Goldtent TA Paradise

$TNX Price Target ~ 50.00

1. silver fox says:

   March 3, 2019 - 1:01 pm at 1:01 pm

   Thanks, JL, for bringing the matter interest rates back into focus. Please correct me if I am mistaken, but if $TNX rises from the recent low of near 26 to a high of near 50, won’t interest rates therefore double from present values?
   If interest rates double, won’t the housing market fall precipitously, commodity prices collapse, and the stock market fall?
   And what about the US federal debt? A quick search suggests 2019 interest on the US national debt expected to be $364 Billion https://www.google.com/search?q=interest+on+us+national+debt+2018&rlz=1C1GGGE_enCA553CA751&oq=us+interest+on+national+deb&aqs=chrome.2.0j69i57j0l2.13240j0j8&sourceid=chrome&ie=UTF-8
   on 2019 tax revenue of $3.42 Trillion, or 10.64% of revenue.
   https://www.google.com/search?q=us+federal+tax+revenue+by+year&rlz=1C1GGGE_enCA553CA751&oq=usa+federal+tax+revenue&aqs=chrome.2.69i57j0l5.19601j0j8&sourceid=chrome&ie=UTF-8
   It seems asset prices are already prepared to dive if interest rates rise only a little bit. And will the Fed allow interest payments on the debt to rise to 21% of tax revenue?
   Of course it is not nominal but real interest rates that matter. High nominal rates might be a reasonable outcome if there is high inflation like we experienced in the late 1970s. But the 1970s were the opposite of what we have now (except for real estate). Back then the stock market was crushed while gold, commodities, and housing prices were on fire.
   Anyway, not saying interest rates can’t or won’t rise dramatically. I am saying the economy is unstable, and if interest rates do rise then we likely face a depression with 1929 overtones.
   If my reasoning is flawed, I should like to know.

   • JenkinsLane says:

     March 3, 2019 - 1:56 pm at 1:56 pm

     This is a very complex subject.

     Julian Brigden’s last interview over at Macrovoices said if you looked at the Commitment of Traders reports only regarding 10 years you’re
     “doing it wrong” because you’re ignoring the 10 year inventories of primary dealers, which, according to him, are large and growing.
     (I never looked at his slide deck for this interview but there’s more detail on that.) If he’s right, then I don’t think this is positive
     for yields because it means they’re being kept low by buying from what are, IMHO, quasi-government entities.

     Meanwhile, you have his pal, Raoul Pal of Realvision fame, pounding the table to buy bonds, i.e, yields are definitely going to fall in
     his opinion.

     My own hunch is that the 10y is going to rise but, before really going into it in any more detail, it needs to put in a higher high.

     Ultimately, unless the rising 10y is reflecting 1970’s style inflation, rising yields are a freaking disaster for the real economy,
     so the Fed will step in an restart QE to prevent it. When that happens though I don’t know.

     Long term, over the next 15-20 years, I think the US probably goes bankrupt for a variety of different reasons.

     • silver fox says:

       March 3, 2019 - 2:42 pm at 2:42 pm

       >> Ultimately, unless the rising 10y is reflecting 1970’s style inflation, rising yields are a freaking disaster for the real economy, so the Fed will step in and restart QE to prevent it. When that happens though I don’t know.
       Long term, over the next 15-20 years, I think the US probably goes bankrupt for a variety of different reasons. <<

       That's the way I see it too. Thanks, JL, for your feedback.

2. Afasilver says:

   March 3, 2019 - 6:04 pm at 6:04 pm

   To me the chart shows yields going down forever, maybe a short-lived bounce up for a while, but not for long unless we want markets to crash … they’re already too fragile and long in the tooth.

   • silver fox says:

     March 3, 2019 - 6:20 pm at 6:20 pm

     $TNX might be building out a bear flag these last two months instead of small double bottom. We don’t know yet.

3. KenS says:

   March 3, 2019 - 8:11 pm at 8:11 pm

   Interesting article from Armstrong stating that we are at 5000 year lows on interest rates. He thinks we go up fast from here.

   https://www.armstrongeconomics.com/markets-by-sector/interest-rates/how-can-the-majority-be-wrong-if-they-all-expect-interest-rates-to-rise/

   • Afasilver says:

     March 3, 2019 - 9:08 pm at 9:08 pm

     Looks like Armstrong has many run ins with the law … didn’t know that … not sure I would want to follow such a man regardless of some of his past predictions?

4. Siri says:

   March 4, 2019 - 12:50 am at 12:50 am

   We can draw chart in both directions in future , but the fundamentals (drivers) are not supporting the inflation, lot of things changed from 80’s.
   All the manufacturing jobs moved to China, lowered manufacturing costs , most of the services are outsourced to India, the services are getting cheaper year by year.
   All the agriculture jobs are done by H2 visa folks and undocumented folks, thats driving costs down, where do we see inflation coming, analysts are calling inflation from last 10 years with QE 1,2,3, but we don’t see it, it may not come in our life time.
   Only inflation we see in stock prices, because of buybacks and housing prices due to lower interest rates, these things wont be included in inflation index, food prices are doubled, but that won’t move the needle as the cost of food vs prices other assets is negligible.
   Now rest of the world already in down trend, we have to see global recovery to see any inflation.
   As per me, we have to worry more about deflation than inflation in US.