That's been sold to the masses for years.
Now the 20-somethings are learning the same thing from the financial media shills. You never hear Jim Cramer or Steve Liesman or any of the CNBC Grand Council of Shills recommending "shorting" a stock. They can't even use the word because the word is verboten in financial media.
The poster child for the Bond Bears has been Bill Gross of PIMCO since he's had more air time than any other bond fund manager because of his reputation, the size of PIMCO and its longevity in the market.
However, in the last year, Bill has consistently tried to short the long-dated Treasuries and has consistently lost money.
Why has he done this? Because even a guy like him, who has been in the business a very long time, cannot get his mind around the idea that a 10-year US Treasury Bond could trade down to a 1% yield. Or that a 30-year US Treasury Bond could trade down to a 2-1/4%. Guys like Bill Gross simply can't get their minds around it.
We haven't been that low yet, but we have been below 1-1/2% in the 10's and we have been down to around 2-1/2% in the 30's.
The Bill Grosses of the world -- which are literally all of the bond fund managers -- simply cannot accept the fact that yields can remain so low for such a protracted period because to accept that fact would mean that they would have to admit the economic signal that the bonds are sending, namely that the planet's economy is collapsing.
Yields fall because money is like any other commodity which means it has its own supply/ demand fundamentals, which are expressed in terms of interest rates.
In other words, when interest rates fall, it means demand for money is falling, so in order to prompt demand, interest rates come down which get a push down by central bank action as is the case now.
This is at the very heart of monetary stimulus. If you make money cheap enough, youâre going to be able to spur demand for it.
But thus far, it hasn't happened. So the central banks are adopting the attitude -- well, we just haven't driven rates down low enough.
What they don't understand is that things have changed. The last time rates were this low was during the deflationary period that immediately occurred after the Korean War.
Also people tend to forget that 10-year Treasury bonds traded down to Â¾ of 1% yield. So to say that the 10-year bonds can't go down to 1% and thereâs no historical precedent for it is wrong. However if you're a bond fund guy, you really can't admit that.
Nobody wants to admit the truth -- what the bonds are signaling is a growing deflationary problem on the planet, something that central banks have very little cure for.
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* AL MARTIN, author of "The Conspirators: Secrets of an Iran Contra Insider" is an Independent Political-Economic Analyst with 25 years of experience as a trader on NYMEX, CME, CBOT and CFTC. He is also currently trading the commodity futures market every day and night and has a teleconferencing service to facilitate transactions in the markets. This is a service for independent market-experienced traders.
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