Home > Predictions > Short-dated govt bonds and gold still the ‘go to’ assets

Short-dated govt bonds and gold still the ‘go to’ assets

Helicopter Ben paves the way for QE2.

What does this mean for your investment dollar?

1.  The real economy will continue to suffer as capital is sucked out of the private economy and re-allocated to holders of govt bonds.

2.  This will put a floor under short-dated govt bills and bank shares, but slowly kill the real economy.

3.  I expect continued steady declines in the stockmarket – with possible bumps on the way down as earnings disappoint and investors have to liquidate out of positions as access to private capital dries up.

4.  I expect continued strong prices – low yields – on US bonds and bills, especially in the range short-dated to 5 years.

5.  I expect continued spikes upward in precious metals – gold and silver in particular.

The irony of govt bonds and gold both being ‘go to’ assets in a time of QE is paradoxical in a superficial sense but is logic if you see that QE is basically a way to save the current debt-based monetary system from immediate collapse – but it can do so only at the expense of the real economy.  At the end of the day it’s always the people vs the banks/govt.  At the moment the banks/govt are ‘winning’ and the private economy is losing.

In these circumstances unfortunately you have to go with the ‘winners’ and put your money ahead of where the counterfeiting bankers will put their own newly printed e-dollars – and that’s into bonds and gold.

This doesn’t make sense in a period of ‘normal’ evenly-distributed inflation.  Normally, broad-based monetary inflation would be positive for stocks. Or at least bad for bonds.

But these are certainly not normal times.  The system is still awash with debt.  All QE does is pick the living dead out of the rubble of the destruction wrought by universal and simultaneous over-indebtedness and save some organs from cancerous bankruptcy over others.  It’s an exercise in moral hazard and Bennie Boy has chosen to save his govt and bankster buddies.  They will be the last to die as cancer ravages the whole system.  The first in line during the downdraft of debt will be small entrepreneurs and the real economy.

The ‘inflation’ is being very narrowly channelled through QE and that channel leads straight to govt bonds.  And to gold.

I don’t like it, but you have to accept reality and ‘go with the flow’.  Of money, that is.

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