"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

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Saturday, March 5, 2011

US Bonds no Safe Haven compared to Gold

One of the things about deeply ingrained responses is that they take years to form. In the case of bonds, it has been going on for decades when it comes to them being regarded as a safe haven during times of political unrest, market turmoil or even natural phenomenons.

It goes something like this - geopolitical developments makes investors nervous about prospects for growth so money flows out of stocks and into bonds as it looks for a temporary haven in which to ride out the winds of adversity.

Such moves by investors/traders become so reflexive, that they tend to occur with very little serious thought actually being given to the movement of funds. The idea is, move first, think second; after all, you don't want to be the last guy left holding the bag when the dust settles.

I do think however that this perception is changing and I might add, as taken a severe hit ever since the inception of Quantitative Easing.

Note the following ratio chart to see how poorly bonds have been performing when compared to gold.

In truth I think this is also a vote against the US Dollar since those buying US Treasuries are in effect voting for the Dollar.

1 comment:

  1. Ouch. If you look at 1979 as a resistance barrier, we definitely smashed through that. I might have to break out the monopoly money, soon it will be worth more than the FRN's!


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