By Bryan Rich 

June 30, 2016, 3:00pm EST

Yesterday we looked at some key markets, some that have recovered nicely following the Brexit news, and others that are still down on either safe-haven demand or speculation of economic drags due to the Brexit.  One particular spot that hasn’t fared well in the past week is Japan.

Japan is three years into a bold plan to beat two decades of deflation and restore its economy to prominence.  The data shows that their efforts haven’t translated so well just yet.  Inflation is still dead, and economic growth — about the same.

Two key tools in the Bank of Japan’s QE program, which is designed to drive inflation and economic activity, is a weaker yen and a higher stock market.  Since they telegraphed their intentions of big, bold QE in late 2012, Japanese stocks have risen by as much as 140%.  And the yen has declined by as much as 38% against the dollar.  But over the past 12 months, about half of those “policy gains” have been given back.  And post-Brexit the attrition has only worsened.

Still, after three years and big moves in the yen and stocks, the inflation objective remains a distant target.  What does it mean?  The Bank of Japan has to do more.  A lot more.

We think they can, and will, ultimately destroy the value of the yen — mass devaluation.

Unlike the U.S., which is constrained by “flight to safety” global capital flows and a world reserve currency, Japan has the ingredients to make QE work, to promote demand, and to promote growth. Japan has the largest government debt problem in the world. They have an undervalued currency. They have a stagnating economy with big demographic challenges. They have are in a deflationary vortex.

They have the perfect attributes for a mass scale currency printing campaign. Not only can it work for their domestic economies, but it serves as the liquidity engine and stability preserver for the global economy.

In normal times, the rest of the world wouldn’t stand for a country outright devaluing their way to prosperity. But in a world where every country is in economic malaise, everyone can benefit – everyone needs it to work. It can be the solution for returning the global economy to sustainable growth. We wouldn’t be surprised to see USDJPY return to the levels of the mid-80s (versus the dollar)in the not too distant future. That would be 250+.  Currently, 103 yen buys a dollar.

To follow our big picture views and our hand selected portfolio of the best stocks owned by the best billionaire investors in the world, join us in our Billionaire’s Portfolio

By Bryan Rich 

June 29, 2016, 4:00pm EST

Yesterday we talked about the ECB’s projection on how the Brexit will impact on euro area GDP.  And we looked at charts of Spanish and Italian sovereign debt. Both suggested that the market reaction, to the downside risk from Brexit, might be over-exaggerated.

Some markets have already fully recovered the Brexit-induced declines.  But some key safe-haven assets continue to show healthy capital flows.

Let’s look at some charts.

ftse stocks
Source: Reuters, Billionaire’s Portfolio

The chart above is a look at UK stocks.  These are blue chip companies listed on the London Stock Exchange.  You can see the 9% has been completely erased in just three trading days.

What about commodities?  This is Goldman’s commodity index.  It’s completed recovered declines, in large part to the reversal in oil and the continued surge in natural gas.  Remember we talked about natural gas earlier in the month as it looks like it’s on a path to $4. It nearly hit $3 today.

comm
Source: Reuters, Billionaire’s Portfolio

So we have some traditional “risk-on” assets sharply recovering losses.

But, the “risk-off” trade continues to hold in the traditional safe-haven assets.  Bonds are being bought aggressively.  You can see the U.S. 10-year yield is nearing levels of the peak of the European Debt Crisis, when Spain and Italy were on the precipice of blow-up.

10yt new
Source: Reuters, Billionaire’s Portfolio

Interestingly, the 30-year yield is sliding too.  This flattens the yield curve, which suggests bets on recession.  But this extreme level is historically has been a bottom throughout the crisis period (2008-present).

30 yt 2
Source: Reuters, Billionaire’s Portfolio

The dollar continues to hold post-Brexit gains — another sign of safe-haven flows.

dollar
Source: Reuters, Billionaire’s Portfolio

And next, the safe-haven flows continue to hold up in gold.  But it’s not the runaway market gold bugs would hope for in a time of global stress.

gold 2
Source: Reuters, Billionaire’s Portfolio

One could argue that the safe haven flows could be coming from core Europe, as Germany is most at risk in the Brexit for the ultimate bad outcome scenario (as we discussed yesterday, where the Brexit could create a spill over into European Monetary Union countries looking for the exit door). But as we reviewed yesterday, the sovereign debt markets in the vulnerable spots in Europe (Italy and Spain) aren’t giving that “bad outcome” signal.

dax
Source: Reuters, Billionaire’s Portfolio

What about Japan?  Japanese stocks have bounced sharply, but were among the worst hit given the sharp rise in the yen (a traditional safe-haven).

jap stocks
Source: Reuters, Billionaire’s Portfolio

And finally, U.S. stocks have come back aggressively, but haven’t fully recovered the decline.

spx june
Source: Reuters, Billionaire’s Portfolio

What do we make of it?  If we consider that the biggest risk associated with Brexit is a destruction of global confidence, rising/recovering stocks go a long way toward defending against that risk. Since the central banks are in the business of defending stability and confidence in this environment, and they are clearly on patrol, they may have a little something to do with stock market recoveries (if not directly, than indirectly).

To follow our big picture views and our hand selected portfolio of the best stocks owned by the best billionaire investors in the world, join us in our Billionaire’s Portfolio

By Bryan Rich 

June 27, 2016, 4:15pm EST

Over the past two trading days, we’re seeing the “risk-off” flow of global capital that we saw through the early stages of the global financial crisis.

For a long time, Wall Street sold us on the idea of sector and geographic diversification for stocks. That abruptly ended in 2008-2009. It was clear that in a global crisis, the correlations of sectors, geographies and many asset classes went to 1 (i.e. almost everything went down–a few things went up).

Our table below gives some perspective on how the swings in global risk appetite have affected financial markets since the onset of the financial crisis in 2008.

In a sense, the risk trade is an easy one to understand. When the world looks like a scary place, people pull back and look for protection. They pull money out of virtually everything, including banks, and plow money into the U.S. dollar, U.S. Treasurys and gold (the safest parking place for money in the world, on a relative basis).

At the depths of the global financial and economic crisis, there was a clear shift in investor focus, away from “return ON capital” toward one of “return OF capital.” Then, as sentiment improved about the outlook, people started taking on more risk, and that capital flow reversed. But with each economic threat that has bubbled up since, we’ve seen this risk-off dynamic quickly emerge again.

Two trading days following the Brexit vote, the market behavior is clearly back in the risk-off phase. The question is: Are we back into the risk-on/risk-off seesaw in markets that we dealt with for several years coming out of the worst part of the crisis?

As we said, there are huge differences between now and 2008. When Lehman failed, global credit froze. Today financial conditions globally have tightened a bit, but nothing remotely near the post-Lehman fallout. Most importantly, as we’ve said, we had no idea how policy makers might respond and how far they might go. Now we know, they will “do whatever it takes.”

When was the last time we had a huge sentiment shock for global financial markets and for the global economy? It was only a year ago, in Greece. The Greek people voted NO against more austerity and more loss of sovereignty to their European neighbors (namely Germany). That vote too, shocked the world. But all of the draconian outcomes for Greece, which were being threatened, with such a vote, didn’t transpire. Greece and Europe compromised.

Bottom line (and something to keep in mind): A bad outcome for anyone, at this stage in the global economic recovery, is a bad outcome for everyone.

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By Bryan Rich 

June 24, 2016, 4:15pm EST

The world was stirring today over the UK decision to leave the European Union.  Here are a few things to keep in mind.  As we discussed earlier in the week, the repercussions of the Brexit are very different than those that were feared over the potential “Grexit.”  Greece was threatening to leave the euro. It would have had major and immediate financial complications, which could have quickly paralyzed the financial system.

The Brexit is more political than economic (not financial).  And any retrenchment in the banking system because of uncertainty can be immediately quelled by central bank intervention.  Not only were the central banks out in front of the potential exit outcome, promising to provide liquidity to the banking system, but they were also in last night stabilizing currencies, and likely bond yields as well.

As we said, there are also huge differences between now and 2008.  When Lehman failed and global credit froze, we had no idea how policy makers might respond and how far they might go.  Now we know, they will “do whatever it takes.”

The market volatility surrounding the Brexit may actually be a positive for the global economy.  Seven years into the global economic recovery, global central banks have thrown the kitchen sink at the crisis, and they’ve proven to be able to stabilize the financial system and the global economy, and restore confidence.  And that has all indirectly created an economic recovery, albeit a slow and sluggish one.  But they haven’t been able to directly stimulate meaningful economic growth (the kind you typically see coming out of recession) because of the nature of the crisis.

Fiscal stimulus has been the missing piece of the puzzle.

Governments have been reluctant to spend, given the scars of the debt crisis.  This may give policy makers an excuse to green light fiscal stimulus.  After all, growth (or the lack thereof) is the primary driver of the public discontent – not just in the UK, but globally. Growth has a way of solving a lot of problems.

To follow our big picture views and our hand selected portfolio of the best stocks owned by the best billionaire investors in the world, join us in our Billionaire’s Portfolio

 

By Bryan Rich 

June 23, 2016, 3:00pm EST

As we said yesterday, we’ve seen a slew of threatening events come and go over the course of the past seven years, and with each passing of those events, the heightened scrutiny of the economy comes and recession predictions.  Each has been wrong.  The Brexit vote is just the latest.

With the UK referendum results looming (as of this writing), today we want to revisit some of our bigger picture perspective on the U.S. economy.  The data just doesn’t support the gloom and doom scenarios.

The Fed has manufactured a recovery by promoting stability.  And they’ve relied on two key asset prices to do it: stocks and housing.  Today we want to look at a few charts that show how important the stock and housing market recoveries have been.

While QE and the Fed’s ultra easy policy stance couldn’t directly create demand in a world of deleveraging, it did (and has) indirectly created demand by promoting stability, which restored confidence.  Without the confidence that the world will be stable, people don’t spend, borrow, lend or hire, and the economy goes into a deflationary vortex.

But by promising that they stand ready to act against any futures shocks to the economy (and financial markets), investors feel comfortable investing again (stocks go higher).  When stocks go higher and the environment proves stable, employers feel more confident to hire.  This all fuels demand and recovery.  And, of course, the Fed has pinned down mortgage rates at record lows, which promotes a housing recovery, and gives underwater homeowners (at one point, more than 25 million of them) a since that paper losses will at some point be overcome, and that gives them the confidence to spend money again, rather sit on it.

Along the path of the economic recovery, the Fed (and other key central banks) has been very sensitive to declines in stocks.  Why?  Because declining stocks has the ability to undo what they’ve done.  And it confidence breaks again, it will be far harder to restore it.

The first chart here is the S&P 500.  Stocks bottomed in March of 2009, when the Fed announced a $1 trillion QE program.

june 23 spx

Sources: Reuters, Billionaire’s Portfolio

Stocks surpassed the pre-crisis highs in 2013 after six years in the hole. But even after the dramatic rise you can see in the chart the damage from the crisis is far from restored.  If we applied the long term annual rate of growth of the S&P 500 (8%) to the pre-crisis highs of 1,576, the S&P 500 should be closer to 3,150.

How does housing look?  Of course, bursting of the housing bubble was the pin that pricked the global credit bubble.  Housing prices in the U.S. have been in recovery mode since 2012.  Still, housing has a ways to go.  This is a very important component for the Fed, for sustainable recovery.

june 23 case shiller

Sources: Reuters, Billionaire’s Portfolio

Housing prices have bounced 37% off of the lows (for 20 major cities in the index) – but remains about 10% off of the pre-crisis highs.

How has the recovery in stocks and housing reflected in the broader economy?

As stocks surpassed pre-crisis highs in 2013, so did U.S. per capita GDP.

 june 23 ps per capital gdp

Sources: Reuters, Billionaire’s Portfolio

While debt continues to be a big structural problem for the U.S and the rest of the world, growth goes a long way toward fixing that problem.

And growth, low interest rates, higher stocks and higher housing prices goes a long way toward restoring household net worth.  As you can see in the chart below, we have well recovered and surpassed pre-crisis levels in household net worth…

 june 23 us household net worth

Sources: Reuters, Billionaire’s Portfolio

What is the key long-term driver of economic growth overtime?  Credit creation.  In the next chart, you can see the sharp recovery in consumer credit since the depths of the economic crisis (in orange).  This excludes mortgages.  And you can see how closely GDP (economic output) tracks credit growth (the purple line).

june 23 credit to gdp

Sources: Reuters, Billionaire’s Portfolio

What about deleveraging?  It took 10 years to build the global credit bubble that erupted in 2007.  Based on historical credit bubbles, it typically takes about as long to de-lever.  So 10-years of deleveraging would put us at year 2017.

You can see in the chart below, the average annual growth rate of consumer credit over the past 55 years is 7.9%.  Over the past five years, consumer credit growth has been solid, just under the long term average.  Meanwhile, FICO scores in the U.S. have reached an all-time high.

 consumer credit growth rate

Sources: Reuters, Fed

With any volatility in stocks, there comes increased scrutiny on the economy and people like to wave the red flag anywhere they find soft economic data. But consumption makes up more than 2/3 of the U.S. economy.  And you can see from the charts above, the consumer is in a solid position.  Still, stocks and housing remain key drivers of the recovery.  The Fed is well aware of that.  With that, don’t expect the Fed, in the current economic environment, to do anything to alter the health of the housing and stock markets.

Have a great night.

To follow our big picture views and our hand selected portfolio of the best stocks owned by the best billionaire investors in the world, join us in our Billionaire’s Portfolio

By Bryan Rich 

June 20, 2016, 2:45pm EST

On Friday we looked at four key market charts that suggested the worst of the Brexit storm may be behind us.

As of Friday afternoon, the bookmakers had the odds of the UK staying in the Eurozone at 64%, versus 36% leaving.  And as we looked across the prices of gold, oil and stocks, all were suggesting, at least technically, that the peak of fear, regarding a Brexit, had passed.

Gold was rising sharply early last week.  Oil began to slide. These are two very important barometers of global risk appetite, and those moves were clearly demonstrating fear and uncertainty in markets.

But on Thursday, gold put in a key reversal signal. So did oil, on Friday.  Those reversals continued today.  Additionally, a very key bond market in Germany (the German 10 year bund yield), which traded into negative yield territory at one point last week, has been clawing back into positive territory since Friday (trading above 5 basis points today – positive 5 basis points).

Why?  Because of this chart…

1aa odsmaker

Above is an update of the bookmaker odds on a Brexit.  The chances of a leave have now dropped from 44% to 25%, since Thursday.

That’s why global markets are aggressively taking back the hedging and selling from last week.

The UK vote is this Thursday.  We’ve said months ago, that despite the speculation of a UK exit, it was not going to happen, given where the oddsmakers were pricing the risk (at about 70/30 in favor of staying for much of the way), and given the scale of the “fear of the unknown” in the voter’s eyes.  Adding to that, we expected that the warnings from big public figures would come in hot and heavy as the date approached.  Type in the words “Brexit” and “warning” into Google and you get almost 7 million results.

Already, everyone has weighed in with draconian warnings in an attempt to influence the decision: from the UK Prime Minister, the head of the Bank of England, the head of the IMF, to the ECB, to the Fed and the U.S. President.  Now UK employers have been latest, directly writing their employees to warn of the business damage from a ‘leave’ vote.

If the Brexit risk continues to abate, and the referendum comes and goes on Thursday, with a ‘stay’ vote, that should clear the way for broad global stock market rallies and a sharp bounce back in yields, as the focus will quickly turn to a July Fed rate hike.

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By Bryan Rich 

June 17, 2016, 4:30pm EST

After a shaky few days for markets, we head into the weekend with some relative calm today.  Next week the UK vote on leaving or staying in the European Union will dominate the market focus.

The pressure in markets had been building in recent days on the pick-up in momentum for the Brexit vote in the UK.  A log on the fire for that pressure was the inaction from the four central banks that met this week (Fed, BOJ, SNB and BOE).  Yields in German 10-years slid below zero.  U.S. yields (10 years) hit four year lows.  Stocks were sliding, globally. The upward momentum for gold started to kick in. And then we had the tragic murder of a member of British Parliament (widely considered to be politically driven, as she was a ‘stay’ advocate).

So leveraged positions across markets that were leaning in the direction of the momentum unwound, to an extent, on the news.

Today we want to step back and take a look at some key charts as we head into next week.

First, the odds of a Brexit from the bookmakers…


As we’ve said, along the way, despite the coin flip projections coming out of the many polls in the UK, this estimation has been clearly favoring the ‘stay’ camp by about 70/30.  Though in recent days the probability of an exit had risen to 44%.  Following the tragic news yesterday, that number is now back to 36%.

Next is a chart of gold.  This is the safe haven trade, though it hasn’t much allure in quite some time.  Still, gold found some legs in the past 10 days.


But as you can see in the chart above, after a $35 higher yesterday, it reversed sharply to close on the lows.  In the process it put in a very nice technical reversal pattern (an outside day – where the day’s range engulfs the prior day’s range, caused by low conviction ‘longs’ reversing course near the highs and hitting the exit doors, exacerbating the slide into the close).  That price action would argue for lower gold, and in general, the end of this recent flurry of doubt surrounding the UK vote (and uptick in broad market volatility).

As we know, the sustainability of the crude oil recovery is a huge factor in global financial market stability.  After trading above $50, it had six consecutive days of lower lows, but it bounced back aggressively today, also posting a key reversal signal (bullish outside day – again, good for the global stability outlook).


Finally, a look at the chart of the S&P 500 …


Despite all of the negative messaging across the media and uncertainty from the investment community, as we head into the weekend stocks sit just 3% off of the all-time highs.

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By Bryan Rich 

June 10, 2016, 4:00pm EST

On Wednesday we talked about the most important market in the world, right now.  It’s German bunds.

The yield on the 10-year German bund had traded to new record lows, getting just basis points away from the zero line, and thus from crossing into negative yield territory for the 10-year German government bond.  That has inched even closer over the past two days, touching as low as 1 basis point today.

Not surprisingly, stocks sold off today.  Volatility rose.  Commodities backed off.  And the broader mood about global economic stability heads into the weekend on the back foot.  For perspective, though, U.S. stocks ran to new 2016 highs this week, and are sniffing very close to record highs again.  Oil and commodities have been strong, and the broad outlook for the economy and markets look good (absent an economic shock).

What’s happening?  Of course, the vote that is coming later this month in the UK, on whether or not UK citizens will vote to ‘Stay’ in the European Union or ‘Leave’ continues to bubble up speculation on the outcome.  That creates uncertainty.  But the real reason rates are sliding is that the European Central Bank is in buying, not just government bonds, but now corporate bonds too.  The QE tool box has been expanded.  That naturally drives bond prices higher and yields lower.  But the question is, will it translate into a bullish economic impact (i.e. the money the ECB is pumping into the economy resulting in investing, spending, hiring, borrowing). As we discussed on Wednesday, it’s the anticipation of that result that sent rates higher in the U.S. when the Fed was in, outright buying assets, in its three rounds of QE.

With that, the most important marker in the world for financial markets (and economies) in the coming days, remains, the zero line on the German 10-year government bond yield.  Draghi has already told us, outright, that they will not take benchmark rates negative (as Japan did).  That makes this zero line a huge psychological marker for perceived value of the ECB’s QE efforts.

With this in mind, we head into a Fed meeting next week.  The Fed has done its job in managing down expectations of a hike next week.  With that, they have no risk in holding off until next month so that they can see the outcome of the stay/leave vote in the UK.  And, as we’ve discussed, the Bank of Japan follows the Fed on Wednesday night with a decision on monetary policy.  They are in the sweet spot to act, not only to reinvigorate the weak yen trend and strong stock trend in Japan, but to add further stimulus and perception of stability to the global economy.  We think we will see that happen.

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By Bryan Rich and Will Meade

June 9, 2016, 4:00pm EST

On Tuesday we talked about the quiet bull market in  commodities. Today we want to talk about one specific commodity that has been lagging the sharp rebound in oil, but is starting to make a big-time move.  It’s natural gas. And this is an area with some beaten up stocks that have the potential for huge bounce backs.

Natural gas today was up almost 6% to a six month high.  The U.S. Energy Information Administration said in its weekly report that natural gas storage rose less than what analysts had forecast.  But that was just an extra kick for a market that has been moving aggressively higher in the past NINE days (up 37% in nine days).

Now, we should note, nat gas is a market that has some incredible swings.  Over the past three years it has traded as high as $6.50 and as low as $1.64.

For perspective on the wild swings, take a look at this long term chart.

 

Source: Reuters, Billionaire’s Portfolio

You can see we’re coming off of a very low base.  And the moves in this commodity can be dramatic.

Three months ago natural gas was continuing to slide, even as oil was staging a big bounce.  But natural gas has now bounced 58% after sniffing around near the all-time lows. Meanwhile, oil has doubled.

Based on the backdrop for oil, broader commodities, the economy we’ve been discussing, and the acknowledging the history of natural gas prices, we could be looking at early stages of a big run in nat gas prices.

Summer is one of the most volatile periods for natural gas with the combination of heat waves, hurricanes and potential weather pattern shifts such as La Nina.  During the summer months, a 50% move in the price of natural gas is not uncommon. Another 50% rise by the end of the summer would put it around $4. And four bucks is near the midpoint of the $6.50 - $1.65 range of the past three years.

Billionaires investor David Einhorn has also perked up to the bull scenario in nat gas.  In his most recent investor letter his big macro trade this year is long natural gas. Here’s what he had to say: “Natural gas prices are not high enough to justify drilling in all but the very best locations. The industry has responded by dramatically reducing drilling activity. As existing wells deplete, supplies should fall. The high cost of liquefying and transporting natural gas limits competition to North American sources. Current inventories are high following a period of over-drilling and a record warm winter. However, the excess inventory is only a couple percent of annual production, which has already begun to decline. Normal weather combined with lower production could lead to a shortage within a year.”

This all contributes to the bullish action we’re seeing across commodities, led by the bounceback in oil.  The surviving companies of the energy price bust have been staging big comebacks, but could have a lot further to go on a run up in nat gas prices.

In our Billionaires Portfolio, we have an ETF that has 100% exposure to oil and natural gas – one we think will double by next year.  Join us today and get our full recommendation on this ETF, and get your portfolio in line with our Billionaire’s Portfolio.

By Bryan Rich 

June 8, 2016, 2:00pm EST

We’ve talked about the bullish technical break occurring in stocks.  That’s continuing again today.

Remember, a week from this past Friday we talked about the G7 (G8) effect on stocks.  We stepped back through every annual meeting of world leaders since 2009.  And the results were clear.  If the communiqué from the meetings focused on concerns about the global economy, stocks went higher. It’s that simple.

Why?  In the post Great Recession world, stocks are the key barometer of global confidence.  Higher stocks can help promote economic recovery (better confidence, higher wealth effect).  Lower stocks can derail it, and threaten a bigger downturn, if not fatal blow to the global economy.

Policymakers can and do influence stocks.  And thus, when we’ve seen clear messaging from these meetings about global economic concerns, stocks have done well (in most cases, very well).

With all of this said, on May 27th, from the meeting in Japan, the G7 issued their communiqué and it started with global growth concerns.  They said, “Global growth is our urgent priority.”  The S&P 500 closed at 2099.  Today it’s trading 2116 and is closing in on the all-time highs set in May of last year (less than 1% away).

Now, we talked in past months about the importance of Europe.  The Fed’s best friend (and the global economy’s best friend) is an improving economy in Europe.  We’ve seen some positive surprises in the data out of Europe, but the actions taken this morning by the ECB could be the real catalyst to get the ball rolling — to mark the bottom, to get Europe out of the slow-to-no growth, deflation funk.

They ECB started implementing a new piece to its QE program today.  Of course, they promised bigger and bolder QE back in March (mostly as a response to the cheap oil threat).  Today they started buying corporate bonds as part of that ramped-up QE plan.

With that, this is a very important observation to keep in mind.  Over the history of the Fed’s three rounds of QE, when the Fed telegraphed QE, rates went lower.  When they began the actual execution of QE (actually buying bonds), rates went HIGHER, not lower (contrary to popular expectations).  Why?  Because the market began pricing in a better economic outlook, given the Fed’s actions.  We think we could see this play out in Europe as well.

Take a look at this chart of German yields.  This is probably the most important chart in the world to watch over the next several days.

germ yield

Source: Reuters, Billionaire’s Portfolio

The German 10-year yield traded as low as 3 basis points (that’s earning 30 euros a year for every 100,000 euros you loan the German government, for 10 years).  Of course, the most important visual in this chart is how close the German 10-year yield is to zero (the white line), and then negative rates.

Remember, we’ve said before that Draghi and the ECB have made it clear that they won’t cut their benchmark rate below zero. And “that should keep the 10–year yield ABOVE zero.”  Were we right?  We’ll find out very soon. If so, and if German yields put in a low today on the “actual execution” of the ECB’s new corporate bond buying program, then U.S. yields would be at bottom a here too.

10s

Source: Reuters, Billionaire’s Portfolio

You can see in the above chart, it’s a make or break level for the U.S. 10 year yield as well (as it is tracking German yields at this stage).  While lower yields from here in these two key markets might sound great to some, it comes with a lot of problems, not the least of which is a negative message about the outlook for the global economy and thus damage to global confidence.  Keep an eye on German yields, the most important market to watch in the coming days.

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