Auction Goes Well
The Treasury sold $35 B of 5 Year Bonds at 2.32% higher than the last auction of 2.19% so analysts felt this was a good sign because it was the second strong auction in a row after yesterday’s 2 Year auction. Foreign investors now own more than half of the $6.35T Treasuries outstanding. Despite a bigger appetite for risk as investors move into higher risk bonds and stocks the demand for US Treasuries looks good.
However 30 yr and Ten yr bonds are down sharply because of the expectation that many more Treasury auctions are required to fund the deficit. The Yield on the 10 yr is 3.64%.
The stock market is selling off on the treasury weakness.
Marc Faber publisher of the Gloom,Doom and Boom Report predicts hyperflation because of the excess debt and the unwillingness of the FED to raise interest rates. Many economists also feel that the FED has a weak dollar policy for the intermediate term to fight the recession.
Despite all the critics of excess government spending it appears for now we are out of the crisis of November 2008 when we were on the cusp of global depression. Tech stocks have performed well and money center banks have raised enough funds with government help to pump up their balance sheets.
Remain positioned in reflation plays such as energy, precious metals, and blue chip stocks with strong balance sheets and paying dividends. Avoid commercial real estate and REITS(short IYR long SRS). Long TBT.
Reflation Winners YTD are:
AUY up 64%
FCX 51.7 up 129%
Gold 939 up 13.7%
GDX gold stock ETF up 39%
IYR real estate ETF down 2 %
PAAS 22.6 up 52%
PCN corp bond fund up 39%
QQQQ up 20%
SLV 14.7 up 39%
SPY up 4%
TBT 55 (short 10 yr. treasuries) up 33%
XLE up 4.5%