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  • jpmoy99 jpmoy99 Sep 10, 2008 11:39 AM Flag

    I warned you guys last night about Deflation

    I was long gold and short financials.

    I sold all my gold on Monday morning at a profit. Why? I watched the bond markets and saw the Asians retreat to they always do in bad times.

    Treasuries rise in deflation (yield curve falls). Treasuries sink on inflation (yield curve rises).

    Gold holders ask yourselves - "I am right in the long term...but do I have enough money to beat the Bank of China?"

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    • I hear you but where do you think the money will come from to pay for the yield on those treasuries? Especially now that the dollar is going up, doesn't that make the debt for more harder to pay back?

      • 2 Replies to arno009
      • Hank and Ben will pass the buck on to the next generation. You have to remember that inflation's effects on the capital markets take time.

        We're feeling it right now on the consumer level for sure. But there's a huge disconnect b/t capital market inflation and consumer inflation.

        In other countries there would be no difference. But the USA is unique in that we have to deflate the asset bubbles first - bubbles in housing, equities, futures, credit markets, etc. This was caused by our unique status as the #1 consumer economic engine.

        I argue that this round of asset deflation is giving the treasury/fed another clip of ammo for more bailouts. You can rest assured there will be a WAMU or Lehman Bros. bailout by this weekend.

        Conclusion: The Fed/Treasury WANT inflation...long term. But right now, they are taking advantage of deflation to re-load.
        As for the consequences on the nation's balance sheet, they will either be dead or long gone by then.

      • Talk to me next year....You were never long on gold if you sold.

        Good luck to you.

    • >Treasuries rise in deflation (yield curve falls)

      I don't get what you say, based on the following info. Could you please help me to understand your statement? TIA.

      US Treasury Bonds Rates Maturity Yield Yesterday Last Week Last Month
      3 Month 1.59 1.59 1.63 1.73
      6 Month 1.79 1.80 1.85 1.94
      2 Year 2.18 2.16 2.25 2.54
      3 Year 2.03 2.02 2.09 2.39
      5 Year 2.88 2.85 2.94 3.26
      10 Year 3.61 3.57 3.70 3.99
      30 Year 4.21 4.18 4.32 4.61

    • " beat the bank of china"......dude, you are a sharp guy. We should talk. Email me at my yahoo address with same handle as here. Maybe we could make money together. I am working on a few ideas.


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