March 27, 2009 – Comments (10) | RELATED TICKERS: TBT
Bubbles, they keep forming everywhere you look, and most are created and busted by the Federal Reserve. The latest bubbles to burst included the housing market, crude oil prices, and commodities except gold. The Fed has had it's hand in making and breaking all these bubbles. The USA passes laws to curb demand or increase demand in particular markets. The next "Great bubble in the making is US Treasury bonds" also propelled by the Fed, in recent news the Fed announced they would be buying a trillion dollars in treasurys over the next 3 months, This will go down as the biggest bubble of all time when its over. All in all, who's side do you think the "Fed" is on we will see.
The housing market was artifically inflated by the Federal Reserve's low interest rate policy in the early years of the new millenium. During this time China was exhibiting large pent up demand for nickel, copper, and steel signaling a robust Chinese economy, all the while the Fed left their rates at 1 percent as if China was invisable to them. Instead of raising rates sooner, Mr. Sleepy Greenspan decided to leave rates at 1 percent untill he retired 3 years later essentially "asleep at the wheel", even as commodities broke through record prices. Greenspan did nothing, driving up home prices further in a time of irrational exhurburance on China's part. By the time Greenspan left office it was too late for Bernanke to do anything but raise rates to curb global demand by wrecking the US housing market , he knew that this would effectively lower demand for Basemetals, steel, and oil. So the burst of the housing market was not a mistake , but a well orchrastrated event planed out by the Federal Reserve Commitee to curb irrantional global demand for products and services by wiping out trillions in home equity value from its own people.
The oil market bubble was fueled grossly by the US government's large purchases of oil for the stragegic reserve. &n... One would think the US would release oil from the reserves in times of need, and not be buying it, an example set by past US President Clinton shows responsible use of reserves as he released oil in the late 90's to harbour US economic growth. The law that broke the back of the oil market happened last year in June 2008 and passed by US president Bush stating that speculators were the ones responsible for the record high oil prices and the new law stated that "NOW YOU CAN ONLY SELL OIL CONTRACTS, AND ARE NOT ALLOWED TO BUY ANYMORE FOR YOUR ACCOUNTS" &n... I knew at this point oil was going to fall from $148.75 a barrel to $85 within a month, and within 5 months it was hovering around $40 a barrel. So once again the US goverment cost investors trillions.
The great Us treasury bond bubble is currently in the making and I believe it is ready to burst within three months. The Fed's interest rate is at or near 0 percent and bond prices are high to reflect this. The Federal reserve is slated to buy 1 trillion dollars in bonds over the next three months, this law was passed recently. &... The US government see's that bond prices will crash soon, but wants to postpone it a bit by iniatiating these bond purchases, usally the US government sells bonds, purchasing bonds is not normal. This extra demand from the Fed purchasing bonds will keep bond prices at their maximun for the next 3 months, when its over the bubble will burst, sending interest rates skyrocketing, just like in the early 1980's, Again the US goverment is going to wipe out trillions in investors assets when this is said and done, ask yourself this "should the US buy bond's at current high prices or buy these bonds at lower prices" it's a no-brainer.
Is the Fed and the US government on your side, I think not, look at the track record to see. the fed has cost its citizens and investors over 20 trillion since 1980. The housing market bubble was planned out perfectly Boom and bust, bust the mortage companies, bust the banks, bust the bond insurers and yes they will bust the bonds, it is the last step in their great plan, but as bonds burst GOLD will make its final run in this classic boom and bust cycle and that is a whole new topic i will discuss in a future article. This bond bubble is slated to burst soon, be on the right side of the bond trade, short or put US bonds, you know Uncle Sam will come through on making history and wiping out trillions once again.