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Bonds & Interest Rates

Warning for Trump: Revenge of the Government Debt Monster

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Posted by Martin D. Weiss PH.D

on Monday, 27 March 2017 06:31

Screen-Shot-2017-03-17-at-7.19.51-PMWhile Washington is buried in bungled health care reform and Wall Street is vexed about possibly jinxed tax reform, both seem to have lost sight of the one, giant, intractable monster in the economy that virtually no one talks about any more: Debt.

They seem to forget that excess debt was the repeat offender behind the bank failures of the 1980s, the subprime mortgage disaster of 2007, the global market meltdowns of 2008, the Great Recession of 2009 and the multiple European debt crises of 2008-2015.

Worse, they seem to ignore the fact that the last 7.5 years of near-zero interest rates and unbridled money printing have only encouraged still more debt pile-ups. “Money is dirt cheap, so why not?” say officials in Congress, the White House, the Treasury Department, and government agencies.

“As long as the government’s debt burden is under 100% of GDP,” they tell you, “we can handle it. It’s only when it surpasses the 100% threshold that we’ll be in danger.”

True or false? Let’s look at the numbers …



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Bonds & Interest Rates

Technically Speaking: “Fuhgettaboutit”

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Posted by Technically Speaking via Lance Roberts

on Wednesday, 22 March 2017 08:57

“Technically Speaking” is a regular Tuesday commentary updating current market trends and highlighting shorter-term investment strategies, risks, and potential opportunities.

In last week’s post, I did a complete sector and major market review. Not much has changed in the past week given the very quiet activity that has persisted. This lack of volatility, while not unprecedented, is extremely long in duration as noted in past weekend’s newsletter, “An Unexpected Outcome:” 

“Speaking of low volatility, the market has now gone 108-trading days without a drop of 1% for both the Dow and the S&P 500. This is the longest stretch since September of 1993 for the Dow and December of 1995 for the S&P 500.”

The issue becomes, of course, which way the market breaks when volatility returns to the market. Over the course of the last three years, in particular, those breaks have been to the downside as shown below.

SP500-MarketUpdate-032017

...continue reading HERE

...also, Michael's Interview with Lance Roberts March 18th:

Bonds & Stocks: Looking Good With One Possible Exception



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Bonds & Interest Rates

Chart Predicts a Dire Endgame for Interest Rates

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Posted by Rick Ackerman - Rick's Picks

on Tuesday, 14 March 2017 07:06

Nasty-fall-ahead-for-TLT

This proxy for T-Bonds has quietly slipped into no man’s land with the recent breach of December’s bombed-out lows near 116.80. Even before this occurred, TLT looked like a good bet to fall to at least 111.97, the midpoint Hidden Pivot support of the pattern shown. But it would require only a breach of the July 2015 low at 114.88 to do very serious damage to the long-term chart. If the 111.97 target is hit, it would correspond to a rise in long-term interest rates to about 3.37% from a current 3.19%.  And if TLT were to fall all the way to the D target at 100.79, yields would be around 3.84%. For borrowers in the U.S. and around the world, this would be more than just a turn of the screw. Indeed, if stock prices were to fall simultaneously as seems logical, it would crush them beyond any hope of recovery. Meanwhile, any counter-stimulus equal to the problem would be tantamount to hyperinflation. 

Click here for two weeks' free access to Rick's Picks

...also: FOMC: Don’t Get Lost in All the Hoopla



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Bonds & Interest Rates

FOMC: Don’t Get Lost in All the Hoopla

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Posted by Bill Hall - Money and Markets

on Friday, 10 March 2017 09:12

The popular financial press is making a big deal about the Fed’s almost-certain 25-basis-point hike in the discount rate that is set to occur at next week’s Federal Open Market Committee meeting. But don’t get lost in all the bluster and hoopla.

Why?

Because the Fed’s decision will have very little impact on your portfolio.

Since a picture is worth a thousand words, I am going to use four easy-to-follow charts to make my point.

To get a true picture of what’s going on, we first need to step back and take a macro view of what the Fed is up against. The chart below shows the history of Federal debt held by the public since the nation’s founding.


chart1s 
Click image for larger view

As you can see for yourself, when the financial crisis hit in 2008, federal debt exploded to its current level of $14 trillion. And get this — the $14 trillion doesn’t even count the federal agency debt supporting farm loans, home mortgages and a variety of other programs, which total another $5 trillion and puts the total official debt level at about $19 trillion.

And then when you throw in the government debt related to unfunded liabilities for federal social service programs, like Social Security and Medicare, the total debt skyrockets to an estimated $130 trillion. No matter how you slice it, total federal debt has become a BIG number.

To make matters worse, at the same time the U.S. government was levering up … so was corporate America. This chart from the Federal Reserve Bank of St. Louis shows that corporate debt in the U.S. has risen about 60% since the first quarter of 2009.



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Bonds & Interest Rates

Fake Risk, Fake Return?

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Posted by Axel Merk - Merk Investments LLC

on Thursday, 02 March 2017 08:56

With seemingly everyone from the blogosphere to the Tweeter-in-chief chiming in on fake news, have investors considered their risk/return profile may also be “fake”? When it comes to investing, who or what can we trust, is the market rigged, and why does it matter?

2016-02-24-pressure-cooker

For eight years in a row now, an investment in the S&P 500 has yielded positive returns.1 In recent years, expressions like “investors buy the dips” and “low volatility” have become associated with this rally. 

In the “old days”, investors used to construct portfolios that, at least in theory, provided a risk/return profile that they were comfortable with. For better or worse, I allege those “old days” are over. To be prepared for what’s ahead, let’s debunk some myths.



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