Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Memorial Day Disaster, Foreigners Dumping Dollar Assets, Stocks & Bonds

Stock-Markets / US Bonds May 25, 2009 - 07:58 AM GMT

By: Money_and_Markets

Stock-Markets

Best Financial Markets Analysis ArticleMartin Weiss writes: This would normally be my time for a quiet Memorial Day at home.

But even as we seek calm, investors overseas are doing precisely the opposite.


They’re dumping U.S. assets.

They’re driving those assets down in price.

And they’re threatening to sink our entire economy into a THIRD phase of this crisis.

Remember: The first phase was the debt disaster. The second phase was the collapse in the economy. Now, in the third phase, Treasury bonds and the U.S. dollar are getting hit hard, largely due to foreign selling.

The latest drama began this past Thursday …

The supply of U.S. Treasury bonds dumped on the market was so overwhelming, even the Federal Reserve, with all its massive efforts to buy up bonds, could not stop the avalanche.

Treasury bond prices sinking fast DESPITE Fed's big purchases!

By the time most traders left for the weekend Friday afternoon, ALL of the gains in bond prices the Fed had been able to engineer in recent weeks were wiped out — vanquished by market forces beyond the Fed’s control.

Why The U.S. Government Is the Next Victim of the Market’s Revenge!

Look. In each successive phase of this debt crisis, investors have consistently attacked and destroyed the market value of institutions that owned large amounts of toxic assets — Countrywide Financial, Fannie Mae, Citigroup, Bank of America and many others.

The shares of these companies were pummeled; their ability to raise new capital, virtually extinguished.

Now it’s the U.S. government that’s the next victim of the market’s revenge.

Why?

Because the government never was — and never will be — immune to market selling. Like private corporations, it borrows. Like any borrower, it has creditors. And like all creditors, it’s ultimately up to THEM — not up to the borrower — to decide what to do with their money.

But unlike most borrowers, the U.S. government has arrogantly thumbed its nose at its creditors. Without remorse.

“We can do anything we damn please,” was the message from Uncle Sam.

“We can spend our money wantonly. We can bail out our giant corporations to our heart’s content. We can even debase our currency.

“But YOU, our creditors, are stuck with us. No matter what we do, you’ve got to keep loaning us more money, endlessly.”

Our creditors swallowed hard and tolerated this message for a while. But not now.

Now they’re fed up. They can’t take it anymore.

Now, explicitly or implicitly, the U.S. government has assumed the liability for TRILLIONS of dollars of bad mortgages, sour commercial paper, and sick consumer credit.

Now, directly or indirectly, the U.S. government has placed its own credit and credibility in grave jeopardy.

And now, our creditors are raving mad, dumping U.S. bonds and the U.S. dollar.

The Immediate Consequences …

U.S. dollar plunges to new 6-month lows!
  • Treasury bond prices aren’t the only U.S. assets plunging. The U.S. dollar is also plunging against major world currencies. It has just fallen below 6-month lows. It’s almost certainly going to fall further.
  • Gold has surged dramatically, coming within striking distance of the $1,000 level — and beyond.
  • Meanwhile, new, unexpected supplies of bonds are being tossed on the market on TOP of the massive supplies the Treasury must issue to finance its mammoth $1.84 trillion budget deficit estimated by the Obama administration for fiscal 2009.
  • Long-term interest rates are getting ready to soar far further. And as rates rise, consumers and businesses will have to pay through the nose to borrow. Or they won’t be able to borrow at any price.
  • You can expect a sweeping, devastating impact on the economy, especially in the real estate market. Even with LOWER mortgage rates, commercial real estate is already collapsing. With HIGHER mortgage rates, any hope for stabilization will be dashed.
  • Thousands of insurance companies and banks will suffer a new round of losses that could make the subprime mess seem small by comparison.
  • The Dow will plunge to our target of 5,000; the S&P, to 500.

A Unique Convergence of Events

If all of these events can tell you anything, it’s that you now have the kind of opportunity that generations of investors could only dream about.

You have the ability to read the handwriting on the wall; to know in advance what is most likely to happen next.

Treasuries bond prices are already sinking. Interest rates are rising. The dollar is falling. Unemployment is surging. Commercial real estate is collapsing. General Motors is going bankrupt.

This is the recipe for disaster I’ve been warning you about.

But it’s also a prescription for some of the greatest profits of all time, using contrarian investments designed to profit from the decline.

Good luck and God bless!

Martin

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .

Money and Markets Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in