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Are investing in bonds the safest bet right now?

May 20, 2015

Rick and Cory dive into the bond market. Bonds have been on many people’s radar and with what Rick has to say it sounds like this investment could prove to be a safe play and have some capital gains upside.

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Discussion
23 Comments
    BCJ
    May 20, 2015 20:46 AM

    Slow day in the major averages, but not in the DJ Transports. I expect that the trannies are the “canary in the coal mine” of this current stock rally. The canary is having a hard time breathing today: down 157 (-1.80%) and below its support zone of 8520-8580 [10:43 CDT].

    May 20, 2015 20:15 AM

    You’ll enjoy this read Rick, fits in nicely with your continued deflationary outlook.

    I can remember you saying you’d dance at Times Square if GS stock hit?….can’t find the youtube video of you doing so. You were very vocal regarding the Feds never removing QE so perhaps when the Feds raise rates we can get that hula skirt dance at Times SQ, work on your tan bud, lol

    http://armstrongeconomics.com/archives/30738

      May 20, 2015 20:34 AM

      JJ is John Jay……figures.

      May 20, 2015 20:37 PM

      Good article from Martin Armstrong. Thanks for posting it JJ.

    May 20, 2015 20:00 AM

    I am invested in a variety of closed end bond funds , Mostly nuveen products . Also in last 9 months i have bought a lot of pipeline and oil producers preferred stocks [not thier common stocks]. I am not getting rich , but i am making modest profits. I watch yields on bonds closely. I still expect a sell off of crude oil this summer. Best of health and wealth too you all. S

    May 20, 2015 20:02 AM

    Good thoughts on the Bond markets today Cory & Rick. Thanks for covering that sector in more detail.

      May 20, 2015 20:14 AM

      TLT and TBT can be used depending on which direction you are positioning in the bond markets. If yields come down then TLT goes up, if yields go up then TBT goes up.

      Personally I have a feeling that yields will be coming back down to test all time lows at 2% in the next month or two so in that environment TLT will do well. However, there still may be a little left to the rise in yields which would pressure TLT and favor TBT. Lastly, when yields do make one more trek lower forcing bonds higher, that will be the end of the 30 year bond party and time to short them for a long time using TBT.

    cmc
    May 20, 2015 20:44 AM

    Interesting. We have Chris touting a paradigm of stagflation, and Rick, deflation. It would be interesting to hear the both of them discuss that difference.

      May 20, 2015 20:44 PM

      I’m with Chris on that one. I have no doubt that we’re in for a stagnant economy (at best) and more general price inflation. That’s where the word stagflation came from.

    May 20, 2015 20:56 AM

    All people need to do to answer the inflation and deflation question is ask those they know from around the world how there cost of living has changed. The fed stats on inflation deflation are absolutely worthless metrics.

      May 20, 2015 20:00 AM

      Of course they are Peter all government data is adjusted, if one invested off their own day to day inflation they would have been killed long commodities in general over the last year, its what Mr Market see’s as inflation/deflationary that we need to invest off

        May 20, 2015 20:42 PM

        We all need to be curious how our world will look once the “wealth effect” of rising bonds, stocks and real estate comes to an end and when that inconveniently coincides with the bottom in the commodity markets!

        What we should understand is that our day to day costs will rise considerably over time as resource prices reassert themselves on a cyclical basis even as our fortunes evaporate in the inevitable reconciliation of asset valuations versus the high debt loads that were generated to create them.

        As has been said before….home prices can fall but the debt endures. And so it shall be with bond holdings, farm lands, equities, art, antique autos and pretty much everything else that has risen to bubble levels of valuation.

        In fact, we might even say in the most general sense that the only major asset class that has been in decline these past years has been commodities versus a staggering rise in almost everything else under the sun.

        It seems logical therefore that positioning for the unwind means buying mines, resources and commodities while they are at their bottoms. Some here can readily see that the resource bottom is rapidly approaching if not already here and that therefore the rotation from inflated assets into beaten down sectors is virtually upon us already.

        In other words, we are not that far from a correction and reversal of fortunes for the vast majority who are usually on the wrong side of the trade. Capital is going to go somewhere. It never sleeps. And it does look to me there are few obvious choices for preservation of wealth and capital appreciation outside the resource sector.

          May 21, 2015 21:49 AM

          I came across this piece from Charles Hughs Smith today and it fits nicely with my comments above on real estate and other inflated assets. Charles has a great graph of the housing bubble and notes that we are currently experiencing an echo bubble that will itself eventually deflate. When it does the Fed will be unable to contain the fallout he asserts so the ending will perhaps be more dramatic than the first bursting of the US housing bubble.

          When the Current Housing Bubble Finally Bursts
          http://www.oftwominds.com/blogmay15/housing-bubble5-15.html

    May 20, 2015 20:21 PM

    http://www.mineweb.com/news-fast-news/romania-hikes-mining-taxes-by-nearly-7/
    7% inflation in Romania since 2012. Romania is not a mining hub but this is just the latest country to look to the natural resources for added revenue. The margins are not there to tap into.

      May 20, 2015 20:30 PM

      Most countries just do not get it. If you keep taxing mining companies like that when the sector is at the bottom of a bear market, then you kill job growth, revenues, and make foreign investment think of doing business elsewhere. Mindless bureaucrats.

        May 20, 2015 20:50 PM

        Totally agree but bullish for metal prices and low cost producers so I am giving Romania two thumbs up.

          May 20, 2015 20:04 PM

          I am in favour of as much pressure as possible on production. This will bring things back to the simplicity of supply and demand.

      May 20, 2015 20:06 PM

      Romania inflation rate is more in line with what my guess of inflation would be for the developed world.

        May 20, 2015 20:15 PM

        Well that is a very good point, I guess my problem is their timing….it’s like kicking someone when they’re already down.

        The same thing with Mexico the end of last year…it really was a surprise to the miners there, but when you took a step back you realized it was only getting in alignment with what most other countries taxed on mining.

    May 20, 2015 20:26 PM

    http://www.mineweb.com/news-fast-news/eu-lawmakers-seek-ban-on-blood-metals-in-surprise-vote/

    Interesting how much “blood metals’ are produced. 2 million ozs of gold. Way more than I expected. That is only Africa. Blood metals originate from many other jurisdications (central and south America, asia). What the EU is considering is pointless as it all will go through China and Russia at a reduced rate. China and Russia don’t care about the exploitation of Africa.

      May 20, 2015 20:53 PM

      I am pretty sure China and Russia will be looking to the managers of these blood mines to lower their all in sustain costs within Russian and China mines. I think Newmont hired a bunch of blood miners in 2014 as well. That was there key to a great Q1.

    May 20, 2015 20:35 PM

    Agree w/Rick on TLT, on the short term daily chart, as a trade. Long term, I have no clue.

    Am wondering what Rick is thinking about gold in a deflationary environment? I think he already answered this once – a few mos back – but forgot his thoughts. Can anyone tell me? Thanks.