"It’s a suicidal investment to own 10 Year or 30 Year U.S. Treasuries. U.S. government bonds are junk bonds. As long as they can print, they can pay the interest. Another way to default is to pay the interest and principal in depreciating currency." ~ Marc Faber
The $USD index seems to be consolidating convincingly around the 73 level.
ReplyDeleteI'm not very surprised that the US Dollar has failed to benefit at all during the current risk off mode as opposed to 2008 global crisis and 2010 euro crisis. The world is starting to figure Bernanke's plans of devaluing the currency further.
ReplyDeleteThe only investors who yet do not get the game are perma-bearish debt deflationists who think governments and central banks are going to just sit around and watch the world unravel. They will tell you should buy Bonds and hold Cash. So obviously Marc Faber's quote holds huge wisdom here.
Even though governments cannot do too much to stop bad economic conditions, they can devalue the currency and prolong the pain of large debt by inflating it away. I understand people go long or go short for trades, but lets not mistake the overall main trend. Who the hell is going to be buying US Dollars as an investment? Or for that matter bonds denominated in US Dollars?
It’s a suicidal investment!
"I'm not very surprised that the US Dollar has failed to benefit at all during the current risk off mode as opposed to 2008 global crisis and 2010 euro crisis."
ReplyDeleteThis statement is interesting, and incorrect, for a couple of reasons. First of all, depending on when you define the beginning of the 'current risk off mode', the $USD is actually UP, not down. If you take the beginning to be the start of August (when markets turned down sharply) the $USD index is up 1.20% since then. Secondly, it is preposterous to compare the 'current risk off mode' to the 2008 and 2010 crises. Those were crises; this is not.
"The only investors who yet do not get the game are perma-bearish debt deflationists who think governments and central banks are going to just sit around and watch the world unravel."
This is an interesting notion - that government actions will somehow trump deflationary market dynamics. I came across the following quote the other day:
'When there is too much private debt going bad but not being written off, it overwhelms the mismanagement of the currency and props it up. It doesn’t matter what you think of the fundamental value of the dollar if you’re in debt and can’t find enough dollars to make your payments. And until asset and labor prices and demand for goods and services can justify borrowing costs, there’s no credit expansion so no inflation.'
If you can refute that with factual evidence (not opinion), then you will have some credibility. Unless or until then, the current reality is characterized by deflationary market dynamics.
"Who the hell is going to be buying bonds denominated in US Dollars?"
Apparently, whoever has pushed the yield on 10-year Treasuries down to 2.07%.
wsm - I have to appologise. I actually failed to see such an enourmous gain on the long term chart of the US Dollar seen here. My bad there, I just do not know how I failed to see that.
ReplyDeleteI also agree with you that currently there is no crisis in the Eurozone. I mean, the ECB just loves buying Italian and Spanish bonds for the sake of fun... right? Excuse the sarcasm.
Finally, that quote is a bunch of mumbo jumbo that is written by some Elliot Wave guy or some Safety Crowd deflationist. There is plenty of Dollars in the world. the world is flooded with dollars for three decades. And Bernanke is going to print more of it.
In regards to the proof, it is your job to do your own research. I am not going to explain why my thoughts are, because it will take too much time here. But I am just going to say this: after studying decades and decades, even centuries of crisises, I have failed to find too many instance where a government under similar conditions to today, did not eventually print money and devalue the currency. History states that when given a chose between a deflationary collapse or an inflationary prolonged pain, governments have almost always chosen to inflate their way out of debt.
US did it in 1970s so they will do it again this decade. Germany did in in early 1900s, France did it after wards. Yugoslavia did in in the 1990s, Zimbabwe did it afterwards. Argentina did it in the 90s too and Mexico did it in the 80s. Greece did it about 20 times in the last 100 years. Russian did it in 1998 and many many other countries have been doing it for years and years.
@ tiho -
ReplyDelete"I actually failed to see such an enourmous gain on the long term chart of the US Dollar..."
That's my fault - I did not realize when you said "current risk off mode" that you were referring to a 15-year period.
"I also agree with you that currently there is no crisis in the Eurozone." The Eurozone does not (necessarily) have anything to do with the fundamental value of US Treasuries. If anything, recent events have pushed the $USD up, not down, as demonstrated in the previous comment.
"...that quote is a bunch of mumbo jumbo..."
Not exactly a convincing, fact-based refute of my argument.
Markets don't move on facts wsm. Im not sure if I am right, but you are probably an academic but the sound of all your replies on this blog and those guys are almost always poor and broke.
ReplyDeleteInstead of focusing on making money, they focus and facts and arguments, like if the Treasury issues bonds "before" or "after". They also seem to notice that there is a difference between the US Dollar being up "1% or "failed to benefit".
I tell you what, you stick to what you believe in, as well as your notion that the US Dollar has good fundamentals. I wish you the best of luck with that strategy!
On e other hand, I'll focus on investing my funds that I've earned from the mining boom and reinvest them into the mining boom and away from the US Dollar and Treasuries. I'll see you on the otherwise of the deflation fence, where prices of all raw materials rise!