Markets may finally be starting to share our view that Treasuries will fall
and gold will rise despite financial asset deflation. As you can see
from the following link, Citigroup is now calling for a bear market in Treasuries.
Looking back to 2008, investors sold what they thought were risky assets -
stocks, private bonds (corporates, mortgages, structured products) and real
estate. With the proceeds, capital moved into what were perceived to
be risk-free assets - Treasuries and gold. Gold is the true safe-haven
whereas Treasuries are just another risky asset.
People try to defend treasuries by saying the US will never default because
the government can always print money. However, just making that statement
acknowledges that there could be risk of a United States Government default. Thus,
government bonds should not be AAA rated nor are they risk-free assets.
During 2008, as stated earlier, money flowed to Treasuries because of their
perceived safety. This was despite clear credit deterioration. Our
government's tax revenues are falling because of the recession/depression,
while the government's balance sheet is deteriorating as borrowing increases
to support bailouts and stimulus. If a family or a business lost revenue/income
and/or took on more debt, its credit score would be hurt and cost of borrowing
would rise. This is what should have happened to the US Government in
2008.
As can be seen in the following link, Spain, a major developed country, recently
lost its AAA rating. This means that the market is being forced to recognize
that government bonds are not as safe as an asset like gold. This explains
gold's recent move higher despite recent strength in the dollar. ALL
citizens around the world should be buying gold, as they need protection from
government defaults and inflationary stimulus policies.
As government bonds fall in price, interest rates will rise in this country.
This will create even greater stress on our broken economy. This will
put downward pressure on risky assets, sending stocks, bonds and real estate
lower while inflating the least risky assets. Rather than capital flows
being split between government bonds and gold, gold will be the beneficiary
sending it to prices that are currently unimaginable.
Continental Capital Advisors, LLC was formed to offset the destruction of
wealth caused by the global devaluation of currencies by central banks. The
name Continental Capital symbolizes the 1775 US Currency, "the Continental",
which was backed by nothing and quickly became devalued.
Disclaimer: The above is a matter of opinion and is not intended as
investment advice. Comments within the text should not be construed as specific
recommendations to buy or sell securities. Individuals should consult with
their broker and personal financial advisors before engaging in any trading
activities. Certain statements included herein may constitute "forward-looking
statements" with the meaning of certain securities legislative measures. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements
of the above mentioned companies, and / or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Any action taken as a result of
reading this is solely the responsibility of the reader.
Continental Capital Advisors, LLC was formed to offset the destruction of
wealth caused by the global devaluation of currencies by central banks. The
name Continental Capital symbolizes the 1775 US Currency, "the Continental",
which was backed by nothing and quickly became devalued.
Disclaimer: The above is a matter of opinion and is not intended as
investment advice. Comments within the text should not be construed as specific
recommendations to buy or sell securities. Individuals should consult with
their broker and personal financial advisors before engaging in any trading
activities. Certain statements included herein may constitute "forward-looking
statements" with the meaning of certain securities legislative measures. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements
of the above mentioned companies, and / or industry results, to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Any action taken as a result of
reading this is solely the responsibility of the reader.
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