‘The US Government
and the US Federal Reserve downplay the threat of inflation. There are two
primary reasons for this:
1)
Acknowledging higher inflation would mean both revising GDP growth much lower
(last quarter’s FDP growth would have been negative 1% if you accounted for the
real increase in costs of living).
2)
One of the primary arguments the Fed uses for why it can print hundreds
of billions of Dollars without hurting consumers it because inflation remains
“contained” or “transitory.”
Because of this, you
won’t see any real acknowledgement of inflation by the US Government or the Fed
until it’s far too late. Remember, one of the central goals for these
organizations is to maintain confidence in the system.
Indeed, while the
mainstream financial media continues to trumpet the wonders of stocks closing
in on all-time highs, larger, more sophisticated players are preparing for a
financial meltdown in a much larger market: bonds.
The cause? Inflation…
Goldman Sachs and
other large financial entities have begun to warn their clients about an
implosion in the bond market.
Goldman Sachs
strategists have issued a big warning to clients hiding out in bond funds: You’re
about to lose your shirt.
The reason:
interest rates began rising this week, and if they return to the historical
average yield of 3 percent, prices for long-term bonds will plummet. (By their
very nature, fixed income prices must fall if rates rise.)
“A reversion of risk premiums to
historical averages of 6% nominal rates (3% real rates and 3% inflation) would
suggest estimated losses in portfolios with bond durations of 5 years of 25% or
more,” equity strategist Robert D. Boroujerdi said in a note.
http://www.cnbc.com/id/100355153/Why_Goldman_Thinks_You_Should_Dump_Bonds_Now
Goldman is not the
only group be warning of a bond market implosion courtesy of rising inflation.
Finra warned
investors today that if interest rates rise – as most market pros expect – bond
investors could be slammed by long duration.
In an investor
alert, the Financial Industry Regulatory Authority Inc. told investors that in
the event of rising interest rates, “outstanding bonds, particularly those with
a low interest rate and high duration may experience significant price drops.”
A bond fund
with 10-year duration will decrease in value by 10% if rates rise one
percentage point, the alert warns.
http://www.investmentnews.com/article/20130214/FREE/130219947
We get additional
signs of the rising threat of inflation from the wave of Gold purchases made by
Central Banks:
Worldwide gold
demand in 2012 was another record high of $236.4 billion in the World Gold
Council’s latest report. This was up 6% in value terms in the fourth quarter to
$66.2 billion, the highest fourth quarter on record. Global gold demand in the
fourth quarter of 2012 was up 4% to 1,195.9 tonnes.
Central bank
buying for 2012 rose by 17% over 2011 to some 534.6 tonnes. As far as central
bank gold buying, this was the highest level since 1964. Central bank purchases stood
at 145 tonnes in the fourth quarter. That is up 9% from the fourth quarter of
2011, and the eighth consecutive quarter in which central banks were net
purchasers of gol
http://247wallst.com/2013/02/14/central-banks-buy-the-most-gold-since-1964/#ixzz2LMLOfBPK
Note… Central Banks,
while talking down money printing and denying the presence of inflation, bought
more Gold in 2012 that any year dating back to 1964. Indeed, However, since
becoming net buyers of Gold in 2010, the Central Banks have been increasing
their Gold purchases rapidly.
In 2010, Governments
worldwide bought 77 tonnes of Gold. In 2011 it was 457 tonnes. And last year it
was a whopping 535 tonnes. All told, they’ve accumulated 1,000 tonnes of
Gold since 2Q09. At today’s price of $1600 per ounce, this stash is valued at
over $56 billion.
The key issue here
is not the amount ($56 billion in Gold purchases is nothing compared to the
over $10 trillion in new money Central banks have printed since 2007), but the
trend: Central Banks were net sellers of Gold for decades until 2010.
With that in mind,
we’ve recently published a new Special Report outlining the dark secrets of
inflation, which mainstream financial professionals never
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detail three of the biggest secrets about inflation that result in 99% of
investors LOSING MONEY by betting on some of the most
popular inflation investments.
Ignore this
information at your own peril! Inflation is a far more complicated issue that
most investors realize. There’s a reason so few people got rich during the last
wave of inflation in the ‘70s.
We are selling this
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Best Regards,
Graham
Summers