Figure 1. $TNX.X/ monthly
Posted on 08/26/2009 9:33:24 AM PDT by TigerLikesRooster
Long Term Treasury Yields: Someone Is Going To Be Wrong
Submitted by thetechnicaltake on 08/26/2009 00:12 -0500
10 Year Treasury Economic Recovery Equities REAL Trade Treasury Treasury Bonds Treasury market Unemployment
For over 8 months now, I have been chronicling the plight of the 10 year Treasury bond. Based upon the "next big thing" indicator it was my expectation that yields on the 10 year Treasury bond would rise once there was a monthly close above a yield of 3.342%. This occurred at the end of May, 2009.
See figure 1 a monthly chart of the yield on the 10 year Treasury bond. The "next big thing" indicator is in the lower panel, and the close over the "key" pivot low point is identified with the blue up arrows. Once this technical metric was met within the confines of the "next big thing" indicator being in the position where we would expect a secular trend change, it was my expectation that this would result in higher yields over the next 12 months.
Figure 1. $TNX.X/ monthly
/snip
Treasury yields did "pop" to 4.014% in June, but there has not been any follow through, and looking back to figure 1, we note that Treasury yields are sitting just above support.
But here is the point: Treasury yields have not moved higher; in other words, the Treasury market is not discounting the economic recovery. On the other hand, the stock market has roared ahead discounting the recovery (and then some). This divergence is noticeable, and it appears someone is going to be wrong.
(Excerpt) Read more at zerohedge.com ...
Ping!
Please translate into layperson terms. Thanks.
Hyperinflation. Coming soon to your neighborhood. But don’t worry, it is deliberate and it is planned by the Obama administration. All part of destroying the US dollar as the world’s reserve currency.
Personally, I think Chinese and other foreign dollars are moving into the market. If you are worried your massive dollar holdings are going to get inflated away, equities are relatively cheap.
Chris Matthews says that Obama doesn’t get enough credit for all of the success he’s had with the economy. Perhaps he will soon get the recognition he deserves.
The guy is trying to reconcile his reasons for being so wrong about the 10 year. It's generally not a good idea to assume that an asset will lose value when that asset is being bought up by the entity that has the most money in the world.
Thank you. That is why people move to T-bills from the market for safety. Right?
Treasury yields are not going up, because the stock market is wrong. Ten Year Notes will make a new high [low yield] into June 2010. Stocks will rally, maybe as high 10,300 and then fall out of bed again
“Personally, I think Chinese and other foreign dollars are moving into the market. If you are worried your massive dollar holdings are going to get inflated away, equities are relatively cheap.”
So your theory is that the stock market will go up even as hyperinflation takes hold?
It may go up some (or it may not) but it will almost surely not keep up with inflation. My personal prediction is that it will mirror the Great Depression stock market, with the final value of the DJIA at around 10% of the starting point, or about $1,400 in 2007 dollars. I suppose that may well be $14,000 (or more) P0Ds (Post 0bama Dollars).
The Chinese have been big gold buyers lately.
“But here is the point: Treasury yields have not moved higher; in other words, the Treasury market is not discounting the economic recovery.”
He’s saying that you don’t get both lower Treasury yields and an economic recovery. So either the recovery isn’t occurring, or yields will be going up.
>> So your theory is that the stock market will go up even as hyperinflation takes hold?
Absolutely
>> It may go up some ... but it will almost surely not keep up with inflation.
I agree with that as well. Carefully chosen equities (i.e. those with pricing power in the face of inflation) *will* rise with inflation, although they may not completely keep up. If you have cash and need a return on it, along with *significant* protection against inflation, carefully chosen equities are one possible and useful hedge.
If I was Chinese and had beaucoup dollars, I guarantee you I would be looking at US Equities. (As well as gold and land.)
The Dow will trade 9,700 in the coming days. It may even spike to 10,300 between Sept6th-12th. I could easily see SPU trading 1095.00. Anything beyond that is a push on a string. This is a bear market rally. My guess is that 2010/2011 is going to make 2008 seem like a picnic.
>> My guess is that 2010/2011 is going to make 2008 seem like a picnic.
That’s why I’m keeping my powder dry. Even if the Chinese aren’t. :-)
It is a trade-off, our worthless stuff for their worthless stuff
Thnaks for the ping.
The goobermint instituted the recent credit expansion and subsequent recession as well as all the banks around the world.
The future is not pretty at all.
lol when does the debt ceiling get raised cuz?
Well who is buying longterm bonds so freely besides the chicoms?
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