Wednesday, December 21, 2016

Michael Pento:
Bond Bubble Is Epic
Greg Hunter .. There is a record bubble in bonds, and money manager Michael Pento warns, “Where’s the 10-year Treasury right now? It was 1.3%, and now it’s around 2.6%. We’re going to 4% on the 10-year Treasury. That, by definition, is an absolute bursting of the bond bubble. The problem is this: All assets are priced off of the ‘risk free’ rate of return, ‘risk free’ rate of return on sovereign debt. All asset prices were priced off 1.3% of the 10-year Treasury, or a negative 40 basis points on the Japanese 10-year, or negative yielding German bunds, all assets, and yes that includes real estate and stocks. So, the bond bubble is epic. It is that big in proportion, and it is now bursting.” .. Pento goes on to warn, “The real estate market is starting to go off-line. If you look at new home starts, they were down 19% in November month over month. There is no more refinancing market. It’s gone off-line. The initial purchase applications have flat lined. . . . As the housing market goes, so goes the economy. While the Dow and the S&P 500 have surged after November 9th, after Trump was elected, emerging markets are down 8%. . . . The emerging market economies and their currencies are crashing, and that is where I see the epicenter of the bubble breaks.” .. In closing, Pento says, “This stronger dollar and this rise in Treasury yields is not going to last very long. They are going to have to reverse course. When they do, they are going to temporarily bring that yield back down. They are going to create unprecedented inflation like you have never seen before--even worse that the 1970s. You are going to want to have gold at that juncture.” .. 34 minutes

2 comments:

Anonymous said...

Maybe assets are priced in theory on bond market yields. However with the 10 year at 1.3 per cent everybody and their uncles realized it was not sustainable for the long haul and so the pricing reaction of say in equities muted when yields increased to 2.6.

Anonymous said...

Dan Oliver-Trump Destined to Mirror the Hoover Depression?
Published on Dec 21, 2016

Dan Oliver talks about the idea that Mr. Trump may be inheriting a mess similar but exponentially greater than that inherited by President Hoover.

https://www.youtube.com/watch?v=hQQCwcfcWGU