Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Gold Is the Winner of the U.S. Presidential Election - 31st Oct 20
Gold and Silver Prepare For Another Price Advance - 31st Oct 20
Gold Is Likely to Win This Election - 31st Oct 20
Why Trump Can Still Win 2020 Election - Establishment Mainstream Media Wrong Again? - 31st Oct 20
Why Budgies Need their Own Feeders - Parakeets Feeding UK - 31st Oct 20
Can Trump Still Win? US Presidential Election Forecast Matrix 2020 - 30th Oct 20
Why a Biden Win will Keep Metals Prices Rocking - 30th Oct 20
Is Silver the Next Bitcoin? - 30th Oct 20
A New World Monetary Order Is Coming - 30th Oct 20
Do These Explanations Make Sense for This Intraday Stock Market Turn - 30th Oct 20
US Presidential Election Forecast Matrix, Stock Market Uncertainty - 29th Oct 20
Stock Market Turning? Look For These Support Levels - 29th Oct 20
Silver: A Conceivable Dead-Cat-Bounce on the Cards - 29th Oct 20
Stocks are Strong but be Aware of this Continuing Pattern - 29th Oct 20
The Most Profitable Way To Play The Gold Boom - 29th Oct 20
Why You Should Hire An Accountant To Complete Your Tax Return - 29th Oct 20
Global Banking: Some Sectors Look as "Precarious as Ever" - 28th Oct 20
Silver Price Minor Dip Possible Before 2nd Major Upleg Starts - 28th Oct 20
�� How to Carve a Simple and Scary Pumpkin Face for Covid Halloween 2020 �� - 28th Oct 20
Gold Price One Last Dip Likely Then Major Upleg to New Highs - 28th Oct 20
Smart Money Is Going All-In On This New Gold Frontier - 28th Oct 20
Gold Stocks Still Correcting - 27th Oct 20
Gold and Crypto: Is This How Charts Look Before A Monetary Collapse? - 27th Oct 20
Silver's Coming Double Trigger Shotgun Price Explosion - 27th Oct 20
The $126 Billion Gold Opportunity in Australia - 27th Oct 20
Tips to Breeze through Your Spanish Classes Online - 27th Oct 20
Try The “Compounding Capital Gains” Strategy Today - 26th Oct 20
UK Coronavirus Broken Test and Trace System, 5 Days for Covid-19 Results! - 26th Oct 20
How the Coronavirus is Exacerbating Global Inequality, Hunger - 26th Oct 20
The Top Gold Stock for 2021 - 26th Oct 20
Corporate Earnings Season: Here's What Stock Investors Need to Know - 25th Oct 20
�� Halloween 2020 TESCO Supermarkes Shoppers Covid Panic Buying! �� - 25th Oct 20
Three Unstoppable Forces Set to Drive Silver Prices - 25th Oct 20
Car Insurance And Insurance Claims and Options - 25th Oct 20
Best Pressure Washer Review - Karcher K7 Full Control Unboxing - 25th Oct 20
Further Gold Price Pressure as the USDX Is About to Rally - 23rd Oct 20
Nasdaq Retests 11,735 Support - 23rd Oct 20
America’s Political and Financial Institutions Are Broken - 23rd Oct 20
Sayonara U.S.A. - 23rd Oct 20
Economic Contractions Overshadow ASEAN-6 Recovery - 23rd Oct 20
Doji Clusters Show Clear Support Ranges for Stock Market S&P500 Index - 23rd Oct 20
Silver Market - 22nd Oct 20
Goldman Sachs Likes Silver; Trump Wants Even More Stimulus - 22nd Oct 20
Hacking Wall Street to Close the Wealth Gap - 22nd Oct 20
Natural Gas/UNG Stepping GAP Patterns Suggest Pending Upside Breakout - 22nd Oct 20 -
NVIDIA CANCELS RTX 3070 16b RTX 3080 20gb GPU's Due to GDDR6X Memory Supply Issues - 22nd Oct 20
Zafira B Leaking Water Under Car - 22nd Oct 20
The Copper/Gold Ratio Would Change the Macro - 21st Oct 20
Are We Entering Stagflation That Will Boost Gold Price - 21st Oct 20
Crude Oil Price Stalls In Resistance Zone - 21st Oct 20
High-Profile Billionaire Gives Urgent Message to Stock Investors - 21st Oct 20
What's it Like to be a Budgie - Unique in a Cage 4K VR 360 - 21st Oct 20
Auto Trading: A Beginner Guide to Automation in Forex - 21st Oct 20
Gold Price Trend Forecast into 2021, Is Intel Dying?, Can Trump Win 2020? - 20th Oct 20
Gold Asks Where Is The Inflation - 20th Oct 20
Last Chance for this FREE Online Trading Course Worth $129 value - 20th Oct 20
More Short-term Stock Market Weakness Ahead - 20th Oct 20
Dell S3220DGF 32 Inch Curved Gaming Monitor Unboxing and Stand Assembly and Range of Movement - 20th Oct 20
Best Retail POS Software In Australia - 20th Oct 20
From Recession to an Ever-Deeper One - 19th Oct 20
Wales Closes Border With England, Stranded Motorists on Severn Bridge? Covid-19 Police Road Blocks - 19th Oct 20
Commodity Bull Market Cycle Starts with Euro and Dollar Trend Changes - 19th Oct 20
Stock Market Melt-Up Triggered a Short Squeeze In The NASDAQ and a Utilities Breakout - 19th Oct 20
Silver is Like Gold on Steroids - 19th Oct 20
Countdown to Election Mediocrity: Why Gold and Silver Can Protect Your Wealth - 19th Oct 20
“Hypergrowth” Is Spilling Into the Stock Market Like Never Before - 19th Oct 20
Is Oculus Quest 2 Good Upgrade for Samsung Gear VR Users? - 19th Oct 20
Low US Dollar Risky for Gold - 17th Oct 20
US 2020 Election: Are American's ready for Trump 2nd Term Twilight Zone Presidency? - 17th Oct 20
Custom Ryzen 5950x, 5900x, 5800x , RTX 3080, 3070 64gb DDR4 Gaming PC System Build Specs - 17th Oct 20
Gold Jumps above $1,900 Again - 16th Oct 20
US Economic Recovery Is in Need of Some Rescue - 16th Oct 20
Why You Should Focus on Growth Stocks Today - 16th Oct 20
Why Now is BEST Time to Upgrade Your PC System for Years - Ryzen 5000 CPUs, Nvidia RTX 3000 GPU's - 16th Oct 20
Beware of Trump’s October (November?) Election Surprise - 15th Oct 20
Stock Market SPY Retesting Critical Resistance From Fibonacci Price Amplitude Arc - 15th Oct 20
Fed Chairman Begs Congress to Stimulate Beleaguered US Economy - 15th Oct 20
Is Gold Market Going Back Into the 1970s? - 15th Oct 20
Things you Should know before Trade Cryptos - 15th Oct 20
Gold and Silver Price Ready For Another Rally Attempt - 14th Oct 20
Do Low Interest Rates Mean Higher Stocks? Not so Fast… - 14th Oct 20
US Debt Is Going Up but Leaving GDP Behind - 14th Oct 20
Dell S3220DGF 31.5 Inch VA Gaming Monitor Amazon Prime Day Bargain Price! But WIll it Get Delivered? - 14th Oct 20
Karcher K7 Pressure Washer Amazon Prime Day Bargain 51% Discount! - 14th Oct 20
Top Strategies Day Traders Adopt - 14th Oct 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Long Term Interest Rates Are On The Up…What’s Next?

Interest-Rates / US Interest Rates Jun 23, 2015 - 04:12 PM GMT

By: Harry_Dent

Interest-Rates The Fed has delayed a rate hike yet again. It seems convinced the economy isn’t ready to survive on higher short-term rates. So we continue to see zero rates to stimulate more economic activity. But today the market is proving just how limited the Fed’s influence really is!

I’ve been warning for years now that there is a limit to how much you can stimulate the economy with free money and zero interest rate policies before the financial drugs no longer work. Eventually, the system breaks down from excessive debt and overexpansion.


There are two signs that this is finally happening. No. 1 is the beginning of debt defaults again, starting with Greece. No. 2 is that, despite continued zero short-term rate policies and endless QE around the world… long-term interest rates are finally rising.

These policies will fail. When it happens, it will result in debt deleveraging and deflation as we have written about extensively.

We saw this start to occur in late 2008… which is precisely why governments around the world stepped in with unprecedented zero interest rate and endless QE policies. They believed they could simply print enough money to offset the economic decline and debt deleveraging — using inflation to fight deflation.

We’ve seen 10-year Treasury yields go up from late January’s low of 1.65% to 2.47% last Wednesday. And they look likely to continue to rise, just as I’ve forecasted. This is not good for stock market valuations or real estate or the economy or the “frackers” that are due to bust ahead from falling oil prices. I believe we could see U.S. 10-year rates rise to as high as 3.3% or a bit higher in the months ahead.

But this rise in rates is worldwide… and it accelerated recently in Europe.

The greatest impact of the impending Greek debt default is not the “Grexit” threat hanging over the euro zone. It is that long-term sovereign interest rates have been rising across the board since April because of it.

Greek 10-year rates were first to rise and have jumped from 5.57% to 13.04% in the last several months. They reached 37.1% in 2012 when the last euro crisis hit… so how high will they go next time?

German bond yields went to an astoundingly low yield of 0.08% and have recently bounced to as high as 0.99%. Other bonds in the euro zone went up similarly as did Japanese bond yields. That’s a big move in a short period of time for Europe’s “healthiest” economy. And it very likely marks an important turning point in rates.

The way Greece’s potential debt defaults are spilling over to Portugal, Spain and Italy is the first cause of rising rates, and these defaults back-up on leading countries like Germany. As risk-free sovereign rates rise, corporate — and especially high yield or junk bond rates — rise more.

The second driver may be what I call “late-stage inflation.”

Inflation has almost always risen into the early stages of a recession — and we are either already in a recession or very close to it, as I discussed in the June Boom & Bust issue. Inflation pressures will likely rise a bit more as job growth remains strong (which I explained Tuesday won’t last forever). It’s a paradox. But that’s how we continue to get rising long-term interest rates at first, despite a slowing economy.

Besides all that, I know long-term rates are very likely to continue rising due to one of my best long-term indicators: the Treasury Bond Channel. When we get to the bottom of this channel, rates tend to rise. When they hit the top, they bounce back down. See for yourself...

The last bottom occurred in mid-2012 when 10-year Treasury rates hit 1.39%. The first rise was to 3.04% leading up into late 2013, then back down to 1.65% late this January. Then, as high as 2.47% last week.

I have been predicting they will rise to 3.3% to 3.4% by late 2015 or so. That will be another trigger for a deeper economic crisis and stock crash ahead. Such a move would simply be about the same spike I just mentioned between mid-2012 and late 2013. That would translate currently to a move from 1.65% to around 3.3%.

So this is not a wild forecast. It’s actually a very likely one.

If we do see such a rise it will be the time to load up on 30-year Treasury bonds to get the greatest yields (4%-plus) and capital gains from the deflationary crisis to follow.

That crisis could bring 10-year yields down towards 0% — the lowest in history. This won’t be as much from potential new and accelerated QE policies like we saw from 2008 through 2014. If QE happens again, it will be less potent. Voters may even resist it after the last QE policy failed so miserably. Rather, it will be more from negative average inflation rates of 2%-plus for the next several years.

So avoid the 10-year. We recommend 30-year Treasuries because they’ll have almost 1% higher yields than the 10-year and greater appreciation when deflation finally sets in and interest rates fall even further.

This play will be especially good for investors nearing or in retirement looking for solid yields and income. Forget buying high dividend stocks with 2% yields! They’ll get crucified in the years ahead and your dividends — if they don’t get cut — will look like nothing compared to your investment losses.

Just remember: Long term Treasury and high quality corporate bonds roughly doubled including interest in the 1930s. They were the only major asset class to go up in the last deflationary and winter season. It will happen again.

Be on alert for higher yields on the 30-year Treasury!

Harry

http://economyandmarkets.com

Follow me on Twitter @HarryDentjr

Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.

Copyright © 2015 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Harry Dent Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules