3 Minute Gold News
A Quick Read for Busy People
A 3 minute synopsis of an interview with Jim Rickards, New York Times bestselling author of The Death of Money and Currency Wars, by Scarlet Fu and Pimm Fox from Bloomberg TV.
Topic:
Treasury Notes the Winning Trade for 2015
Jim Rickards
Interview link
Bloomberg TV
from December 31, 2015
US Treasury Notes
One of Jim’s favourite trades for 2015 are treasury notes, because while interest rates are low they’re only low in nominal terms.
In real terms interest rates are quite high.
If the 10-year note is at 2% and inflation is at zero then the real rate is 200 basis points.
If you look back to 1980, interest rates were at 13% but inflation was 15%. So the real rate was negative 200 basis points.
Right now real rates are actually quite high even though nominal rates are low.
If inflation stays where it is, particularly at these low levels, the bang-for-the-buck — what is called the DVO1, which is basically how much you make on every point decline in interest rates — goes up at lower levels. (The DVO1 shows the change in a bond’s price compared to a decrease in the bond’s yield)
You could have huge capital gains on 10-year notes, plus the US dollar is getting stronger, so that looks like a nice trade.
Jim expects US rates to come down to below 1% because the world is deflating. If US Treasury notes go from 2% to below 1%, say 80 basis points, there are huge capital gains there.
If the Fed raises the short term interest rates then it’s going to put the economy into a recession, and then long term interest rates would go down even more.
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Gold is $1,183.10 US per ounce via Kitco.
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Preparing for the Fall, is a live solo album available on iTunes and includes the singles Wag the Dog, Black Swan Dive, Miss American Pie and Gods of the Copybook Headings.
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Wag the Dog (Drums of War and Back Room Banker Passes)
words and music Elaine Diane Taylor
© 2014 Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
from the album Preparing for the Fall available on iTunes
Another Week on Wall Street
words and music Elaine Diane Taylor
© 2013 Intelligentsia Media Inc. All rights reserved.
SOCAN/ASCAP
from the album Coins and Crowns available on iTunes
Elaine Diane Taylor 