With the bulls attempting to rally, two major warnings could spell disaster for stock markets but be extremely bullish for gold and silver…
Two Major Warnings For Markets
By Peter Boockvar, author of the Boock Report
March 16 (King World News) – Here is what Peter Boockvar wrote as the world awaits the next round of monetary madness: It was back in 2011 and 2012 when foreigners had a voracious appetite for US Treasuries. They loved us as they bought a net $400b+ in each of those years. They loved us a lot less the next year and by 2015 they turned into sellers by $20.3b. In 2016 they sold $326b and we saw a modest rebound in 2017 as there was net foreign buying of $14b…
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In January 2018, foreigners bought $8.4b of notes and bonds. This came as the 10 yr yield rose from 2.4% to 2.7% that month. What they mostly had an appetite for in January was US stocks as they ripped higher. They bought the most amount of stock since May 2007 and the 2nd most on record.
Back to Treasuries, China bought $4.2b of notes and bonds but their total holdings fell by $16.7b because T-bills likely matured. They own the least amount of US Treasury debt since June 2017. Japan, the 2nd biggest foreign holder of US Treasuries, sold $2.1b of notes and bonds but offset that with the purchases of bills.
Bottom line, with the Federal Reserve essentially selling Treasuries, a massive pick up in supply and foreigners dramatically cutting back on their purchases, we need all the help we can get from others.
…2 yr note yield up to 2.29%, a fresh 9 1/2 year high and with the 10 yr at 2.81%, the spread has narrowed by 10 bps this week to 52 bps, 2 bps from matching the lowest level since October 2007. Also, I’ve been highlighted the persistent rise in 3 month LIBOR for the past year and the increase just doesn’t stop. It was February 6th the last time it fell (see stunning chart below).
INTEREST RATE WARNING: LIBOR Is Soaring!
The preliminary UoM consumer confidence index for March improved to 102 from 99.7 and that was 2.7 pts better than expected. We are now at the best level since 2004 (it peaked at 112 in January 2000). The components though were mixed as Current Conditions jumped by almost 8 pts while Expectations was lower by 1.4 pts. I do want to highlight this on the inflation theme I keep harping on: one year inflation expectations rose two tenths to 2.9%. That is the most in 3 years. I also need to highlight what is potentially great for employees but also adds to the overall inflation story (especially if productivity doesn’t improve): those expecting Higher Income rose to the highest on record in this survey dating back to 1978. The underline is mine. Those expecting more employment rose 1 pt to the best since 1984.
INFLATION WARNING: Those Expecting Higher Income Just Hit Highest Level Since 1984!
The Bottom Line
The bottom line is that the twin trouble in the bond market and significantly higher inflation could both spell disaster for global stock markets. However, it is important to remember that the stagflation of the 1970s, with rising interest rates and surging inflation, produced the greatest gold and silver bull markets in history.
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