Interest Rates Will Be Higher In 5 Years
The cost if capital is rising, the big cycles are rolling over. Today's debt slaves will not be happy.
For the fundamental trader a good reason that interest rates are on the long trend higher can be found via Steven Roach comments on a change in China.
Rebalancing is China's only option. Several internal factors - excess resource consumption, environmental degradation, and mounting income inequalities - are calling the old model into question, while a broad constellation of US-centric external forces also attests to the urgent need for realignment.
With rebalancing will come a decline in China's surplus saving, much slower accumulation of foreign-exchange reserves, and a concomitant reduction in its seemingly voracious demand for dollar-denominated assets. Curtailing purchases of US Treasuries is a perfectly logical outgrowth of this process. Long dependent on China to finesse its fiscal problems, America may now have to pay a much steeper price to secure external capital.
The 60 year interest rate cycle..
Are the lows in? With a 60 year cycle bottom suggest at 2010, a 10% margin of error is plus or minus 6 years. This means the interest rate cycle bottom is in if there is NO new low before 2016. So far this is true. Therefore the trade is to BUY THE DIP (the ETF known as TBT is an option).
Interest rates for the world are on the rise.
"Tape reading is rapid-fire horse sense...The Tape Reader aims to make deductions from each succeeding transaction -- every shift of the market kaleidoscope; to grasp a new situation, force it lightning-like through the weighing machine of the brain and to reach a decision which will be acted upon with coolness and precision" ~ Richard D Wyckoff
"If past history was all there was to the game, the richest people would be librarians" ~ Warren Buffett