economic dollar collapseLow inflation would not explain the 80 basis point drop in long bond yields since January 1st.
“Flight to safety” would flow either into the very short end of the yield curve or into gold or under the mattress.

With retail sales, auto sales,  and home sales all collapsing, the only explanation left is that the Treasury bond market is pricing in a severe economic downturn.    This would explain also why high yield bond spreads have widened considerably over the past month.  The big drop in oil prices this week would further affirm this.
The Treasury bond market is starting to price in economic Armegeddon.


 

 

Submitted by PM Fund Manager Dave Kranzler, Investment Research Dynamics

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We know that inflation is running a lot higher this year – true inflation, that is, and not the phony Government CPI.

Thus, low inflation would not explain the 80 basis point drop in long bond yields since January 1st.   “Flight to safety” would flow either into the very short end of the yield curve or into gold or under the mattress.   Therefore, it is apparent to me that the Treasury bond market is starting to price in economic armegeddon.   This will mean deflation of asset prices (stocks, homes, crappy Wall Street concoctions) but not necessarily deflation of necessities.

With retail sales, auto sales,  and home sales all collapsing, the only explanation left is that the Treasury bond market is pricing in a severe economic downturn.    This would explain also why high yield bond spreads have widened considerably over the past month.  The big drop in oil prices this week would further affirm this.

For anyone who is reading this and has invested in my Easy Trade Idea from the end of July, I used to today’s low volume pullback in the stock to add to our position in the fund by shorting slightly in the money puts that expire tomorrow.  If the price closes below the strike tomorrow, we will take delivery of more shares with a cost-basis reduced by the amount of put premium we collected today.


  1. The timing is just too odd regarding oil prices relative to Russia/Ukraine.  What if the Fed is trying extra hard to boost the dollar as financial war on Russia?  Doesn’t a stronger $US achieve all of the outcomes described?  And while stackers wish for higher gold price, consider that gold is holding around $1313 in spite of the dollar going from 80 to 81.5.  That should have forced gold down to $1290 so while gold looks a little stalled in its chart, just holding is strength right now.  Maybe hard to remember, but oil was trading at $95 before Crimea issues.  Now $95 is proof of global depression?  I don’t think so.  And why if Europe is in so much trouble, is the spread of WTI/Brent the typical $7?

    Or an optimistic view is $1313 will hold and when the dollar goes back to 80, gold will go to $1335. That will be great for mining stocks, especially if oil stays under $100.
     
    The spread widening between junk and T-bills is the junk bond bubble collapsing, also influenced by a stronger $US. I hope some of that money finds its way into PM stocks.

  2. This bastardized (or might I say bankerized) use of the word inflation, leads us to these nonsensical headlines and arguments.

    Inflation is expansion of trading media (aka: money, which has also been thoroughly transmogrified) and when taken in that sense, then the cratering of bonds is … in fact … correctly and predictably responding to inflation.

    The financial elites may be able to export inflation, a la ‘Eurodollars’ and ‘Petrodollars’, or shunt the price-effect of inflation into their pet assets when export fails, but the reality of inflation inevitably takes its toll despite chicanery. That’s the Laws of Economics at work and no amount of Orwellian NewSpeak can prevent it.
     

  3. On Aug 15, 2014, at 4:25 AM, Bix Weir <bix@roadtoroota.com> wrote:
     

    Ok, more info is coming out about the NEW silver fixing mechanism. This is from an article in Money Morning…

     
    Here’s What the New Silver Price Fix Means for Prices 

    http://moneymorning.com/2014/08/14/heres-what-the-new-silver-price-fix-means-for-prices/
     
    Here’s how the new procedure will operate…

    The New Silver Pricing Mechanism
    At midday (London time), an electronic auction will take place on a trading platform provided by CME Group Inc. Members will begin a bidding process at a price based off quoted rates for silver across the market.
    Members will process buy and sell volumes at the initial seed price for 30 seconds. If after that auction buy and sell volumes are in tolerance, that is, if they are within 300,000 ounces of each other, a new price will be set. If not, the auction will restart at a new price determined by an electronic algorithm. Auctions will continue to reset until the buy and sell orders are properly balanced at the prevailing price.
    The list of members within the price discovery mechanism has yet to be formally announced, but the application deadline for participants clears today (Thursday).
    Rhona O’Connell, Head of Metals at Thomson Reuters GFMS, told Money Morning in an email that the initial members are largely from the banking sector, but there are hopes that “that may expand into industry as time goes on.”
     
    END

     

    What was that??? Does anybody know what the hell they just described??? Where are bidders BUYING physical silver for delivery and where are the sellers DELIVERING that metal???
     
    This isn’t a market pricing mechanism for silver at all…AGAIN!!
     
    How hard is it to set up a market that has legit physical silver buyers wanting to take home metal and legit physical silver sellers wanting to sell and deliver metal??? 

     
    And don’t you love this line…
     
    “Thomson Reuters GFMS, told Money Morning in an email that the initial members are largely from the banking sector, but there are hopes that “that may expand into industry as time goes on.”

     
    Bahaha!!! It’s only Banksters bidding against Banksters again on a phantom electronic market!!!
     
    But it shouldn’t matter to us because we are watching what happens to the silver derivative contracts that are still outstanding and are supposed to settle at the “Silver Fix”…which doesn’t exist anymore.
     
    Hopefully, all the silver bugs out there will yell at the top of their lungs tomorrow morning when they announce the new “London Silver Price”….
     
    THE FIX IS IN AGAIN!!!
     
    WHERE IS THE PROMISED TRANSPARENCY???
     
    WHERE IS THE PHYSICAL SILVER BEING EXCHANGED???
     
    WHERE IS THE OVERSIGHT AND REGULATORS MAKING SURE EACH BID IS REAL AND EACH OFFER TO SELL HAS DELIVERABLE METAL…THAT WILL GET DELIVERED??? 

     
    WHY IS IT SO HARD TO SET UP A PHYSICAL SILVER MARKET???
     
    May the Road you choose be the Right Road.
     
    Bix Weir
    http://www.RoadtoRoota.com 

     
     
     
     
     
     
     
     
     

    • Oh G*D! I hope they do!  Wouldn’t that be so damn cool!? (I mean, for those of us who saved some purchasing fiat to take advantage of it!)
      I would be pissed for the prior purchases made at higher prices, but MAN! could I CRUSH my old stack numbers with NEW ONES!

  4. What a complete joke.  
    Pricing  in armegeddon!?!?!   WTF  
    Yeah, Like the treasuries priced in inflation, corruption, bankstere shenanigans, QE to Infinity and BBB minus with a negative outlook risk.  
    10 yr USTs?   2.4%  Ooooh, I can smell the fear.   
    Spain’s and USA 10 yr treasury rates are the same.  
    Which one is  stronger?
     A country with a 25% unemployment rate and negative GDP or a country with a 23% unemployment and a negative GDP.  
    So, why I wonder if they have a derivative market for armageddon?  
    Where will it trade?
     How many times can it be rehypothecated?
    Will Goldman Sachs sell it to the muppets?
    We have a new market for silver, as if that was fixed.
     My dog was fixed too! He got his nads snipped.
     That fixed him really good.  
    What’s the difference between a neutered dog and a neutered bankster
    THe bankster will still screw you.  The dog’ll only hump your leg.
    Maybe the faux silver traders only allow eunuchs in the trading pits.
    The only thing being traded today is bull crap.   BS to infinity.
     

  5. On the BRIGHTER SIDE- I modernized my Norinco S-K-S to accept magazines without an open bolt! Whoo hoo! oh, and with about 2 hours of mild grinding the Korean drum now fits too! (closed bolt even!) WOOT!

    HOWS THAT FOR ARMA…AMRO…. OH, END OF THE WORLD PREP FOR YA! ;)

    • I was issued a R4 5.56 AR with a 32 round clip when I was 17 during my 2 year compulsory call up,  { no bell to ring }  after six months of madness I was only to pleased to give “her” back, I can still see every part in my minds eye, we would have full pack out inspection every morning, which meant my rifle had to be fully dismembered and at the base of my bed, as we stood rigid at attention all that would be in our minds was the fear that the corporal would choose our rifle to look down the barrel and find it not 100%, bearing in mind we were in the bush and the dust gets everywhere and as you know the tiniest of particle shows up in a barrel held to the light. If such a violation of code was discovered the offender was taken  to the shower block and forced to drink water whilst doing star jumps holding his rifle above his head until he would become to weak from projectile vomiting, this could last up to half an hour …
       
      My fondest memory {sarc} was rolling down a hill all day in full combat gear with my R4 wedged between my legs, one hand holding the tripod in place  and the other holding the barrel  with my thumb wedged in the muzzle, believe me when I tell you this gave a whole knew meaning to ones girl friend busting ones balls , so to speak  

    • Well, owning your firearm, keeping her pretty and tuned up is a lot different that uncle sam’s field torment.  It’s the BS inspections like those, that you can’t win, is the reason I opted out when my term expired.  Man! Those BS inspections- just thinking about them pisses me off all over again!

  6. Ok. So it was only the first day of the JOKE of a benchmark the “London Silver Price” but already the data is trickling out.
     
    Thompson Reuters said
     
    “Volumes stood at 525,000 ounces on sell side and 325,000 ounces on the buy side”
     
    Huh?? 525,000 ounce on the sell side and 325,000 ounces on the buy side?
     
    ARE THEY KIDDING???
     
    The AVERAGE daily volume on the LBMA is the following:
     
    Net 140,000,000 ounces transferred PER DAY!!!
     
    Gross 420,000,000+ ounces transferred PER DAY!!!
     
    So that means that the “London Silver Price” is determined by 3 banks that traded 00.08% of the average daily LBMA Silver volume!!! (325,000/420,000,000) 

     
    The latest silver con is being exposed very quickly!!
     
    New LBMA”Silver Price” Still Not Transparent

    http://www.goldcore.com/goldcore_blog/new-lbma-silver-price-still-not-transparent

    Stay tuned as the World discovers they’ve been had all these years!
     
    May the Road you choose be the Right Road
     
    Bix Weir
    http://www.RoadtoRoota.com

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