Tuesday, October 11, 2016

Which Event Will Mark The Peak Of The Bond Bubble?

The most recent example of the bond bubble's speculative euphoria are the 50 year government bond sales in Europe. Martin Armstrong wonders if this insanity finally signals the top;

"If there was ever any question that this is a bond bubble with a 5,000-year low in interest rates, the final bit of insanity just took place. Italy managed to sell its first 50-year bond last week as investors were betting that the European Central Bank might soon add ultra-long debt to its asset-purchase stimulus scheme. Draghi has said he would do whatever it takes to stimulate inflation. Hence, speculators are betting they can sell these 50-year Italian bonds to the ECB for a profit.
The speculation was so great that about 16.5 billion euros in orders were received for a bond issue that was about 20% of that amount. They are not considering the risk that the upcoming referendum might overthrow Italy’s prime minister. This is speculation gone completely mad. These insane speculators have already bought 50-year bonds from Belgium, France, and Spain as well. Many of these same speculators have also signed up for Ireland’s 100-year bond in March."

2 comments:

  1. Hi Tuna,

    I know this is off-topic, but do you think it is a good time to buy gold with the recent pull-back? Or do you think it has potential to drop further? Jim Rickards is predicting a rate-hike in December - he is usually right.

    Very interested in your opinion...I know you are a busy man these days(congrats btw!)

    Thanks.

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  2. I think it's a good idea for investors to hold 10% of their wealth in precious metals. If you are more risk adverse I would hold more silver and gold mining shares in that basket. If something goes wrong in the world you will be happy you have that 10% insurance policy. If nothing ever goes wrong again in our lifetime you'll still have 90% of your assets in other areas. Do I think gold has the potential to drop further in the short term? Definitely. You should then purchase more to bring your portfolio total back up to 10% of your total assets.

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