Are US Treasuries a Safe Haven?


Dear PGM-Capital Blog readers,
Since July 22nd 2011 we have seen investors, driven by fear, running in the wrong direction, by buying US-Treasuries as a safe haven and sending the yield of the 10-year note to a historic minimum of approx. 1.75% by early October of 2011.

History has proven that Greed & Fear will block common sense and will lead to illogical behavior of people. What also amazes us, is that people haven’t learned from their mistakes from the past.

  • In 1998 /1999 the media was broadcasting the magic word of “New Economy” in the sense that in the “New Economy” Internet stocks with NO intrinsic value would be the “Asset Class” to invest in and anything with a “DOT COM” behind it, was a free ticket to a great life-style” and that fundamentals like Price to Earning, Price to Book and Price to Cash flow was something of the past. From August 5th 1999 to March 10th2000, the tech heavy weighted NASDAQ appreciated from 2,565.83 to 5,048.62 points and then on March 11th 2000, it was BOOM!!!!!!. Most of those high-flyers of then are now either bankrupt or reduced to a small cap company. While most of the leaders that survived the crash have been trading sideways for more than a decade.
  • The same happened in the period of 2002 – 2005, when the media told the middle class that the value of their House would always go up and advised them to take Home Equity loans in order to buy more real estate. NINJA (No Income No Job no Assets) loans were provided and early 2007 BOOM AGAIN…………. The collapse of the Real Estate started and again, similar to March 2000, charlatans told investors to hold on to or even buy more Real Estate. It is fresh in our memory how this event led to the big crash of September 2008 – February 2009.
  • Since the financial crisis that started in October 2008, Investors – this time based on FEAR -have been running in the wrong direction again. They are fleeing into the most risky asset, which is the US Treasury, and in doing so, they are creating a Hugh US-Treasury bubble, which, similar to those two previous mentioned bubbles, will burst. The big difference this time is that this Bond-market crash, due to the magnitude of the bond market will become the mother of all crashes.

Please, think and think again and think logical and ask yourself the following question:

Will you lend money to a country with a debt to GDP of over 100% for 10 years at a rate of 1.75%?” If you are honest with yourself the answer is NO!

If on top of that you are aware that the central bank of this country is printing money like there is no tomorrow, your answer will be a definite ‘NO WAY‘ and you’ll start selling these treasuries and flee into the only safe Haven, which is Gold & Silver.

Since the beginning of March of this year we are seeing the yield on the
10-year Treasury bond is up 20% and the 2-year bond, which is a little more volatile, up 35%, which means while everybody’s been focusing on the stock market…bonds received a hair-cut..

So does the increase of the bond-yield of the last two-weeks signal the begining of the bond-market crash?

We believe that with an election year, the USA FED will put the printing press in high gear in order to maintain the yield of the 10-year note below 3% this year. Needless to say that by flooding the market with more fiat dollars, this will make the crash of the (US) Bond market even more disastrous, which will send the price of Silver and Gold to even higher records.

Due to this we advise investors and the middle class to exchange their paper or fiat currency for Real Money: Gold, Silver, and other precious metals.

Before following any investing advice, always take your investment horizon and risk tolerance into consideration and keep in mind that the price of Commodities, Precious metals as well as the stocks of their producers can be very volatile and that sharp corrections may happen in the short term.

Yours sincerely

Eric Panneflek

One thought on “Are US Treasuries a Safe Haven?

  • Eric,
    A good article: commonsensical, easy to understand and the logic inescapable!
    There are two aspects to consider:
    1. Group think, which is a force to reckon with, and which will induce the ‘common guy’, with little info, to go with the ‘flow’. Whatever is published, like this article of yours, will not reach his/her pre-conditioned mind, brainwashed as he is by a corrupted media, dancing to the tune of BIG MONEY & BIG GOVERNMENT.
    2. The gold & silver escape route requires ENORMOUS staying power and VERY STRONG belief in what you suggest/advise, because what we’ve been seeing the past few days, is nothing less than a concerted attack on the gold & silver position by the ‘big players’ , who either want to convince the ‘gold bulls’ that gold & silver do not offer the way out and/or that the US$ is still the world’s best haven (and so: “do buy US treasuries”). Consequence: gold has dropped below $1650/ounce. If you’re a gold bull, it does take a lot of self-assurance to stick to your guns and maintain your long-term investment position in the face of the concerted action of the Big Banks and the Fed to maintain the course ‘steady as she is” to use a seaman’s term.
    Fact is, though, that the anti-bank, & anti-government groundswell we have seen these past 6 months is a clear sign that Big Money and Big Government (all over the world) are under siege and that “vox populi” is lashing out at abuses that have been going on for decades and are exacerbated by arrogant politicians who do their populist act, and thereby ruin the future of their constituents.
    You see, what your article has caused, my friend? That’s why it’s good!

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