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Silver Wheaton Corp. Message Board

  • chemaes44 chemaes44 Nov 8, 2008 6:24 PM Flag

    $USD and Bonds/notes, PM's nemesis

    Where once I focused on the movements of the dollar, I've had to go and learn a bit about bonds/treasury notes over the last year or so because they now offer serious competition to gold and silver.

    I think one of the reason's PM's are not favored as a safe haven asset is because it offers no yield. The last few generations of investors have become spoiled in believing that anything they hold for investing purposes should give them a few percentage points return, a dividend, or something. And, thus, the rush to instruments that have yield in spite of PM's historic significance for preserving wealth.

    My interpretation of the of the 3 month notes vs the 6 month notes is that the 6 month yield fell closer to its lowest point of the last few years, than did the 3 month. This seems to suggest a feeling that things get worst at least to the 6 month mark (people wanting the safety of it more than the 3 month, because it -the 6 month- moved more dramatically).

    The 2 year and 5 year bond prices have broken out from their patterns upward but the 10 years haven't, suggesting that folks believe this thing will drag on to at least the 5 year mark and likely somewhere in between 5 to 10 years.

    I speculate that if the short term notes become desired in demand to the point that prices explode, and therefore yields fall to zero, then all of a sudden what makes a 3 month or 6 month note any different than precious metals??

    Well, one is your actual wealth held in your hand (silver/gold) while the other is your wealth being promised to be returned to you(treasuries). If this is indeed a world where worse case scenarios become the mainstream thought, then at that point I believe folks will say I'd rather hold it in my hands than hold a promise.

    So, yeilds dimish to zero, making folks think which one is better? promise notes (treasuries) or actual wealth (PM's)?
    Actual wealth should win, right?

    The problem I'm facing right now is looking at the USD index. Anyway I look at it (wedge or pennant) the pattern looks bullish. It looks to be consolidating for another thrust upward. This scares me as it would imply gold and silver may still be further ravaged, unless as I speculated in "buy signs appearing" thread that PM's are decoupling from the USD realtionship. A decoupling could imply PM's don't get ravaged as the dollar rises, that, bond prices go up dropping the yield to the point where PM's and treasury notes are all on an equal playing field absent the advanatage treasuries always had - yield.

    There is no mistaking that PM's have changed direction the last week or two, the stocks may not show it but the futures and spot for the metals do. I am just a bit worried about the USD index set up.

    Does anyone have any thoughts on the bonds/treasuries, USD index set up technical or fundamental? I am stuck.


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    • The real rival for specie is 8-10% bond yields on rock solid companies, 10% yields on some corporates, and skittish burned investors stuck in cash.

      Those retrenchments of what's left of available cash should start happening first of the new year, to offset further deterioration in S and P, but many of those valuations are looking back at companies prior earnings, and those were "good" last year and "attrocious" this year.

      $5TRILLION reflatable cash will mean those 10% yields will barely keep with inflation, and people will look wistfully at specie as the dollar turns to sooshie in about six to nine months.

      Look where specie is stuck at the old high of 2006. The tea leaf readers think this is an inflection point on some head and shoulders chart.

      DON COXE can't explain it, but in last Friday's session finally came to the conclusion that the recent sell off in gold and silver was normal in a recession, and in 1974 didn't signal a flight to gold and silver till we were on our way out of the mess we were in then.

      Which means, you can collect cheap shares of SLW for the near term, nine months, sell covered calls against your position, and drive your cost to pennies waiting for the inevitable pop.

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