Why are bonds going up at the same time that gold is climbing? Real yields are the highest that they have been since the late 1980’s and the third highest in the last 100 years, investors expecting slow to negative inflation and growth are buying and will keep buying as they grasp for yield. (click on chart to enlarge)

10-Year T-Note Real Yield

Why has the SP500 continued higher even when earnings have been weak and unsustainable and demand has been virtually non-existent?  There are several contributing factors such as the oversold condition, sentiment, etc. but our favorite one is that the Government is debasing our currency and in the process it is driving asset prices but not their actual values higher, if your investment in the SP500 is up but the actual value of your dollar is equally low then have you actually made any money? (click on chart to enlarge)

SP500 and US Dollar Index

If we are in a deflationary environment then why is gold climbing higher?  No one wants to hold the US Dollar so instead of being a inflation/deflation play the current move of gold is based more on the devaluation of the US Dollar than anything else-It’s a currency trade. (click on chart to enlarge)

GLD-Gold ETF and US Dollar Index

If housing is cheap, interest rates are low, and everyone wants to trade their US Dollars for other assets than why aren’t housing sales going through the roof?  While your mortgage broker may be calling and saying that rates are at or close to all time lows the reality is that real rates are at their highest levels since 1987, cheap money my #%$. (click on chart to enlarge)

Real 30-Year Fixed Mortgage Rates

If demand is so weak than why has oil been so strong?  Once again it gets back to not wanting to hold US Dollars, when the USD bounces oil will likely get hit hard. (click on chart to enlarge)

West Texas Crude Oil and US Dollar Index

Happy Trading,

Dave@TheMacroTrader.com

Disclaimer-We are long some GLD-Gold ETF

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Last 5 posts by David Taggart

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