Is the U.S. T-Bond a Judas Goat? - by Ja, 2017-03-21 00:00:00.0

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Farmers have learned that a goat can be trained to associate with sheep or cattle, leading them to a specific destination. In stockyards, a trained goat will lead sheep to slaughter, while its own life is spared. Judas Goat is obviously named after the betrayal of Jesus.

Michael Oliver’s brilliant technical work has led him to perceive that the U.S. T-Bond is a “Judas Goat.”  Of course in this case it’s the Fed, not a farmer that owns the Judas Goat. Michael’s longer-term momentum indicators strongly imply that both the T-Bond market as well as the equity markets are nearing a major decline even as the equity market continues to make new highs on post-election euphoria.  

Like lambs being led to the slaughter, the general investing public, and especially now the small investor, are buying stocks because they trust the T-Bond market’s signal that higher rates means our economy is strong. If the Fed says T-Bonds are signaling a stronger economy, what more do you need?

But if you trust the Fed, then you may as well trust the “Tooth Fairy.” As James Bullard of the St. Louis Fed recently pointed out, the Fed is beyond clueless when it comes to predicting interest rates. The chart on your left makes the point. At every year ending FOMC meeting since 2012 the Fed predicted a sharp rise in the fed Funds rate believing that the economy would respond to their Keynesian stimulus. The black line on the chart shows where after so many years, interest rates actually are.

Today, Republicans are going to have to begin dealing with lifting the budget ceiling well beyond $20 trillion. Meantime as David Stockman noted this past week, tax revenue flowing into the U.S. Treasury is dropping like a rock indicating once again that our government is less than truthful about the economy’s strength.

There are many reasons why interest rates are rising, but it’s not because the economy is strong. Many nations, most notably China and Japan, are dishoarding U.S. Treasuries and even by the governments own dishonest cost of living terms, inflation is on the rise. At some point, investors who are buying Fed propaganda will realize that their goat, Janet Yellen has led them into the slaughter.

This should be very positive for gold because as Dan Oliver points out again in his latest Myrmikan Research piece, gold is the only asset class with a negative beta. It is precisely for times like these, that gold is most needed to reduce portfolio risk and enhance returns.

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Farmers have learned that a goat can be trained to associate with sheep or cattle, leading them to a specific destination. In stockyards, a trained goat will lead sheep to slaughter, while its own life is spared. Judas Goat is obviously named after the betrayal of Jesus.

Michael Oliver’s brilliant technical work has led him to perceive that the U.S. T-Bond is a “Judas Goat.”  Of course in this case it’s the Fed, not a farmer that owns the Judas Goat. Michael’s longer-term momentum indicators strongly imply that both the T-Bond market as well as the equity markets are nearing a major decline even as the equity market continues to make new highs on post-election euphoria.  

Like lambs being led to the slaughter, the general investing public, and especially now the small investor, are buying stocks because they trust the T-Bond market’s signal that higher rates means our economy is strong. If the Fed says T-Bonds are signaling a stronger economy, what more do you need?

But if you trust the Fed, then you may as well trust the “Tooth Fairy.” As James Bullard of the St. Louis Fed recently pointed out, the Fed is beyond clueless when it comes to predicting interest rates. The chart on your left makes the point. At every year ending FOMC meeting since 2012 the Fed predicted a sharp rise in the fed Funds rate believing that the economy would respond to their Keynesian stimulus. The black line on the chart shows where after so many years, interest rates actually are.

Today, Republicans are going to have to begin dealing with lifting the budget ceiling well beyond $20 trillion. Meantime as David Stockman noted this past week, tax revenue flowing into the U.S. Treasury is dropping like a rock indicating once again that our government is less than truthful about the economy’s strength.

There are many reasons why interest rates are rising, but it’s not because the economy is strong. Many nations, most notably China and Japan, are dishoarding U.S. Treasuries and even by the governments own dishonest cost of living terms, inflation is on the rise. At some point, investors who are buying Fed propaganda will realize that their goat, Janet Yellen has led them into the slaughter.

This should be very positive for gold because as Dan Oliver points out again in his latest Myrmikan Research piece, gold is the only asset class with a negative beta. It is precisely for times like these, that gold is most needed to reduce portfolio risk and enhance returns.

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