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Bonds general & USA

bond bubbleUpdated November 25,  2018 -  This is the top and the end of the 35 year old uptrend for bonds - Bonds are the bubble and ticking bomb of the 21st century - 

Bond market topping out...since 2011 and natural market forces are not taking over yet!?. However, you cannot predict higher interest rates if you also predict QE to infinity. QE is the non economic purchase of government and other debt securities. Therefore as long as QE expands to meet the size of bond offering, the bond market will stay bullish and interest rates will not rise significantly...IMPORTANT however is to understand that the impact on interest rates of QE is exponentially decreasing as the power of manipulation is also fading exponentially....

  - Seen in history - what happened in Greece is a perfect example of what is to happen with other Treasury Bonds - when the bubble bursts, most of the time, it's too late to act - Five past twelve to move out of Fixed interest instruments & financial instruments based on bonds (incl. TAK and other bank manufactured products) and into Real Assets (incl shares but excl. Real Estate and exl. financial shares, pension funds, (re)-insurance co's). This is a completely MANIPULATED market and will be the coffin of many Fortunes...Treasuries = Credit Default Swaps = Bank manufactured products = saving accounts = bank deposits,. What good does it  do to be safe when on day 1001 you are slaughtered!?.

BND candle2 HYG High yields corp bonds
Vanguard Total Bond Market High Yield Corporate Bond

 

Interest Rate is the derivative of Money Supply...it is impossible to regulate the economy by RIGGING the interest rates (like Central banks try today)

Utility Index has been moved where it belongs!

UTIL pf1  
 
Short Candle Chart Comments
UTIL candle1
  • June 9, 2014: markets will continue to go up as long as THEY PRINT MONEY !
  • Nov 11: we shall see much higher markets.
  • Feb 19 - May 18, 2015: bull run
  • Oct 22: this is the 5th, most dramatic upleg but also the FINAL bull run.
  • Jan 16, 2016: support (520) is holding..
  • Feb 22: NEW BUY SIGNAL after positive backtest
  • Mar 16 - Sept 5: and BULL RUN...
  • Jan 19, 2017: Utilities however will probably start a fresh upleg as interest rates come down again.
  • July 13: and a BUY signal....expect higher!
  • Oct 25: Bullish Triangle
  • Jan 10, 2018 : Potential STOP LOSS = CAUTION
  • Feb 5 - Mar 25: STOP LOSS..expect lower.
  • May 10: Expect a LOWER index/stocks + Higher interest rates!
  • June 9 - June 19: BREAKDOWN = Higher Interest Rates
  • Aug 31: Central Banks will do whatever they can in order to keep interest rates low!
  • Sep 20: KEY BEARISH reversal on short Candle !?!?!?
  • Oct 5 - Nov 26: Resistant Utility Index proofs the Bull market is not over yet.
Long Candle
UTIL candle2

 

A DRAMA will unfold if Central Banks reverse QE...The Bond market is one BIG Bubble...and January 2018 Central Banks start to reverse QE...

35 year bond cycle

30 year US-Treasury Bond price
Bullish Objective we have 4 historic tops and a bubble!....
Resistance 175
Support was 150
Bearish Objective 138
Technical pattern BUBBLE & TOP - end of 35 year cycle

 

USB pf1

Short term candle Chart comment
USB candle1
  • Feb 10, 2015: NEW ALL TIME HIGH. Unbelievable dangerous!
  • March 15: High Pole Reversal = Bearish Warning
  • 6 August - Sep 28 - Oct 28 - Nov 19 - Dec 17: more TOP building.
  • Jan 26, 2016: more TOP building
  • March 1- April 29 - May 25 - July 11: NO DOUBT that we're gonna see NEGATIVE INTEREST RATES in the USA.
  • Jan 20 - Feb 22, 2017: the trend is reversing DOWN...mind the bearish wedge.
  • Dec 23: more Top building but we could finally see Bonds breaking down in 2018
  • Jan 17, 2018: If the 30 year yield rises and stays above the 3.05% , it'll be breaking up marking a Trend Reversal. So far for this month the 30 year yield rose to 2.93%
  • Feb 11 - June 19: STOP LOSS = higher interest rates and confirmation of 35 year old top.
  • Aug 31 - Sep 20: Central Banks will do whatever they can in order to keep interest rates low!
  • Oct 5 - Nov 26: Strong Support Level.
Long Term candle
USB candle2

 


ʘ ʘ ʘ 30 year US Treasuries Yield - critical level for japan is 1% - critical level for other western countries is  3% (Jan 2018)

TYX pf1
 
Short term Candle Chart comment
TYX candle1  
  • Jan 26, 2016: Bottom!
  • Mar 1 - Apr 29 - May 25 - July 11 - Aug 31: Brace for NEGATIVE interest rates !!
  • Sep 18 - Oct 20: Mind the dangerous BULLISH WEDGE...
  • Nov 10: BREAKOUT
  • Dec 19: expect a correction soon
  • Jan 20, 2017: but the trend is reversing and better brace for HIGHER interest rates.
  • Feb 22: ???...what will happen AFTER the consolidation??
  • March 16: Interest Rates are breaking UP....out of the bullish wedge.
  • May 4 - May 30: but the rise may not be sustained as Yellen is getting cold feet.
  • July 24 - Dec 23: trend interest rates is still BEARISH!
  • Jan 17, 2018: Trend reversal is confirmed once 3.05% is broken and holds.
  • Feb 11 - June 19 - Aug 31: 3.05% is broken and HOLDS!
  • Sep 20: However this time Interest Rates are bouncing into heavy resistance.
  • Oct 5 - Nov 26: Strong Resistance - watch out if the RED trendline is broken.
Long term Candle
TYX candle2

 


ʘ ʘ ʘ 10 year US Treasuries Yield - the Bond market is finally turning Bearish and one must avoid Bonds for the time being.

TNX pf1
Short Candle Comment
TNX candle1
  • Jan 17, 2018: The 10 year yield has already broken the downtrend and the 2.58% marks a 10 year high.
  • Feb 11 - June 19 - Aug 31: confirmation of BREAKOUT = expect higher interest rates.
  • Sep 20: Running into IMPORTANT RESISTANCE
  • Oct 5 - Nov 26: BREAKOUT!?
Long Candle
TNX candle2

 


ʘ ʘ ʘ - Municipal bonds now also bought by Central Banks.

The Federal Reserve, along with the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, just changed the liquidity requirements for the nation's largest banks. Municipal bonds, long considered safe liquid investments, have been eliminated from the list of high-quality liquid collateral. assets. That means banks that are the largest holders will have to dump them in favor of the Treasuries and corporate bonds that do satisfy the requirement.

March 2016: Less than a week after the ECB’s announcement, and months before it is to actually buy any bonds, a new record for a euro-denominated corporate bond issue was set on Wednesday when brewer Anheuser-Busch InBev said it was seeking to raise 13.25 billion euros ($14.9 billion).

“In our view this highlights the current positive backdrop for primary issuance induced by the ECB’s new easing measures” and particularly the new corporate bond program, credit analysts at Dutch bank ING wrote in a note to clients.

The corporate debt market has already benefited indirectly as ECB purchases of government bonds have pushed investors into the corporate market, lowering borrowing rates. In addition to the corporate bond purchases, the ECB also announced earlier this month a program to effectively pay banks if they step up their lending.

 

MUB pf1
Short term candle   Chart comments
MUB candle1
  • November 19 - Dec 21 - Feb 10 - March 15, 2015: DANGEROUS CLIMAX TOP...
  • April 26: Municipalities are going belly up but bonds are at an all time high!?...something wrong here?
  • Dec 17: looks like we finally have this HISTORIC TOP of the 35 year cycle.
  • Jan 26: 2016: HISTORIC TOP of the 35 year cycle.
  • Mar 1 - Apr 29 - May 25 - July 11 - Aug 31: we are about to see NEGATIVE interest rates.
  • Dec 19: correction coming soon.nnel
  • May 4 - May 30: seems we will see new upleg?!
  • July 24 - Aug 17 - Sep 26 - Oct 28 - Nov 23 - Dec 23 : No new upleg but more top formation.
  • Jan 17, 2018: ???
  • Feb 11 - Oct 5: Stop Loss
 Long term candle
MUB candle2


Interest Rates have never so low since the 15th Century.

zero rates
  click to enlarge 
 Interest Rate is the derivative of Money Supply...it is impossible to regulate the economy by RIGGING the interest rates (like Central banks try today) Long term interest rates 1700 2018

To the left is the law of supply and demand of Money...or how the price of Money (Interest) is regulated in an open system.

When the money supply goes up, the interest rates should come down.

When the money supply comes down, the interest rates should rise. 
sellbonds buyGold interest 1970-2017
 click to enlarge
1981 was a historic top and 2017 is a historic bottom

This is the section where so far we have been completely wrong (at least for the USA - but also for the EU where the FED and the ECB have been able to avoid the worst) because so far no crash happened. This does not mean however that a CRASH can happen any time. Having said this, the TIMING is wrong..the technicals and the fundamentals however are not !

sirenMy name is Bond and I have a license to kill your savings: SELL - SELL - SELL ! (this is an extremely dangerous and highly manipulated market). Definition of a DISASTER = out of control deficit spending + monetization of Debt + artificially low interest rates. The 2009 Bond crash is happening right now under your eyes: Ireland, Greece, Portugal, Spain, Italy....next are France, Belgium.....Bonds and especially Treasuries remain extremely dangerous and we maintain our SELL advice. (did you notice how fast the yield on Greek Treasuries went up from 3% to +12%!?) Bonds are artificially kept alive until the rubber band snaps and investors lose 85% of their savings in months' time.This is a totally manipulated and rigged market and DEATHLY dangerous.... ---


USTGOLD pf1

10 Year Treasury Bonds in Gold ---A CRASH IT IS ! ...80% loss since 2000 or 10% loss each yearly. The downtrend is about to be resumed in September 2017.

  • This is a CLEAR almost SPOTLESS downtrend...or Gold becomes the ultimate Barbaric money and Bonds and Treasuries worthless.
  • Ever since 2001 it was safer and the yield was better for those holding Gold instead of Bonds. Or how to loose 70% and more of your savings in a couple of years only by holding on to Bonds
  • Merlin is active in the Bond market...and what a wonderful job he's  doing... municipalities go broke but their bonds go up!
  • As long as the PF chart shows no Trend Reversal one should not touch Bonds and Treasuries. Not even with a 10 yard stick.
  • Bonds are certificates of guaranteed confiscation (Ludwig von Mises) and the safest way to loose your savings.
  • The first phase of the banking crisis has only wiped out bank equities, the second phase is to whipe out deposits but the last phase will wipe out bondholders, bank equities, deposits,. ...once the Bond market wakes up, it will be GAME OVER!
  • The FED, the ECB, the BoJ and the Bank of England have become the largest single buyer of debt. Quantitative Easing it is called but monetary inflation it is....such a policy always results in worthless money, worthless bonds and higher interest rates.
  • Interest rates will rise AND so will GOLD!
  • Did you notice how fast Greek interest rates went up from 3% to +10% in only a week's time!? The 2009 Bond crash has started in Europe (Greece) last February 2011 and has started in the USA and gets increasing Media coverage. The Bond crash in the USA is delayed thanks to what is happening in Europe'
  • Remember the Top for Bonds has been seen last year and cycles are 37 years long...and Bonds will indicate the beginning of Hyperinflation.

Interest Rate cycles are 60-70 years long: 30-35 years up and 30-35 years down.

10year gov.yields 60y cyclePension funds and (re)Insurance co's must by law invest the bulk of their assets in Treasuries. It is clear we have an ALL TIME LOW for long term yields and an ALL TIME HIGH for Bonds. (click on thumbnails to enlarge) The Treasury SELL-OFF has already began...click on picture below to enlarge...

treasuries sell off 2014
TYX yield LT 198030 y Gov. bond yields UK, EU, US (60 year cycles)

Click here for more Bond charts: Italy, Greece, Spain,...

german yield mar2016
yields june2016 Nominal Interest Rates are at record lows and Real Interest Rates are NEGATIVE and will be pushed deeper into the Negative (June 2016)..NOT logic is that there is a disconnect with the Money Supply.
negative rates
Negative Nominal Interest Rates actually REDUCE the Money Supply and hereby increases its intrinsic value.

The PF and Long term candle charts below are of capital importance as well as the 3% threshold ! The higher the debt, the lower the critical level; for Japan the critical level is 1%.

Hyperinflation occurs when a country’s bond market breaks. In other words, the sovereign nation is no longer able to fund itself. Its bonds fall (yields rise) to the point where the government has to print money or default. Rising interest rates cause the interest payments to consume too much of the overall budget. The government or central bank then begins to print money to fund its deficit. Then the citizens start to consume, knowing the currency is rapidly losing value. Demand has nothing to do with the cause or the onset of hyperinflation.

debts20and20deficits202010Why didn't Japan have hyperinflation in the 1990s? It didn't have to monetize its debt. It had the internal savings to be able to finance its budget. The same thing is true with the United States in the 1930s. Even though we devalued the currency, the bond market remained strong into the early 1940s, thus preventing runaway inflation.

The catalyst for severe inflation globally is the breaking of many bond markets. The UK, Japan and the US won’t be able to finance their budget gaps without monetization. The budget deficits are now larger and they come at a time of reduced global liquidity and reduced tax revenues. Global monetization will lead to severe inflation and hyperinflation.

The other point to make about severe or hyperinflation is the fact that it doesn't come about steadily. The preconditions and causes are all the more subtle as hyperinflation occurs suddenly or dramatically. ..click here for more fundamentals


ʘ ʘ ʘ  - TBT is an instrument to short Bonds.

 This is a manufactured financial instrument to SHORT bonds (we don't like it!)
 TBT pf1
Short term Candle  Comment
TBT candle1
  • 10 June 2015: bouncing off the bottom of the trend channel - breaking the 200 day Moving Average (see short candle)
  • 6 August - Sep 28 - Oct 28 - Nov 19 - Dec 17: BOTTOM..
  • Jan 26, 2016: BOTTOM
  • Mar 1 - 29: no BOTTOM in sight....
  • Jan 20, 2017: but the trend is reversing...
  • Feb 22 - March 16: consolidation = coil
  • May 4 - May 30 - July 24 - Aug 17 - Sep 26 - Oct 28 - Nov 23 - Dec 23: ??? BOTTOM??
  • Jan 17, 2018: ???
  • Feb 11 - May 14 - Aug 31 - Oct 5: BREAKOUT.
Long term Candle
TBT candle2

 

In a system of Real Money (Gold and Silver) it is the Money which regulates the economic activity and the general level of interest rates.

World Bond markets move in symphony. We have GLOBAL MARKETS. What happens in Greece is the direct reflection of what happens in the USA and the UK is a precursor of what is to happen in the rest of the world.

History is being written. Bringing down interest rates and keeping them low is EXACTLY the opposite of what should be done. History shows over and over again that the authorities are champions for doing the wrong thing at the right time. Ludwig Von Mises explains clearly that one must INCREASE interest rates to INCREASE SAVINGS which are to be used for fundamentally sound INVESTMENTS. Authorities are doing exactly the opposite: low interest rates increased consumption and created the real estate bubble (dead capital) hereby debasing the savings of the Baby boomers.

Today Authorities do all they possibly can to keep the rates down and the economy alive. It goes that far that the FED buys US treasuries as soon as other buyers fail. Low interest rates keep the rate of Foreclosures low and troubled Credit Card companies alive. However, as explained by Ludwig von Mises, at a certain point the market forces take the final decision. The longer interest rates are suppressed, the stronger they will veer up once time has come.

Chart below: European bonds have also reversed trend. The earlier break down resulted in a false break and will now built a double Top. Authorities are injecting Trillions (Quantitative Easing) in the economy in order to keep it alive. We know this won't - in the medium term run - save the system from collapsing. It NEVER did in the past and it will not today. Only after the misallocated funds have been cleansed out of the system a fresh boom can be initiated! By artificially lowering interest rates, the authorities are doing nothing more than increasing the misallocation of funds..

In the long run, interest rates rise as a consequence of the inflationary policies of the 'authorities and banks' and the latter adjust what we call 'the official interest rate' to the conditions of the market.



2014 Total Debt versus GDP:

debt and gdp 2014 Fed insolvent 2014
Total debt versus GDP FED is insolvent

Per Capita debt Feb 2012

per capita debt feb12

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