Peter Schiff Video Market Morning: March 4, 2009

Business News Network ^ | 3.4.09 | BNN

[Lady GOP]

Market Morning : March 4, 2009 : Playing the Next Leg Down [03-04-09 10:40 AM]

[Lady GOP]

_

[Lady GOP]

With the US economy in the doldrums, these government bonds aren't as attractive as they used to be. China has already said they want to diversify away from them, though nobody thinks there will be a wholesale dumping of US bonds.

One of the Chinese top brass recently hinted that the country may review its large purchases of US Treasuries, saying that future buying will be adjusted to meet the nation's need to maintain the value of its foreign currency reserves. Even Warren Buffet has warned of low US government debt yields in his recent letter to the shareholders. He says: “The U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary to previous bubbles in housing and internet stocks.” He says the government stimulus efforts will likely generate an "onslaught" of inflation.

http://economictimes.indiatimes.com/News/Economy/Oil_may_touch_75_as_China_hedges_US_Treasury_risk/rssarticleshow/4228061.cms

[Lady GOP]

Suresh Chandra, analyst at Horizon Capital Management, says, “the next bubble to burst will be the US treasuries. Over the past 15 months, the Arab oil countries have been the biggest buyers of US treasury bills worth $245 billion. The next biggest buyer is China at $233 billion.”

“However, the current economic situation has changed the game of the business. With the slump in the global economy and US running huge fiscal deficit, the dollar is expected to depreciate heavily in the mid- to long-term. And hence, a country like China, which has huge foreign reserves in dollars and US treasuries, is trying to hedge against their dollar denominated holdings,” he added.