"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's Work is NOW AVAILABLE AT WWW.TRADERDAN.NET



Monday, February 21, 2011

Another Downgrade for Japanese Debt

It was mere weeks ago when we got the news that the ratings agency, S&P, had downgraded Japanese debt to 'AA-'.

Now comes the news of another downgrade of the same, this time from Moody's.

Both agencies cited structural issues which will make it very challenging for Japan to deal with its chronic debt problem, which most predict will reach more than 200% of GDP later this year.

One has to wonder at what point it will be before we get an end to this unthinking, blind panic into bonds at the first whiff of a crisis anywhere around the globe.

Here is the full story from Bloomberg.

http://www.bloomberg.com/news/2011-02-22/japan-s-aa2-government-debt-rating-outlook-changed-to-negative-by-moody-s.html


Here is a chart comparing the gold price to the long bond in a gold/bond ratio. This ratio basically details in picture form which of the two so-called "safe haven" assets is performing better.

One look at the chart tells us which way Mr. Market is voting. (Hint - it ain't bonds even with this reflexive rush into them due to the current unrest in the mid-East). Ever since Quantitative Easing was announced, the paper IOU's have been lagging far behind gold in terms of preserving their holders' wealth.


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1 comment:

  1. JPFebruary 22, 2011 at 8:54 AM

    Great chart, Dan.

    I was just listening to CNBC's Santelli talk about UST's as the "counterintuitive safe play".

    I sent him your chart. :-)

    ReplyDelete

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