Since Wednesday was PI day (3.14), I thought I might update my PI trade article, says Dave Landry, f...
11/23/2014 8:00 am EST
An economic war is taking place and its gaining momentum. It’s happening on the world stage and it’s being fought on several fronts, explains Mary Anne and Pamela Aden, editors of The Aden Forecast.
This global war is linked to deflation, which has been gaining momentum. It’s overpowered inflation and it’s clearly in the driver’s seat.
Japan has moved back into recession. So has Russia. China’s growth is the slowest since 2009. The EuroZone is teetering between very slow growth and recession. Latin America is hurt by the global slowdown and low commodities.
So against this backdrop, it’s no wonder the individual countries are increasingly nervous about slow growth, recession, low inflation, and the ultimate fear, deflation.
The oil plunge will further fuel the deflationary pressures. Meanwhile, a currency war is adding fuel to the economic war. No one wants a strong currency. Instead, they want a weak currency because it will make their exports cheap.
The hope is that this will attract buyers for their products, which will help boost their economies. But it’s also flooding the world with low priced goods, again, fueling deflation.
If anyone told us last year that US government bonds were going to be the big winners for 2014 it would’ve been hard to believe. But that’s exactly what happened.
We recommended buying long-term government bonds in February and, since then, our profits are 32%. The Ultra 20+year Treasury (UBT) is clearly the strongest.
But aren’t bonds way too overextended at this point? Isn’t it too late to buy new positions because the party’s about over? Surprisingly, the answer is no. In fact, it’s just the opposite.
Despite the fact that bonds have already risen strongly this year, a renewed rise is just getting started. Plus, the leading indicator for bonds is showing they have room to rise further. This reinforces higher bonds ahead. This, of course, means interest rates are going lower.
We know that may seem strange, especially considering that interest rates are already near zero and they’ve been super low for the past six years. But that’s what the market’s telling us.
We’re fairly sure the main reason why bonds are headed higher is because of deflation. It clearly has the upper hand, and as long as that’s the case, US government bonds will continue to do well, keeping their status as the world’s favorite safe haven.
Overall, our indicators are telling us to buy and hold long-term US government bonds. They’re strong and bullish, and they continue to be the best investment.
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