There’s chaos in European bond markets.
German 10-year bonds yields have climbed to 0.9%, from the record low of 0.049% in April. They haven't sold off that hard since October 1998, when hedge fund Long-Term Capital Management imploded.
The bond rout is partially European Central Bank chief Mario Draghi’s fault. On Wednesday, he spooked markets when he warned “prepare for higher volatility.”
Many, including Draghi, believe bond yields are rising because inflation is picking up in Europe. But we think it might be because the Greek debt crisis is finally boiling over.
Signs are ominous. European officials are holding an alarming number of “emergency” meetings in Brussels. And Greece has become the first developed country to ever miss a payment to the IMF.
It‘s getting harder to ignore the reality that Greece will have to default eventually.
The turmoil has even spread to the United States bond market. Treasury prices have tanked and liquidity is drying up. And for the first time in 2015, 10-year Treasuries are now down for the year.
The Casey Report warned readers in May that “It’s time to exit bonds and watch from the sidelines.”
OPEC Won’t Curtail Oil Production
OPEC, the cartel that controls 39% of global oil production, is meeting in Vienna. Its members have reportedly agreed to keep pumping lots of oil, rather than curtailing production to boost oil prices.
Saudi Arabia’s oil minister says he’s “happy” with low oil prices. And why wouldn’t he be? The Saudis have $750 billion in currency reserves. They can afford to continue selling oil for cheap. Unlike US oil producers, whose hedges (which protect them from low oil prices) will soon run out.
The Saudis appear committed to their strategy of squeezing higher-cost producers by selling oil for cheap. So the question is: how much longer can Wall Street keep the US shale sector afloat?
Gold Stocks Are Primed for a Bull Market
If history is any judge, there’s huge upside in gold once this bear market ends. There have been eight gold bull markets since 1975… and the price of gold more than doubled in seven of them.
The best time to buy anything is when it’s most hated. And the mining sector is the most depressed sector in the world right now.
Blips & Bogeys
Signs of capitulation in the gold and silver markets suggest now may be the time to buy.
Will MSCI include China’s locally traded shares in its benchmark indices? If it does, billions of dollars could flow into Chinese stocks.
The Colder War: Greece backs Russia’s Turkish Stream project.