8/16/2016 – A positive day with the Dow Jones up 396 points (+1.58%) and the Nasdaq up 32 points (+0.42%)
Today’s market action was ideal in terms of illustrating what a perfect short squeeze on the Dow looks like. Over the last few days we spoke about numerous large down gaps the market has left behind, suggesting it would close them before anything interesting happens. And so it was. If you would like to find out what the stock market will do next, based on our timing and mathematical work, in both price and time, please Click Here
Now, let’s talk about who the hell is buying the US Treasury Bonds currently flooding the market.
Who Bought the $1.36 Trillion of New US National Debt over the Past 12 Months?
“Official” foreign investors – this would be central banks, governments, etc. – and private-sector foreign investors held $6.21 trillion of US Treasury Securities at the end of June, up by $61 billion from a year earlier, according to the Treasury Department’s TIC data released Wednesday afternoon.
But over the same period, the US gross national debt, fired up by a stupendous spending binge, soared by a breath-taking $1.36 trillion. So who bought this $1.36 trillion in new debt?
The largest holder of marketable Treasury securities remains China, whose holdings in June fell by $4.4 billion from May to $1.18 trillion, within the same range since August 2017, despite escalating threats and counter-threats over trade.
No Seller – Not Even China – Can Disrupt US By Selling Treasurys…But The “Why” Ain’t Good
In short, Bernie Madoff would blush at the farce that is now the US Treasury market (further manipulating all downstream interest rate sensitive markets). A little lie or meddling led to more lying and more meddling…and suddenly the free market no longer exists. It should be clear that a buyer without profit motive is intervening in the Treasury market to maintain a bid and sustain continued low rates on US debt…all this because America has matured but those in control still want to synthetically maintain growth rates (hello China) via unrestrained debt issuance. Regardless how much debt the US issues and how few buyers remain, don’t look for interest rates to rise in kind.
We agree.
Having said that, it is a little beside the point of who is buying or selling US Treasury. As we have argued in the past, the Yield Curve itself is of much more importance here. FED Powell Confirms – Yield Curve Inversion Imminent
To very quickly summarize, the yield curve is already as flat as a pancake. The FED will continue to hike and the yield curve inversion is now imminent. Massive recession and debt implosion will come next and today’s short-term treasury buyers will look like absolute geniuses.
At least according to our work. If you would like to find out what the stock market will do next, in both price and time, based on our timing and mathematical work, please Click Here
