Browse > Home / General Investing/Trading Commentary / Get Out Of Bonds

Get Out Of Bonds

May 31, 2008 2:17 AM

run.jpgThis is a simple statement. GET OUT OF BONDS. The strength today was a bounce, nothing more. Rates are going far higher i believe. The 30 year Treasury cleared a key number, and inflation is at least twice what is reported as I mentioned FAR before anyone else. Now you have Bill gross with PIMCO saying inflation is understated, and others jumping on board. I have said the same thing for over 6 months. Now CNBC said that someone plugged in the data using the old inflation formula and inflation was 11%.

The dollar has fallen 60% against the EURO in 5 years and yet we report the same inflation data as Europe? That is a mathematical impossibility. I was wondering if someone would eventually pull out the old inflation formula and see what it is at some point. Someone did, finally. While I do believe in the concept of substitution and people do choose other products when one goes up, it still does not account for maintaining your standard of living. At some point you are simply “swapping” your standard of living for a less costly one. This does not mean that the inflation does not exist. Therefore, I believe the old formula overstated inflation and new one understates it - by a wide margin.

Whatever “real” inflation is, and that is certainly being hotly debated, it most certainly is over 6%. That means that the 10 Year Treasury trades at least 2% below inflation, probably far more. That cannot last. Sell bonds.

Written by Tom@StockBlade.com · Filed Under General Investing/Trading Commentary 

Comments

Got something to say?