Peter Schiff who predicted US recession 2 1/2 years ago, sees the collapse of the bond market sometime during Obama's first term, and he further says, interest rates are going to spiral out of control, and the dollar is going to just be destroyed.
The fear and the volatility we’ve seen in the past few months in the stock market has driven investors to safe-haven instruments like U.S. Treasuries, and prices for Treasury bonds and notes have soared. It’s looking like the next big bubble. Like any bubble, it should eventually burst.
"The sheer steep day after day appreciation of Treasuries is no different than the appreciation in tech stocks in 2000, or a REIT in 2006 or an energy stock just 6 months ago.”
Treasury prices and yields trade inversely to each other, so as prices have skyrocketed, yields have dropped to historic lows. The 10-year Treasury note yield has seen its lowest levels in half a century, falling under 3 percent. The 10-year Treasury note yield even briefly fell below the dividend yield on Standard & Poor’s 500, which hasn’t happened either in 50 years. This is certainly a sign the stock market is cheap right now, and that a bubble is forming in Treasuries. Some analysts say Treasury yields could drop even more.
There’s the exploding budget deficit and the ballooning bailout commitments of the U.S. Treasury. By our count the U.S. government has loaned, invested or committed …
* $200 billion to nationalize the world’s two largest mortgage companies, Fannie Mae and Freddie Mac;
* $25 billion for the Big Three auto manufacturers;
* $29 billion for Bear Stearns;
* $150 billion for AIG;
* $350 billion for Citigroup;
* $300 billion for the Federal Housing Administration rescue bill to refinance bad mortgages;
* $87 billion to pay back JPMorgan Chase for bad Lehman Brothers trades;
* $200 billion in loans to banks under the Fed’s Reserve Term Auction Facility (TAF);
* $50 billion to support short-term corporate IOUs held by money market mutual funds;
* $500 billion to rescue various credit markets;
* $620 billion for industrial nations, including the Bank of Canada, Bank of England, Bank of Japan, National Bank of Denmark, European Central Bank, Bank of Norway, Reserve Bank of Australia, Bank of Sweden, and Swiss National Bank;
* $120 billion in aid for emerging markets, including the central banks of Brazil, Mexico, South Korea and Singapore;
* Trillions to guarantee the FDIC’s new, expanded bank deposit insurance coverage from $100,000 to $250,000; plus …
* More trillions for other sweeping guarantees.
The grand total? A mind-blowing $7.8 trillion and counting! How much is that
That’s half the yearly output of the entire U.S. economy. It’s equal to $25,507 for every single man, woman, and child in the United States. In the more than 200 years the U.S. has been a nation, it has racked up almost $10.7 trillion in public debt. Now, in just a matter of months, policymakers have added contingent and direct obligations equal to almost three-fourths of that amount.
Bottom line: There are lots of reasons to believe this Treasury rally is unsustainable, and that a day of reckoning is fast approaching.
The fear and the volatility we’ve seen in the past few months in the stock market has driven investors to safe-haven instruments like U.S. Treasuries, and prices for Treasury bonds and notes have soared. It’s looking like the next big bubble. Like any bubble, it should eventually burst.
"The sheer steep day after day appreciation of Treasuries is no different than the appreciation in tech stocks in 2000, or a REIT in 2006 or an energy stock just 6 months ago.”
Treasury prices and yields trade inversely to each other, so as prices have skyrocketed, yields have dropped to historic lows. The 10-year Treasury note yield has seen its lowest levels in half a century, falling under 3 percent. The 10-year Treasury note yield even briefly fell below the dividend yield on Standard & Poor’s 500, which hasn’t happened either in 50 years. This is certainly a sign the stock market is cheap right now, and that a bubble is forming in Treasuries. Some analysts say Treasury yields could drop even more.
There’s the exploding budget deficit and the ballooning bailout commitments of the U.S. Treasury. By our count the U.S. government has loaned, invested or committed …
* $200 billion to nationalize the world’s two largest mortgage companies, Fannie Mae and Freddie Mac;
* $25 billion for the Big Three auto manufacturers;
* $29 billion for Bear Stearns;
* $150 billion for AIG;
* $350 billion for Citigroup;
* $300 billion for the Federal Housing Administration rescue bill to refinance bad mortgages;
* $87 billion to pay back JPMorgan Chase for bad Lehman Brothers trades;
* $200 billion in loans to banks under the Fed’s Reserve Term Auction Facility (TAF);
* $50 billion to support short-term corporate IOUs held by money market mutual funds;
* $500 billion to rescue various credit markets;
* $620 billion for industrial nations, including the Bank of Canada, Bank of England, Bank of Japan, National Bank of Denmark, European Central Bank, Bank of Norway, Reserve Bank of Australia, Bank of Sweden, and Swiss National Bank;
* $120 billion in aid for emerging markets, including the central banks of Brazil, Mexico, South Korea and Singapore;
* Trillions to guarantee the FDIC’s new, expanded bank deposit insurance coverage from $100,000 to $250,000; plus …
* More trillions for other sweeping guarantees.
The grand total? A mind-blowing $7.8 trillion and counting! How much is that
That’s half the yearly output of the entire U.S. economy. It’s equal to $25,507 for every single man, woman, and child in the United States. In the more than 200 years the U.S. has been a nation, it has racked up almost $10.7 trillion in public debt. Now, in just a matter of months, policymakers have added contingent and direct obligations equal to almost three-fourths of that amount.
Bottom line: There are lots of reasons to believe this Treasury rally is unsustainable, and that a day of reckoning is fast approaching.
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