Wednesday , 18 October 2017


Take a LOOK: U.S. Gov’t Debt Tracking of Rodrigue’s “Bubble Model” Suggests Treasury Bonds Could Be the Short of the Century

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The US Treasury Bond market is the longest unbroken bull market known to the financial world [thanks in large part to the Fed who is] buying up every penny of newly issued government debt. [In doing so] this issuance of debt is following the exact path of the Jean-Paul Rodrigue’ “bubble model”. Words: 290; Charts: 4; Tables 1

So writes Jeff Berwick (http://dollarvigilante.com/blog/) in edited excerpts from his original article* entitled Biggest Bubble In History About to Pop – US Treasury Bonds.

This article is presented compliments of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and www.munKNEE.com (Your Key to Making Money!) and may have been edited ([ ]), abridged (…) and reformatted (some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Berwick goes on to say in further edited excerpts:

For more than 30 years…[the 30-year US Treasury bond price] has trended higher in nominal US dollar terms [as can be seen in the chart below].

Of course, it has been helped greatly by… Ben Bernanke, who has now bought up more Treasuries, by far, than any other identifiable group, but didn’t pay for them out of production; he just did it with the pressing of a button, using a pretty fat finger!

STAGES OF A BUBBLE

…Money printing…is the distinguishing feature of a bubble – its ultimate cause – and there is no more direct form of this model than the central bank printing money to buy the government’s debt right out of the gate.

Jean-Paul Rodrigue is a Canadian most noted (in 2008) for his “bubble model”, charting four “phases of a bubble”. According to the model, while the “smart money” has purchased during the earlier “stealth phase”, institutional investors begin to buy during “take off”. Following media coverage, the general public begins to invest leading to steep rise in prices as “enthusiasm” and then “greed” kick in. “Delusion” precedes the peak.

Here is the progression, according to Rodrigue:

…[Below] is a look at the entire US debt as plotted by the Heritage Foundation:

We then plotted Rodrigue’s “bubble model” over top of the US debt data:

It’s not perfect but it fits the model almost exactly. Where do you think Treasury bonds will head from here?

Editor’s Note: The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://dollarvigilante.com/blog/2013/2/27/us-treasury-bonds-the-biggest-bubble-in-history-about-to-pop.html

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One comment

  1. I believe that the ability of most traders to short will be prevented very soon because of all the “naked” shorting that going on!
    +
    I wonder if there are any recent examples of bursted bubbles that readers can use to “gauge” what such a thing might look like if it happened in the USA?