Sunday, November 22nd, 2009

Treasury Bonds Are Doomed Just as Fannie and Freddie Were

Sep 11th, 2008 | By Bill Bonner | Category: Politics & Economics

The 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


Advertisement

Cash in on the NEW COLD WAR

The October 13th confirmation of new $5.7 trillion petroleum reserve has thrust the superpowers into an all-or-nothing energy stare-down. Here's how YOU could parlay their high-stakes chess-game into 190 TIMES YOUR MONEY or more...

For more info, click here.



More on this topic (What's this?)
Freddie and Fannie Outside Supervisor Ousted
Silver - About to Explode?
Read more on Fannie Mae, Freddie Mac, Gold at Wikinvest
Tags: , , , , , ,

By Bill Bonner

Related Articles



About the Author

Bill BonnerBest-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..

See All Posts by This Author



The Daily Reckoning offers a "uniquely refreshing" perspective on the global economy, investing and the ability to live well in uncertain times. You will learn what you can expect from today's markets and how to prosper in the face of uncertainty.

See All Posts from This Publication

Leave Comment