Author: Gold Macro Page 16 of 18

Last week we read the following piece from Sovereign Man’s Simon Black, with the context of rising rates in mind and thought it worth sharing.

Remember, the US 10 year treasury rate has already doubled from 1.67$ to 2.97% in the last 18 months.

Think about a million dollar mortgage going from 4.5% to almost 9% then just add the 0’s, for effect, 9 for a billion, 12 for a trillion, on the short scale, of course.

Another nice titbit on this matter is, at a little more than 0% Japan’s interest bill soaks up 30% of its governments revenue!!

February 27, 2018
Santiago, Chile

Earlier this month, the United States government released its annual financial report for the year 2017.

This is something the government does every year, similar to how large companies like Apple, or Warren Buffett’s Berkshire Hathaway, publish their own annual reports.

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It’s not just the start of the week today, but it’s also our first opportunity to welcome you to the start of a new period in financial markets.

It’s back. After years of central bank suppression, just like that, volatility came back with a vengeance. Very close to a return to some type of normal… but we still suspect the ship of normality has sailed so far away it’s even hard to see with the Hubble.

So, share markets took a tumble, short volatility players got torched as the bond market lead the way.

Inflation and interest rates? They’re going up.

As confirmed this morning by the great Christopher Joye of Smarter Money Investments, rates will rise, asset prices will correct and central banks will do all they can to verbally placate markets in the face of rising inflation.

To add to this, Joye is quite confident that because the FED is soooo far behind the curve for fear of inflation, they’ll not got straight to QE when markets tumble. That’ll make things interesting for a market whose constituents have been investing for so long with the belief of Central Bank backing.

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Well, a happy New Year to all.

It’s very interesting to monitor how financial markets start the New Year.

On that note, just one week in and it’s unusual for almost every asset class to have risen in the very first week of the calendar year. Investors seem happy to buy anything with risk.

This complete lack of fear as expressed by the VIX (volatility index) last week having traded at never seen low levels, again.

To assess global investors’ fearlessness, one needs to note that 2017 marked the 8th consecutive year of Global emergency stimulus from Central Banks around the world, despite calls to wind it up 3 or 4 years ago for fear of runaway inflation and nothing in the tank (interest rates) to cope with any future crisis, as there is sure to be.

However, asset price action from the end of last year and the beginning of this year is actually shaping up to show us the “true” results of this monetary experiment.

Depending on whose numbers we use and whether we include China, we’ve seen something like $14TRILLION in QE (money creation) and 700 rate cuts since 08/09 from Central Banks.

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