The Bubble to End All Bubbles

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Zero Hedge:

The mainstream financial media likes to focus on stocks because:

1)   The stories are a lot sexier than bonds or currencies

2)   They make for better hype jobs than bonds or currencies

If your job is to sit in front of a camera selling the notion of getting rich from investing, you’re not going to talk about bonds or currencies (maybe the latter is of interest but only with insane amounts of leverage which usually bankrupts a trader in his or her first trade).

However, today stocks are in fact a very minor story. They are, in a sense, the investing equivalent of picking up pennies in front of a steamroller.

That steamroller is the $100 trillion bond bubble.

For 30+ years, Western countries have been papering over the decline in living standards by issuing debt. In its simplest rendering, sovereign nations spent more than they could collect in taxes, so they issued debt (borrowed money) to fund their various welfare schemes.

This was usually sold as a “temporary” issue. But as politicians have shown us time and again, overspending is never a temporary issue. This is compounded by the fact that the political process largely consists of promising various social spending programs/ entitlements to incentivize voters.

This type of social spending is not temporary… this is endemic.

The US is not alone… Most major Western nations are completely bankrupt due to excessive social spending. And ALL of this spending has been fueled by bonds.

This is why Central Banks have done everything they can to stop any and all defaults from occurring in the sovereign bonds space. Indeed, when you consider the bond bubble everything Central Banks have done begins to make sense.

1)   Central banks cut interest rates to make these gargantuan debts more serviceable.

2)   Central banks want/target inflation because it makes the debts more serviceable and puts off the inevitable debt restructuring.

3)   Central banks are terrified of debt deflation (Fed Chair Janet Yellen herself admitted that oil’s recent deflation was an economic positive) because it would burst the bond bubble and bankrupt sovereign nations.

The bond bubble, like all bubbles, will burst. When it does, everything about investing will change.

Bonds have been in bull market since the early ‘80s. Thus, an entire generation of investors and money managers (anyone under the age of 55) has been investing in an era in which risk has generally gotten cheaper and cheaper.

This, in turn, has driven the rise in leverage in the financial system. As the risk-free rate fell, so did all other rates of return. Thus investors turned to leverage or using borrowed money to try to gain greater rates of return on their capital.

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It’s the elephant in the room that dwarfs all other elephants. It might not be a matter of if, but of when. Neither party is actually addressing the problem. Republicans claim they would, but I think it’s really nothing more than an empty promise. That’s because any real solution would necessarily involve both spending cuts and tax increases.

I ran across this ad for silver ounces. I’ve stashed away a few, though the idea that they’ll retain much value if the sh-t totally hits the fan might prove to be bogus. Personally, I prefer rounds. These are rectangular, like a tombstone. That might be appropriate. Maybe the inscription is graveyard humor:

http://sdbullion.com/silver/sbss-silver-shield-collection/silver-shield/den-thieves-federal-reserve-1-troy-oz-999-silver

Obama’s been up to no good lately trying to trick dumb people (his supporters) into ”investing” in MYra’s.
Myra’s are IRA-looking devices in that you buy them for retirement.
But they ”return” only 2%.
!!!
Think of that!
And what have you bought?
Think all eggs, one basket only worse.
These bonds finance a quick turn-over in short-term debt that covers our real long-term debt.
This, appears to help the USA’s interest payments be lower than long-term bonds.
But all you are getting as a promise that you will be paid way later for buying bonds that might be only 24-hour loans and up to 1 month loans to the gov’t from YOU!
They are a woefully bad and risky deal.
Obama had to ”Executive Order” (or memo) them because the requirement of Congressional approval just was never going to happen.

Since the film industry has been completely transformed by modern digital cameras and advanced printers, Silver is not that great an investment as a precious metal.

Gold remains lucrative because of the value that humans place in it as well as it’s industrial uses.

Platinum is IMO a much more lucrative investment because it’s rarity and the high demand for it in the automotive industry (Ie. in catalytic converters. It is essential to the catalytic process, and it’s rarity created a mini boom market for auto recyclers and converter thieves). Since the South African Platinum mine workers strike has ended, the Platinum market will stabilize, but demand will remain high as China and other emerging nation’s demand for new vehicles continues.

Copper also continues to increase in value due the fact that it has been a very long time since any new copper deposits have been found (resulting again, in a boom market for copper thieves).