China, Japan and some other countries have a nuclear option they could use in the pending trade war.
If deployed, it could serve as the pin that pops the stock market bubble. At the same time, it could put the US government in a nasty spot as it tries to fund its profligate spending and upward spiraling debt.
What is this nuclear option?
Ten-year Treasury yields flirted with 3% this week, hitting a four-year high of 2.95. Does the Treasury yield hold the leash of the stock market?
Peter Schiff talked about it in an interview with Liz Claman on Fox Business, saying the Fed has kept rates artificially low for years, but given current conditions, it’s inevitable that the market will lift rates toward “normal.”
Gold is going to “go ballistic.”
During a podcast last month, Peter Schiff asked a key question: who is going to buy all of the debt necessary to finance the ballooning US deficit?
In his most recent analysis, Dan Kurtz at DK Analytics explores this question more in-depth and comes to generally the same conclusion.
The dollar has lost more than 8% of its value over the last year. That decline may accelerate as bond investors sell ahead of a huge expansion in Treasuries coming into the market. Interest rates will have to climb significantly. The price of bonds will drop. As Dan put it, where bonds go, stocks follow.
We’ve excerpted some key points from Dan’s report.
The US dollar dropped to its lowest level in three years Friday.
Extending losses on Thursday, the dollar index against a basket of six currencies dropped to 88.253. This marks its lowest level since December 2014.
A Reuters report noted that “Traders’ confidence in the dollar has also been eroded by mounting worries over the United States’ twin budget and current account deficits.” Interestingly, just last month Peter Schiff said these twin deficits may ultimately doom the stock market.
During a podcast last week, Peter Schiff asked a key question: Who is going to buy all of this US debt?
The US Treasury Department plans to auction off around $1.4 trillion in Treasuries this year. And it won’t end there. The department expects that pace of borrowing to continue over the next several years.
That’s a lot of bonds. Who will buy them? Because the biggest purchasers of US debt aren’t in a buying mood.
Ten-year bond yields have hit their highest level since July 2014.
Meanwhile, the stock market has gone up about 45% since that time. Contrast that with earnings that have increased just 6%. As Peter Schiff pointed out in his most recent podcast, a lot of the justification for that increase in stock market valuation has been lower interest rates.
Well, they’re not lower anymore. They’re back exactly where they were in July 2014. But what’s more ominous is not where they are but where they’re headed.”