A Flight Out of U.S. Assets?

Let's take a look at TNX:

Now let's take a look at the dollar:

My Take:

All right now let me get this straight: We have gold holding its highs, treasuries majorly selling off, and the dollar collapsing after rising sharply earlier in the day.

Oh and of course stocks are also up! What a shocker (sarcasm off)!

Folks, the disconnect between what's going on in the economy and the stock market is at an all time high in my opinion. Unemployment rose to 9.7% Friday and the economy lost another 200,000+ jobs. How is this bullish?

The bulls say "things are improving." I say where? The greatest analogy I read around this line of thinking is "after you slice the throat of a pig, the bleeding slows down after awhile".

The charts above tell me that we could be seeing a major flight out of the US dollar. In fact, we could be seeing a flight out of US assets all together based on the price action in bonds today. I was very curious to see if gold would hold its highs Friday and it has.

The Bottom Line

When the cat's away, the mice will play. I think the high frequency traders were able to take this casino higher Friday because everyone was in the process of heading to their favorite Labor Day spots.

My view has not changed. The fundamentals of this market are stunningly bad and worsening in my view. We should hit 10% unemployment by the end of the year. U-6 unemployment now sits at a stunning 16.8%. That's right folks, almost 1 out of 5 people are now out of work.

How is the economy going to grow when almost one fifth of the nation is not working?

The big boys are back from the beach next week. It will be interesting to see how they react to Friday's unemployment numbers and the big move in metals last week.

Keep an eye on gold, the US dollar, and bonds moving forward. If they keep acting like they did Friday, we could see a 5 alarm fire in no time in the stock market.

Well I am off for some R&R. Enjoy your Labor Day!

Disclosure: Short treasuries via TBT in longer term accounts. Long Gold via GLD.

Comments

[Dave Wrixon:]

The tax revenues suggest that 1 in 5 is way too simplistic and overly optimistic.

Sep 06 04:54 AM

[Michael Clark:]

This bodes well for gold. If people want to flee US assets, where do they go? Commodities? ONLY if the global economy is going to recover. Not much chance of that. Who wants to own oil as an anti-dollar if demand for oil continues to diminish. Without a recovery, holding oil at $70 is worse than holding the US Dollar.

TBonds are only up because Ben B is buying every bond that no one else wants. TBonds will have to come down -- and yields will rise, eventually.

Which makes the gold/silver complex the only commodity (currency) worth pricing up and holding.

Gold will go up until about 2019. Then we will have another bear market in gold from 2019 - 2037.

Sep 06 05:01 AM

[Michael Clark:]

Actually, if there wasn't a current trillion dollar bail out of the stock market going on, people would be running to gold...and that's something the US government is desperate to avoid.

Sep 06 05:02 AM

[Steven Hansen:]

the market buys and sells on the news. the market thinks like a champion chess player many moves in advance.

i am an economic bear. the way the unemployment rates are determined - they could be off by a significant amount due to people off of the grid. it easily could be a 20% true employment and underemployment rate.

i don't think there were any surprises in the employment / unemployment numbers - so therefore there will be little movement due to this (other things maybe).

Sep 06 05:13 AM

[Michael Clark:]

The real news that moves the markets is news of war, revolution, political assassination....but even more so the direction of interest rates.

Sep 06 05:20 AM

[Roger Knights:]

"U-6 unemployment now sits at a stunning 16.8%. That's right folks, almost 1 out of 5 people are now out of work."

17% = 1/6th, so it would have been more accurate to say, "almost 1 out of 6 people are now out of work."

Sep 06 07:36 AM

[Dave Wrixon:]

I would not put money on it not being as high as1 in 3, and even if it isn't, it probably soon will be. But I am sure the GDP will continue just saying up or down a percentage or two. Some numbers are just too easy to manipulate.


On Sep 06 05:13 AM Steven Hansen wrote:

> the market buys and sells on the news. the market thinks like a
> champion chess player many moves in advance.
>
> i am an economic bear. the way the unemployment rates are determined
> - they could be off by a significant amount due to people off of
> the grid. it easily could be a 20% true employment and underemployment
> rate.
>
> i don't think there were any surprises in the employment / unemployment
> numbers - so therefore there will be little movement due to this
> (other things maybe).

Sep 06 09:15 AM

[highlarche:]

There has always been and will be bubbles in the markets. eg. tulips, energy, .coms etc. Now its gold and silvers turn. Just watch the rise in slv to 25 and gld to 150

Sep 06 09:21 AM

[Tony Daltorio:]

A pity you got it exactly wrong.

Yes, there are bubbles. But right now they are in US treasuries and in the US stock market, not in gold and silver which are still relatively cheap.


On Sep 06 09:21 AM highlarche wrote:

> There has always been and will be bubbles in the markets. eg. tulips,
> energy, .coms etc. Now its gold and silvers turn. Just watch the
> rise in slv to 25 and gld to 150

Sep 06 11:52 AM

[Mark123:]

I think you mean gold 1,500... and that's hardly a bubble.... Now gold at 15,000.... That's a bubble


On Sep 06 09:21 AM highlarche wrote:

> There has always been and will be bubbles in the markets. eg. tulips,
> energy, .coms etc. Now its gold and silvers turn. Just watch the
> rise in slv to 25 and gld to 150

Sep 06 01:14 PM

[Albertarocks:]

On Sep 06 01:14 PM Mark123 wrote:

> I think you mean gold 1,500... and that's hardly a bubble.... Now
> gold at 15,000.... That's a bubble

$15,000 gold wouldn't be anywhere close to a bubble if the USD goes the way of the German mark in the days of the Weimar Republic, or the way of the Zimbabwe dollar. And when we consider that during the Weimar days, although their printing presses were running 27 hours a day, they weren't very good presses compared to the efficient electronic money making monsters the US is using today to create the fiat out of thin air. When the truth is finally exposed, you'll be looking at $15,000 gold in the rear view mirror.

Sep 06 09:32 PM

[Albertarocks:]

I had some more thoughts on gold so I apologize for a second post so quickly. But consider this: There's a rule of thumb that in the days of the Romans, one ounce of gold would buy a nice man's suit of armor. In the 10th century it would cost approximately one ounce of gold to purchase a nice suit of clothing. And today, I think I could find a nice new suit for about a thousand bucks.

When gold really starts to take off, it will undoubtedly overshoot to the upside for perhaps a year or two. But when things settle down, gold will still buy a nice new gentleman's suit for about (let's say) $15,000 USD. That might translate to $10,000 Canadian dollars or maybe 1000 Japanese yen. There's going to be a lot of currency shift going on. But in reality, gold is a store of wealth, not necessarily a way to get wealthy. But owning ETFs or gold producers' stock... that's the ticket.

But as difficult as it is to comprehend, and as aggravating as it is to be referred to as a "gold bug", facts are facts. Gold might once again get squashed right here by the greedy bastards who own the FED, but ultimately, it's a game they're going to lose. It's just a matter time. The next month or two will be fascinating, to say the least.

Sep 06 09:57 PM

[The Housing...:]

Great thoughts all

If you go back to the 1970's, the volatility in gold was huge. $50 swings in either way in a day were not uncommon as investor's feared both inflation and deflation.

Inflation eventually won out until Volker took rates to the moon and killed it.

I think we will see an even bigger bout of inflation this go around but we may see a vicious bout of deflation beforehand.

This is one tough market. Diversification is a must for either scenario. Preservation of capital should be everyone's first priority in a market like this IMO.

GL to all.

Sep 07 01:49 AM