After Europe's Finished It's Our Turn

Phoenix Capital Research's picture

I wanted to take a moment to address the Fed's new program of buying the long-end of the Treasury curve and its implications.

 

First off, because of the August collapse in stocks, long-term Treasuries have already rallied quite sharply. Indeed, the 30-year Treasury just hit a new ALL TIME high the afternoon after the Fed announced its new program.

 

That’s correct, the 30-Year Treasury is now trading even HIGHER than it was at the absolute nadir of the 2008/2009 Crash:

 

 

The fundamental picture here couldn’t be worse. The US is running a deficit equal to 10% of GDP. The US’s debt to GDP level is north of 100%. And the 30-Year Treasury is at an all-time high.

 

To be blunt: for the Fed to be buying Treasuries at this level is akin to buying Tech Stocks in 2000 or Housing stocks in 2007. Treasuries are in a bubble. And this bubble will end as all bubbles do: with a bang.

 

As noted in previous issues articles, interest rates are already at or near all time lows. So why would the Fed choose to buy longer-term Treasuries at all?

 

The answer lies in new US debt issuance. While everyone focuses on Europe’s mess, the US has once again raised its debt limit in September (the huge debt-ceiling debacle of August was just smoke and mirrors). With deficits and debt-to-GDP ratios on par with Greece, the US will be following Europe in the global debt implosion.

 

The Fed’s decision to buy $400 billion of longer-term US Treasuries in this environment is essentially the Fed announcing that it will be covering a significant portion of new debt issuance going forward as a means of putting off the inevitable US debt default. At most the Fed has bought 2-3 months of time for the US. I fully believe that before the end of this year, the bond market will shift its sights away from Europe to the US. At that time, the US debt bubble will burst resulting in systemic failure.

 

Indeed, last week we got a confirmed SELL on my proprietary Crash indicator. This is the SAME indicator that registered before the 1987 Crash, the Tech Crash, and the 2008 collapse.

 

It's just triggered again... which means that last week’s sell off is JUST the beginning of what's coming.

 

Yes, the GREAT COLLAPSE has begun. The markets will be going to new lows (below the March 2009 lows) in the coming months.

 

We're also going to be seeing major banks go under, market crashes, food shortages, government shutdowns, and SYSTEMIC FAILURE.

 

Yes, I believe that before this mess ends, the financial system as a whole will have collapsed. What's coming is going to make 2008 look like a joke.

 

If you have yet to prepare yourself for what’s coming, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.

 

Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).

 

Best of all, this report is 100% FREE. To pick up your copy today simply go to:http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.

 

Good Investing!

 

Graham Summers

 

PS. We also feature four other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s my proprietary Crash Indicator which has caught every crash in the last 25 years or the best most profitable strategy for individual investors looking to profit from the upcoming US Debt Default, my reports covers it.

 

And ALL of this is available for FREE under the OUR FREE REPORTS tab at:http://www.gainspainscapital.com.