Paul Krugman & Marc Faber & Michael Lombardi: U.S. Debt Could Be Reaching A Breaking Point While Americans Continue To Suffer From Depression Conditions, The Next Leg Of The Bear Market Will Be Much Worse Than After The Great Depression!! I’m Selling Shares Right Now!!
Could U.S. debt be reaching a breaking point?
In the chart below of the U.S. 10-year Treasury, it looks like yields on U.S. bonds have bottomed out and are rising again.
There’s definitely selling pressure in U.S. bonds, otherwise the yields would not have risen 30% since last summer. (Imagine if the Federal Reserve was not buying $45.0 billion worth of U.S. Treasuries per month; a move that keeps prices artificially low, because demand appears so strong.)
Trouble could be brewing in the bond market. Why? If the Federal Reserve is buying so many billions of dollars in bonds each month, but the yield on the 10-year Treasury is rising, something is out of whack….
The agreement “may have prevented the immediate threats that the fiscal cliff posed to our fragile economic recovery, but we haven’t remotely fixed the nation’s debt problem,” said Michael A. Peterson, president and COO of the Peterson Foundation.
While many cite the possibility that the Fed’s policy may spark inflation, Krugman notes that inflation of 3 or 4 percent could be helpful.
While he acknowledges that the economy is in the midst of a slow recovery, he says the United States continues to suffer from “depression conditions.”
He also dismisses the concerns over the federal deficit. Krugman argues that the Federal government, like the Fed, need not lend its ear to calls for tightening spending, but rather insists that the path to better economic conditions is paved by more spending.
Better Enjoy the Market Rally While You Can: Faber
Investor “euphoria” is taking stocks higher but eventually will be their undoing, market bear Marc Faber told CNBC.
The author of the widely followed Gloom Boom & Doom Reportsaid the current rally, which has seen the Standard & Poor’s 500 gain more than 5 percent in 2013 and 12 percent since its November 2012 low, is getting tired and will run out of steam soon.
“We are very overbought, but it is also possible that we have a mild correction in February and then a further increase in stock prices,” Faber said on “Closing Bell.”
Yes, most investors have heard that dark warning many times: “This will hit Americans harder than anything since the Great Depression … It will hit like a brick wall.” The Dow will lose about half its value, as it did in the recession of 2000-2003 and again in 2007-2009.
The ominous voice behind Critical Warning No. 6, Michael Lombardi, is a gold investor writing in the “Profit Confidential” newsletter where he says his investors profited from his five prior predictions that all came true: Into gold in 2002, out of housing in 2006, the 2007 recession, out of stocks in 2008, then back into stocks in 2009.
Except today it’s far worse: “If the present rally follows the same trend as of 1934-1937, the prices of stocks are expected to fall below their March 2009 lows in the coming months,” when the Dow Jones fell 54% from 14,164 in 2007 to 6,440. Soon after “the next leg of the bear market will be much worse than after the Great Depression.”
Then he warns of a “blanket of gloom, a sense of desperation, a future of uncertainty,” asking us to “imagine the trauma of the following precarious situation: The Utter Simultaneous Collapse of the U.S. Government, The U.S. Economy, The Housing Sector, and the Stock Market.”
Stocks have headed higher without respite to start 2013.
Today, we get an indication from BofA equity strategist Savita Subramanian that hedge funds are now selling stocks – and they’re selling them to private investors, who are picking up their pace of buying.
Below is a chart showing that BofA “private clients,” or individual investors, have been buying stocks since mid-January:
Meanwhile, hedge funds are doing the exact opposite: