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Assume The Opposite

Start Of A Bond Market Crisis?

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The video mentions a bloodbath of 6000 US retail stores.

The Zero Hedge article mentioned shows US and German bonds rising.

http://www.zerohedge.com/news/2015-05-05/bunds-treasuries-test-key-technical-levels

The UK 10 year gilts are rising as well. Could this be due to Greece, or a bigger problem such as a global financial slowdown? Both US and UK GDP Q1 growth have been pathetic.

In addition the Economic Collapse Blog posted this recently:

http://theeconomiccollapseblog.com/archives/experts-are-warning-that-the-76-trillion-dollar-global-bond-bubble-is-about-to-explode

Aren’t mortgage rates tied to the 5 year or 10 year bond rate?

Food for thought :P

Screen%20Shot%202015-05-06%20at%2016.48.

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2nd half reflation after the oil "deflation" DOOM!!!

Since all the bugs are popping up again with links to doom websites I guess its also time to sell gold. i.e. "Assume the opposite"

Edited by R K

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I would not bother given any wieght to 6000 stores shutting.

A combination of gross over investment in stores and the internet.

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I would not bother given any wieght to 6000 stores shutting.

A combination of gross over investment in stores and the internet.

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http://www.wnd.com/2015/05/retail-apocalypse-6000-chains-closing-stores/

Major U.S. retailers have announced the closing of more than 6,000 stores from coast to coast. The list includes only those retailers that have announced plans to close more than 10 outlets this year and next.

For example, 1,784 Radio Shack stores (Electrical) are vanishing, 400 stores in the Office Depot/Office Max chain by 2016, and 340 Dollar Tree/Family Dollar stores. (Pound shops)

The growing list of stores getting shuttered coincides with the decline in discretionary consumer spending over the past six months.

http://www.usatoday.com/story/money/business/2015/04/09/walgreens-closing-200-stores-earnings/25512125/

Walgreens to close 200 stores, boost cost cutting

Edited by 200p

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Radio shack is not competive.

Bit like lowering BoE rate in 1920 as the demand for horse drawn carriages has fallen off.

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This extend-and-pretend is getting very tiring... chosen winners

The Great Disconnect——Central Bank Driven “Markets” Have Nothing To Do With Economics
by David Stockman • May 7, 2015


...So its time to recognize that there has been a monetary regime change. The Fed might well have been your friend since March 2009 or even for the last several decades. But stranded on the zero bound and smothered by a $22 trillion collective balance sheet, the central banks of the world are now fast becoming your fiend.

http://davidstockmanscontracorner.com/the-great-disconnect-central-bank-driven-markets-have-nothing-to-do-with-economics/

Dollar Hits Air Pocket, Euro in Epic Short Squeeze
by Wolf Richter • May 7, 2015


...And that’s where El-Erian had nailed it: these all-controlling entities might “no longer control as much as they think they control.”

http://wolfstreet.com/2015/05/07/dollar-hits-air-pocket-euro-in-epic-short-squeeze/

“Smart Money” Prepares to Profit from Bond Market Rout
by Wolf Richter • May 6, 2015


...These companies, too, are the ultimate smart money. They’re doing what Buffett would like to do, and what the shorts are now doing, this being the deal of a “lifetime”: they’re selling bonds that mature so far in the future that redeeming them is going to be another generation’s problem.

Heck, governments do it too. Even Mexico, which has a solid history of foreign-currency debt crises, a month ago was able to sell €1.5 billion in 100-year bonds at a 4.2% yield to maturity.

But for the buyers, for the very folks who have been scrambling over each other to grab a piece of this reeking pie, for the yield-desperate bond-fund managers, insurance companies, and others that have been driven to near-insanity by years of interest-rate repression and QE, for all those eager buyers who’ll end up owning these bonds in their conservative-sounding bond funds, for them, these bonds might curdle.

Never before has “duration” – the sensitivity of bond prices to interest rate increases – been higher, according to Bank of America Merrill Lynch index data cited by Bloomberg. If interest rates rise from these artificially low levels, these investors are going to take a bath. Bond funds are going to get hit brutally.

...“The environment is much riskier for investors,” Jim Kochan, chief fixed-income strategist at Wells Fargo Funds Management LLC, told Bloomberg. “At these low-yield levels, it doesn’t take a big move to lock in losses.”

Those who bought the Oracle and Microsoft 40-year bonds have already taken a hit when yields began to rise. Even small increases in yields have a big impact on 40-year bonds.

But for companies it may be the last chance to get their hands on ultra-cheap long-term money as the Fed’s cacophony is increasingly clear that rates will eventually rise, even if much of Wall Street is clamoring for ZIRP Infinity. For 40-year bonds, it doesn’t matter whether rates begin to rise in June or September; 40 years is a long, long time.

http://wolfstreet.com/2015/05/06/smart-money-prepares-to-profit-from-bond-market-swoon/

What dynamic growth prospects have any of these now old mega-corps got? Some for those who play it right, and sure they are cashed-up to buy such emerging dynamic companies for top money... I'd like to see them challenged by new entrants.. but maybe it will be the yield chasing bondholders to take the hits to near future market value of their 4% styley bonds.

Duration, which tracks the sensitivity of bond prices to interest-change changes, is the highest on record for company securities, according to Bank of America Merrill Lynch index data. That may bode poorly for performance when the Fed starts lifting its benchmark rate. Dollar-denominated bonds due in more than 15 years lost 6.1 percent in 2013 after then-Fed Chairman Ben S. Bernanke began laying out his plans to taper the central bank’s bond purchases is a reminder of that risk. For now, investors would rather remember the securities’ 16.9 percent gain last year, and are continuing to buy.
Petunia
May 6, 2015 at 10:18 am

I was in a Best Buy store yesterday and they claim they are remodeling the store, but it felt more like they are slowly selling everything off. The merchandise on the floor was definitely sparse. I only mention this because two weeks ago I walked into a Tiger Direct store and was shocked to learn they were liquidating and closing most of their stores. It’s starting to look like a pattern.

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Mama Yellen complaining that stock market prices are too high. But Bernanke said the purpose of QE and ZIRP was to run stock prices up so everybody could get rich via trickle down!

handsum.gif

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Does anyone listen to Martin Armstrong or read his blog? His predictive computer model holds 1 Oct 2015 as the peak in the bond bubble and Government debt. This date is a turning point after which we're looking at GFC2 on steroids 2015.75-2020. Sovereign debt crisis, defaults, pension crisis... People's confidence in Goverment will collapse and capital around the world will turn to private assets like equities (DOW in particular), corporate bonds, gold, etc for safety and yield. Things will get bubbly.

However before this happens stocks and gold should bottom this Q2/Q3. Lots of volitility from June.

We all know something is wrong...not long now..

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I've bought a lot of 10/15-year index-linked gilts for the last five years in a pension wrapper, managed to get £100K in that by salary sacrificing £30K net. (65% EMTR and 10% investment gains). On retirement, I should get £85K of that back net.

My reasoning was that equities look risky and that a falling deficit meant fewer gilts being sold at the same time as pension funds having to buy them for the hordes of oldies retiring. However, they have had a good run and I don't see much more upside so am selling today, back to boring cash and will see what happens.

Just for balance, a friend of mine is an experienced bond trader and he advised me to keep them.

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Peter Schaffrik, at RBC Capital Markets, said rising yields can be a healthy development if the global economy is picking up speed. It is a different matter if they suddenly jump at a time of sluggish growth and disappointing figures in the US. “It is potentially dangerous. What worries me is that we don’t have a good macro-economic back-drop driving yields higher. We don’t see a reflationary recovery,” he said.

more-more http://www.telegraph.co.uk/finance/economics/11590314/Violents-bond-moves-signal-tectonic-shifts-in-global-markets.html

The Daily Telegraph, Friday, 8, 2015, has front page of Business supplement headline: Investors hit by half a trillion dollars in paper losses over just last two weeks.

Venger: Rising debt levels creates economic feedback that forces deflationary reaction. Debt cannot indefinitely compound faster than income.

Bring on some tiny sparks...mighty flames.

After so many years of flat interest rates it's quite possible that any changes will be significant rather than gradual. The BoE for example talks about gradual but recent events have been anything but.

Unexpected change. I was thinking in the financial markets mainly but it could also influence political markets/events - just look at the way Greece is affected. The Swiss suddenly ditching the peg, the sudden oil price change and the Russian crisis etc are all huge events that have already had consequences that could change directions and outcomes significantly.

Nobody knows exactly what or how but after a long period of relative flatness often movements are large and rapid and take some time to stabilise.

These can all be attributed to the lax financial attitudes, the bailouts and QE etc etc.

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Does anyone listen to Martin Armstrong or read his blog? His predictive computer model holds 1 Oct 2015 as the peak in the bond bubble and Government debt. This date is a turning point after which we're looking at GFC2 on steroids 2015.75-2020. Sovereign debt crisis, defaults, pension crisis... People's confidence in Goverment will collapse and capital around the world will turn to private assets like equities (DOW in particular), corporate bonds, gold, etc for safety and yield. Things will get bubbly.

However before this happens stocks and gold should bottom this Q2/Q3. Lots of volitility from June.

We all know something is wrong...not long now..

Amusin that he has a computer model. Bit like a 1960s bond villain who has just discovered this incredible new technology with which to dominate the world.

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Mama Yellen complaining that stock market prices are too high. But Bernanke said the purpose of QE and ZIRP was to run stock prices up so everybody could get rich via trickle down!

handsum.gif

Except, as you know, that wasnt what she said was it. Tsk tsk.

(She said they were "quite high" but didnt pose a risk to financial stability).

As Buffett said, if yields remain at this level for 10 years equities are incredibly cheap. ERP of the SPX due to low bond yields is nowhere near typical of an equity top. This has been one of the most unloved equity bull markets in history

Yellen will want to be sure the yield curve remains moderately steep so she can raise the short end. Last thing they will want to see is the long end coming off as they start to raise rates, causing an inversion too soon. 10 yr is still well below level of taper tantrum and a long way off 2010/11 levels.

http://stockcharts.com/h-sc/ui?s=%24TNX&p=D&yr=5&mn=0&dy=0&id=p75075199783

Edited by R K

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1. Its a ZH idea. Thus wrong.

2. Armstrong projects an equity bust from October. Thus FI bonds would soar.

3. We are far more likely #turningjapanese. So inflation is a nonsense. CPI is 0.0%. Fact!

4. Closing 6000 stores is the opposite of inflationary. Obviously!

5. The recent rise in rates is entirely within normal gyration of last 30 YEARS.

Buy govt bonds. Not advice etc

Edited by Killer Bunny

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1. Its a ZH idea. Thus wrong.

2. Armstrong projects an equity bust from October. Thus FI bonds would soar.

3. We are far more likely #turningjapanese. So inflation is a nonsense. CPI is 0.0%. Fact!

4. Closing 6000 stores is the opposite of inflationary. Obviously!

5. The recent rise in rates is entirely within normal gyration of last 30 YEARS.

Buy govt bonds. Not advice etc

thought amstrong was predicting a bond shafting in october, maybe i read it wrong.

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Well its possible he meant both but would be extraordinary if equities if equities start collapsing and bonds too.

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Armstrong says 2015.75 is a peak in Government debt.

No exact timing given, but there will be a stock market AND gold price shake down - he calls it a fake out decline, which will push more capital into bonds for the final peak. After that..going into 2016-2020 = a sovereign debt default somewhere (Europe/emerging markets?) with capital fleeing Govt debt and into private assets etc.

2017-2018 will be the CRASH years.

Great article from 2013 about how we're being forced into a cashless society (so we can be taxed 100%, no bank runs, bailins at the touch of a button), negative interest rates and why Govt debt will never, ever be repaid: http://armstrongeconomics.com/archives/15764

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Well its possible he meant both but would be extraordinary if equities if equities start collapsing and bonds too.

If it's the mother of all deflations looming then it's entirely possible.. there were days post-Lehman when bonds blew out hard together with equities, if such is a rush for liquidity...

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Days? Who cares? Bonds soared post Lehmans/AIG. And soared again and again in the last several years.

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Days? Who cares? Bonds soared post Lehmans/AIG. And soared again and again in the last several years.

I appreciate what you say, this just to highlight it can happen. Now, to me it would seem both bunds and treasuries may have put in a very lasting bottom in terms of yields. Gundlach rather presciently called bunds the short of a life time the other week. Given it all floats on the belief of CBs controlling it all, banks and whom not parking their money in treasuries bc it's nowhere else to put it, it's not that difficult to imagine major liquidation. Re stocks, suffices to say NYSE is coming off leverage that tangibly surpasses the one seen at the 2007/2008 top. This crowd is even less likely to be proven "right"...

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Grundlach can say what he wants. When the market decides to sell them off sustainably ie for more than say 9 months then we MAY be seeing the new era of rising inflation from the era of disinflation. That rates have risen for several weeks is normally IRRELEVANT.

They have done so dozens of times over the last 30+ years and the trend is down until it is no longer.

The tell will be a monthly close above the 100m EMA. Risen above several times last 30 years but NOT ONCE closed above.

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I appreciate what you say, this just to highlight it can happen. Now, to me it would seem both bunds and treasuries may have put in a very lasting bottom in terms of yields. Gundlach rather presciently called bunds the short of a life time the other week. Given it all floats on the belief of CBs controlling it all, banks and whom not parking their money in treasuries bc it's nowhere else to put it, it's not that difficult to imagine major liquidation. Re stocks, suffices to say NYSE is coming off leverage that tangibly surpasses the one seen at the 2007/2008 top. This crowd is even less likely to be proven "right"...

Fitch reporting that the cost of servicing Chinese debt (~300% of GDP) is now 15% of GDP p.a. (see China thread).

Tick tock.

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