Treasury Bonds Are Doomed Just as Fannie and Freddie Were
Sep 11th, 2008 | By Bill Bonner | Category: Politics & EconomicsThe Daily Reckoning’s Bill Bonner says that one day the world will see the US for what it is: a subprime borrower. When that happens, Treasury bonds will be worth about as much as shares in Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE)…
If smart investors are selling stocks, what do they do with the money? Our advice has been to buy gold. From the looks of it, the smart money is not following that part of our advice. Yesterday, the price of gold fell $26 to $781.
The smart money is looking for safety. But it seems to think that it is better off in US Treasuries than in gold.
Yesterday, while gold and stocks both dropped, Treasury bonds went up. The yield on the 10-year T-note fell below 3.6% (yields go down as prices go up).
This makes us think the smart money is not as smart as it thinks.
Our guess is that the credit of the world’s biggest debtor will prove less sure than they believe. The debts and financial obligations of the U.S. government continue to rise many times faster than the growth of the economy.
Under the Bush administration, they’ve gone up faster than ever before in the history of the nation. We doubt that they will go up any more slowly if Obama is elected.
Eventually, the United States will be recognized for what it is: a subprime borrower. And eventually, U.S. Treasury bonds will be looked upon as though they were Fannie Mae shares.
Source: Where the Smart Money is Going
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Best-selling investment author Bill Bonner is the founder and president of Agora Publishing. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning and three best-selling books, Financial Reckoning Day: Surviving The Soft Depression of the 21st Century, Empire of Debt: The Rise of an Epic Financial Crisis and Mobs, Messiahs and Markets..
