An article supporting a stronger coin (and PMs) markets

roadrunner

An article from www.financialsense.com that seems to make sense to me. Bonds have a rough road to hoe, and the coin market and gold are going to benefit from it. Reads fairly easy unlike many of these articles discussing interest rates, etc.

Coming debacle in bonds


roadrunner

badger

I could never understand why you would hold any funds in cash. In the 80's, you had to spend to save - pay now because the price would be higher tomorrow. Then in the 90's, stocks were better than lottery tickets.

This may be the first time in our generation that cash will truely be king.

RedneckHB

I wouldn't be so quick to jump on the "interest rates are going higher" bandwagon. In the 3 weeks since the Fed raised interest rates 1/4 point the yield on the 10 yr bond has dropped about 1/2 point. While it is true that rates are near historical lows, lets not forget that in Japan rates dropped to near 0%. I doubt that we will ever see rates that low, but there is a lot of room for them to drop lower.

This may not happen in the immediate future, but I can see rates down to 2% as the stock market continues to languish, threats against our economy persist and baby boomers retire seeking relative financial security through fixed income. Also greater manufacturing efficiency will keep a lid on inflation. Of course rates could go higher if the current economic enviroment remains strong, however we be in a recession again someday and rates will fall from lower ceiling.

roadrunner

I think the message in the article was that interest rates would have to rise to attract new bond holders as old holders bail out. As long as we are printing money like a drunken sailor and creating $500 billion in new debt every year, foreign investors are going to continue to shrink away from our bonds. If you look at the first 5 months of the year, the foreign buying has tailed off quite a bit. The Japanese were buying our bonds like mad in 2003 to early 2004. They purchased around $200 Billion worth. They have since come to their senses. To make up for the lack of buying, the FED is monetizing the debt by printing more currency. I would not want to be a bond holder in such an environment. And at some point interest rates will have to rise or no one will want to hold bonds.

roadrunner

badger

I am more worried about deflation than inflation. However, I am usually about two years ahead of the economy.

roadrunner

Badger, don't worry, this is a buffet, we are going to see a little bit of everything. Some assets will get deflated and others will get inflated. It will pay to be in the inflatable assets.

roadrunner

RedneckHB

Really it depends on your time horizon. Personally I think the rate on the 10 yr could rise from the current 4.4% to about 5.25-5.50% over the next yr. A substantial increase, but remember it was 6.75% just 4 yrs ago.

The demand for US bonds does not have to come from overseas. In a few years the baby boomers will begin to retire. They will look for both safety of principal and an income stream. The only way they can acheive this is to buy bonds. And buy they will.

Trime

It is an unsettled time and the markets are in transition. Most (smart) money is opn the side of an inflationary trend. Roadrunner is a perenial goldbug and he may ( someday) be right.

roadrunner

Trime, I only became a gold supporter in December 2002, so I'm not even 2 years old yet. When gold is no longer the right place to be, I'm sure I'll move back into stocks, bonds, tulips, or what have you.

FYI, I own very little actual gold bullion, most of my "gold" holdings are in MS62 to 65 Saints (the bulk are 64's). So I'm supporting both the numismatic market and the gold market. Saints are like the numismatic futures of the physical gold market. They tend to advance 2 or 3 times the price of gold (up or down). I don't think this really qualifies me as a gold bug, maybe just a gold follower.

roadrunner

oreville

Trime: roadrunner may be a perennial goldbuy.........err goldbug......... but suspect that is true only for the past 4 years or so. In the meantime, gold has done pretty well indeed.

oreville

........or a goldfellow.

roadrunner

Oreville, but let's not forget than many well selected rare coin has done just as well or probably better than gold over the past 4 years.
Key dates, CC's, DMPL's, early type, monster type, monster color, Washington quarters, Indians, Buffs, Roosies, to name but a few.
The key is to pick the right coin at the right time and then wait.

For he's a jolly goldfellow....for he's a jolly goldfellow...for he's...

roadrunner