U.S. Treasuries Bubble Ups Chances of Snapback Gold and Miners Rally

Right now treasuries and the U.S. dollar are viewed as refuges of safety, while gold (NYSE:GLD), silver (NYSE:SLV) and miners (NYSE:GDXJ) are sold off. The perceptive investor notes that these U.S. debt instruments are forming a parabolic move as the herd tilts the see-saw in an unsustainable direction.

Again it is Mackay’s “Madness of Crowds” repeated over and over again. The panic is reaching such irrational heights that the masses are willing to give their hard earned cash to the Federal Government at negative interest!

What greater folly can there be than investors  putting their hard earned savings into U.S. debt for the next 30 years? Our country is bankrupt, the money of investors is being sunk in a bottomless pit of a government that can not manage its own finances.  Hard earned investor money that may never be seen again are disappearing into the maws of government incompetence and downright malfeasance. Talk about an irrational bubble!

Hot Feature: The Customer is Always Right: CME Raises Gold Collateral Limit>>

Instead, such a money losing procedure would be better invested in palpable mineral assets in the ground. Here we have the spectacle of panic and fear propelling hard working middle class investors willingly leaping as lemmings into one of the most risky assets of them all U.S. Debt and selling real mineral assets for pennies on the dollar.

U.S. debt should’ve been downgraded a long time ago, but for the failure of their crony rating agencies to act in a fiduciary manner. They have a bad record.  Remember the subprime fiasco which is one of the causes of the impoverishment of our entire country. Talking about kicking the can down the road-it is a can of worms.

Foreign agencies are questioning the validity of the U.S. credit rating being assigned increasingly shaky assets, yet investors flock to them in search of liquidity.

A more rational approach would be to purchase a quality gold and silver producers who are posting increasing profits quarter by quarter, return on equity and a growing pipeline of development opportunities.

Gold Stock Trades sees a snapback occurring imminently. Do not be confused by the machinations of the Wall St. institutions in their age old process as they steer the small investor away from situations which they themselves are picking up at bargain basement prices.

We may now be testing a bottom that may furnish us additional entry points. The current crisis may be just the excuse that the Federal Reserve has been waiting for to inject additional stimulus. Do not be dismayed by violent corrections as investors are forced to sell natural resource stocks in order to meet margin requirements. These liquidity traps may result in declines of 50-90% which are characteristic in the life cycle of junior mining companies.

To reiterate, we are possibly being programmed by the authorities to accept yet another stimulus. Recently Bernanke said, “…The possibility remains that the recent economic weakness may prove more persistent than expected and that deflationary risks might reemerge, implying a need for additional policy support.”

It is the old law of the casino: there can not be 100% of winners at blackjack. Perhaps 20% of the winners walk away with the losses of the 80% who go home with empty pockets. Joseph advised the Pharaoh of Egypt thousands of years ago, there are fat years and there are lean years during which as faithful stewards we should prepare ourselves for the hard times during the prosperous years by taking profits as targets are reached.

What do all these allusions mean to the subscribers of GST? Witness the panic and fear that now pervades the marketplace. The astute speculator watches and waits as the corrective process wends its way through the markets. It is the age old transfer of wealth from weak hands to strong hands.

Let’s look at the events of this latest correction. What we are now going through is not novel. As far back as the early civilizations until the present time, the financial markets have created winners and losers. Whether it be tulip madness or the Florida Land Boom fiasco, the markets have always found ways to separate the winners of the losers. Today’s bubble is not in mining stocks, but in U.S. treasuries.

This is a guest post by Jeb Handwerger.

Hot Feature: The Customer is Always Right: CME Raises Gold Collateral Limit>>

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