but look at it this way. Back in October, the 10 year yield was ~2.6% the Fed declared QE2 that was supposed to keep the interest rates low for forseeable future. Today, its 3.215%.

What do you make out of it? I don't know yet but it looks like the Fed completly lost control. I don't know whether it's a good thing or not but I have very bad feelings about it.
 
#8 ·
Regardless of historical correlations and indicators, I will not be dumping my PM's and regard this as a "buy" opportunity for PM's, just holding off for another day to see if I can save a bit more :)

Personally at this point I could care less about what the markets are doing, when the FIAT falls flat on its face, PM's will still have value.
 
#12 ·
Regardless of historical correlations and indicators, I will not be dumping my PM's and regard this as a "buy" opportunity for PM's, just holding off for another day to see if I can save a bit more :)

Personally at this point I could care less about what the markets are doing, when the FIAT falls flat on its face, PM's will still have value.
That's the key. Don't worry about what your PM holdings are worth in dollars right now if you're in this long term. Just use it as an opportunity to get a little more ahead.
 
#10 ·




It seems like an odd relationship but many things have changed since 1973 regarding the USD, gold, oil, and of course, UST's. I think there are two main factors at work in today's environment that make it unlike any other we've seen, and when you add in the tremendous amount of USD's that have been printed over the last 15 years, it starts to make more sense, at least to me....


One: The fiat game is up. When this happens gold goes from a commodity to money, where it always has been...

Two: Obvious suppression of the bond curve by TPTB using fiat's which contributes back to number one.

So we have artificially low bond yields right now and a commodity that never should have been one, that has returned to money. Perhaps we will see these relationships all take on a whole new form as we move through this nightmare?
 
#13 ·




It seems like an odd relationship but many things have changed since 1973 regarding the USD, gold, oil, and of course, UST's. I think there are two main factors at work in today's environment that make it unlike any other we've seen, and when you add in the tremendous amount of USD's that have been printed over the last 15 years, it starts to make more sense, at least to me....


One: The fiat game is up. When this happens gold goes from a commodity to money, where it always has been...
Two: Obvious suppression of the bond curve by TPTB using fiat's which contributes back to number one.

So we have artificially low bond yields right now and a commodity that never should have been one, that has returned to money. Perhaps we will see these relationships all take on a whole new form as we move through this nightmare?
The answer would be number 1. When you have an inflationary environment it takes more interest to get back the same value for lent money at the end of the note. Also in an inflationary environment cost of commodities will also rise. The fed is actively inducing inflation in the form of quantitative easing. It serves 2 purposes: it gives the government money to blow, but it also inflates prices. When in an environment of asset deflation like the housing market the way to get things moving again is to reinflate those prices.

Of corse debasing your currency irritates those that have lent you thier money and will now be paid back in lesser valued dollars. Those people are turning off the money supply on thier end, which will cause the need for a new source of credit, QE2 anyone? Its a vicious cycle that will likely lead to the hyper-inflation scenerio that we have been expecting for the last couple of years.
 
#17 ·
I have faith in Ben dumping some more hazardous waste FRN's into the system. For the long term PM's give me that warm fuzzy feeling.

Today I picked up a good bit of Canadian silver from a guy taking profits, at 4% under spot I'm happy. The lower silver goes the more I will buy as long as I have excess FRN's. Holding FRN's just makes me nervous though I think it will hold up better than many suspect.

I'm really hoping for some panic selling. If you can handle it, it usually pays well in the long term. If you are buying real assets not dreams.

Red
 
#21 ·
Quick questions from the peanut gallery?

Bond yields? This is similar to what i keep hearing on the radio about CA offering guaranteed return bond buying opportunities, similar program with the feds? Or more dealing with QE2?

So bond yields are going up from just the current economy or did the fed/reserve do something to encourage bond investments?

PMs will fall in price soon, even it temporary is what your predicting? Might be good news for me, trying to get into PMs.. Is waiting for a drop advised in light of this news?

sorry - still learning how this all works.
 
#22 ·
I just found this piece on the subject. I think you will learn a lot.

The money trilogy: Gold, interest rates and the dollar

Sometimes the best trading systems are based on simple proven concepts without a lot of modification to muck up the process. One basic fundamental relationship exists among gold, interest rates and the dollar. Here, we explain the link in both historical and modern-day terms and show some straightforward ways to exploit it.
http://www.allbusiness.com/economy-economic-indicators/economic-indicators/10601507-1.html
 
#28 ·
As I've said in other posts, we need to throw the whole linear line of thinking out the window. With the global carry trade and currency "race to the bottom" in full force, these assets, which are nothing more than liquidity washing machines, will race all around each other. Gold will rise with the USD on some days because there is a fire burning on some AUS/EUR carry and the Yen will explode another day causing the equity markets to get hammered, and then the next week all those correlations will break down....

There is only one correlation worth really paying attention to, and this chart is its father:


this is its mother:


and the family tree is just as ugly!
 
#30 ·
Money is just a convenient method of exchange used to simplify our trades of labor and goods. Unfortunately, our CONgress declared the US dollar to be our money by fiat. Fiat currency being an old english term for something you use to wipe your ass.

The US dollar (Federal Reserve Note) is just a third party check that we trade back and forth, because no one want to try and cash it. We are all secretly afraid it will bounce.

Wealth is real stuff. Real estate, real coins, real commodities like food and ammo. Gold is just a convenient commodity that we humans like to use to store wealth. Since it is real stuff it carries no third party risk and governments hate it because it can be hidden and passed on without them taxing it.

The dollar is money, but not wealth. Investing my retirement egg in dollars, and stocks and bonds tied to the dollar, is one of the dumber things I have done. Perhaps this price correction will allow me to fix that.

Gold is one form of wealth, but not it is not money. Not now and not yet anyway.
 
#31 ·
So bonds are crashing. I guess that means in 1-2 months when checks their 401k statement, a LOT of money is going to rush back into stocks?

This is bad. Some of these people sold out of the stock market close to the bottom, went into bonds, and are about to lose a second time.
 
#35 ·
Historically, individual investors buy at the top and buy their shares from the institutional money getting out, and they sell their shares at the bottom to the institutional guys buying.... The bond market is very, very large however so Mom & Pop are not moving their money out into stocks, which have now shown 31 straight weeks of equity mf outflows, nor would they move the needle even if they did.
 
#32 ·
I guess I am looking at PMs as more of an investment for a worst case situation. The stocks and bonds (hopefully diversified enough) will stay as the majority of my investments (for now). Should the bottom drop out of PMs because of a bond increase (or any other reason) I will just continue to accrue more PMS for the future.

Just a quick question. WIth precious metals being a commodity (at least defined as one at this time), aren't the prices for them governed to a great extent by the laws of supply and demand? AND if supply and demand factor in to their price wouldn't the current use of silver (for example) outstripping what is physically being pulled from the ground cause the price to increase???
 
#34 ·
AND if supply and demand factor in to their price wouldn't the current use of silver (for example) outstripping what is physically being pulled from the ground cause the price to increase???
A large part of demand now is obviously inflation/currency plays and fear/greed.
People buy gold/silver trying to get rich quick, people buy it because they're afraid of the end of the world, and people buy it because their local currency sucks.
When the dust settles, and those reasons are resolved, USE of silver could skyrocket, but the falling demand would still bring the price down.

Don't fall for the same trap home owners fell for. Watch the market, watch the economy. Have a sell point.
 
#36 ·
So bond yields are on the rise?

Money will flow from gold to US treasuries? Sure. Some, I guess.

I don't expect that to be a long term migration. Smart money realizes the risk of holding fixed income in FRNs while the Fed's unabashed policy is that of stimulating inflation.

What good will a 3.25% bond be if we have even 4% inflation? What about potential hyperinflation?

Let's not forget the correlation between oil and the economy - and here's where the rubber meets the road.

Used to be that the price of oil moved around according to supply and demand.
Since oil hit it's high of 147? /bbl it has been welded to the stock market and economic predictions.
Bright future? oil jumps up, stock market jumps up.
Dim future? oil drops, stock market drops.

What does this have to do with gold? As oil moves up, it takes all commodities with it. especially PMs.
Ironically, when oil dips with sour economic news, safe haven money has moved to PMs.

That explains why PMs have risen when positive and negative reports arise.

In order for PMs to drop long term, you will have to have a bullish dollar. People will have to have long term faith in the dollar and US economy.
 
#41 ·
One word (alright, it is not TECHNICALLY a word...but it is 5 letters)

FOFOA

IF you really want to understand about money and what is going on in the world, go read about what he has to say. There is NOTHING that I could more strongly advise ANYONE who is concerned with such issues.
 
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