Saturday, December 14, 2013

People ARE Shocked

The only reason the interest rates went up over the summer was because of the taper talk. But they didn’t actually taper and I didn’t expect them to and I honestly don’t see how they’re going to, maybe ever. So the rates went up, not only in the fundamentals but because of the talk of tapering.
People were shocked, they said, “Wait a second, you’re going to taper and do weak economic data? You’re going to taper into a recession?” Which is what they’re doing. But they didn’t taper, so now rates are coming back down again.

If we follow the Japan scenario, and I expect we will, I can see ten-year no-rates coming down to 80 basis points. If they go from 250 to 80, that’s the greatest bond market rally in history.

So everyone’s worried about the bond bubble, but they’re focused on nominal rates. They’re not looking at real rates. Nominal rates could come down a lot more as a way of getting real rates lower, because inflation is low it may even dip into deflation.
So we could be set up. But in the long run rates would go way up and the country would go bankrupt and we’ll all have hyper-inflation. That could be two or three or four years away. Over the course of the next year you can see a very strong bond market rally.

- Jim Rickards via Future Money Trends: