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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

The Inflation Secrets Your Broker Won’t Tell You About

Stock-Markets / Inflation Mar 05, 2013 - 05:49 PM GMT

By: Graham_Summers

Stock-Markets

The US Government and the US Federal Reserve downplay the threat of inflation. There are two primary reasons for this:

1)   Acknowledging higher inflation would mean both revising GDP growth much lower (last quarter’s FDP growth would have been negative 1% if you accounted for the real increase in costs of living).

2)    One of the primary arguments the Fed uses for why it can print hundreds of billions of Dollars without hurting consumers it because inflation remains “contained” or “transitory.”


Because of this, you won’t see any real acknowledgement of inflation by the US Government or the Fed until it’s far too late. Remember, one of the central goals for these organizations is to maintain confidence in the system.

Indeed, while the mainstream financial media continues to trumpet the wonders of stocks closing in on all-time highs, larger, more sophisticated players are preparing for a financial meltdown in a much larger market: bonds.

The cause? Inflation

Goldman Sachs and other large financial entities have begun to warn their clients about an implosion in the bond market.

Goldman Sachs strategists have issued a big warning to clients hiding out in bond funds: You’re about to lose your shirt.

The reason: interest rates began rising this week, and if they return to the historical average yield of 3 percent, prices for long-term bonds will plummet. (By their very nature, fixed income prices must fall if rates rise.)

A reversion of risk premiums to historical averages of 6% nominal rates (3% real rates and 3% inflation) would suggest estimated losses in portfolios with bond durations of 5 years of 25% or more,” equity strategist Robert D. Boroujerdi said in a note.

http://www.cnbc.com/id/100355153/Why_Goldman_Thinks_You_Should_Dump_Bonds_Now

Goldman is not the only group be warning of a bond market implosion courtesy of rising inflation.

Finra warned investors today that if interest rates rise – as most market pros expect – bond investors could be slammed by long duration.

In an investor alert, the Financial Industry Regulatory Authority Inc. told investors that in the event of rising interest rates, “outstanding bonds, particularly those with a low interest rate and high duration may experience significant price drops.”

A bond fund with 10-year duration will decrease in value by 10% if rates rise one percentage point, the alert warns.

http://www.investmentnews.com/article/20130214/FREE/130219947

We get additional signs of the rising threat of inflation from the wave of Gold purchases made by Central Banks:

Worldwide gold demand in 2012 was another record high of $236.4 billion in the World Gold Council’s latest report. This was up 6% in value terms in the fourth quarter to $66.2 billion, the highest fourth quarter on record. Global gold demand in the fourth quarter of 2012 was up 4% to 1,195.9 tonnes.

Central bank buying for 2012 rose by 17% over 2011 to some 534.6 tonnes. As far as central bank gold buying, this was the highest level since 1964. Central bank purchases stood at 145 tonnes in the fourth quarter. That is up 9% from the fourth quarter of 2011, and the eighth consecutive quarter in which central banks were net purchasers of gol

http://247wallst.com/2013/02/14/central-banks-buy-the-most-gold-since-1964/#ixzz2LMLOfBPK

Note… Central Banks, while talking down money printing and denying the presence of inflation, bought more Gold in 2012 that any year dating back to 1964. Indeed, However, since becoming net buyers of Gold in 2010, the Central Banks have been increasing their Gold purchases rapidly.

In 2010, Governments worldwide bought 77 tonnes of Gold. In 2011 it was 457 tonnes. And last year it was a whopping 535 tonnes. All told, they’ve accumulated  1,000 tonnes of Gold since 2Q09. At today’s price of $1600 per ounce, this stash is valued at over $56 billion.

The key issue here is not the amount ($56 billion in Gold purchases is nothing compared to the over $10 trillion in new money Central banks have printed since 2007), but the trend: Central Banks were net sellers of Gold for decades until 2010.

With that in mind, we’ve recently published a new Special Report outlining the dark secrets of inflation, which mainstream financial professionals never tell their clients.

If you’re an individual investor (not a day trader) looking for the means of profiting from all of this… particularly the US going over the fiscal cliff… then you NEED to check out  my Private Wealth Advisory newsletter.

Click Here Now!!!

Graham Sumers

Chief Market Strategist

Good Investing!

http://gainspainscapital.com

PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.

I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).

Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.

Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.

Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.

© 2013 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Graham Summers Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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