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  • The 90's and Now [Edit or Delete]1 comment
    Jun 6, 2011 2:12 PM

    The one and ten year treasury yields are still sooooooo low, and this is why debt default won’t happen. The bond market is smarter than the worthless rating agencies and libertarian/leftist ‘time to default’ gloomers.

    Here’s a recap of the macroeconomic differences between the 90’s and the past decade up until now

    The 90’s: rising stock market fed by technology hype in the second half of the decade, falling/stable commodities, stable cost of living, high employment, less productivity, 5-6% treasury yields, weakening S&P 500 profits (especially in the late 90’s), steadily rising PE ratios (peaking after the dotcom bubble burst), housing boom, pre-emergence of BRIC, balanced budget, weak government spending.

    From 2001 until now (since 2008 this trend has actually accelerated)

    Booming stock market, booming commodities, surging costs of living, 0-4% treasury yields, record S&P 500 profits year after year, record worker productivity, high unemployment, falling PE ratios, weak housing market (except for high-end real estate), BRIC boom, record deficits, ‘Bin Laden stimulus package’ in the form of endless Iraq/Afghanistan/Libya wars & homeland security and various bailouts.

    Notably, treasury yields were substantially higher in the 90’s but there was no commodity and living costs inflation. Nowadays it’s reversed This is the paradoxical two-track inflation explained in more detail in the original dyseconomics article.


    Presently the wealth gap between the highest and lowest earners is wider than in 1929 and that this inequality foreshadows another great depression. Yea right. I would be willing to wager for the remainder of the decade this trend will continue as companies like Facebook, Groupon, Twitter, Apple, and Netflix make their founders and investors fabulously wealthy and Bernanke leaves rates at 0% forever.  The have-nots are having less and the ‘rich and big’ getting richer and bigger. Web 2.0, multinationals, and speculators are the winners of this ‘new economy’ and small biz and main street are the losers because economy policy is designed whether intentionally or accidentally to benefit the ‘big and rich’ because this is optimal for economic growth.  Stocks will keep going up even if the economy from the perspective of mainstreet sucks.

    Buy ‘big and rich’ stocks like IBM MCD CAT PCLN NFLX AAPL GOOG BIDU AMZN. These companies have huge cash flows, market dominance, strong growth, global exposure, and benefit from a falling dollar. And also commodities, too, such as SLV, UGA, (this is the pain at the pump ETF) and GLD (the least favorite one compared to SLV or UGA).

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  • "The one and ten year treasury yields are still sooooooo low, and this is why debt default won’t happen. "
    here is my prediction for the top in bonds:
    still 2 to 3 years of upside left. I am now long the dollar, then will short the yen, and only after that I will short the bonds.
    6 Jun 2011, 03:16 PM Reply Like
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