Jim Rogers | U.S. Treasury Bond Bubble

Jim Rogers agrees with Peter Schiff that buying or investing in long term or 30 year government Treasury bonds will be a disaster, and investors should watch them in order to short them when the government stops interceding and artificially propping them up by buying them.

Investement expert Jim Rogers gave a scathing rebuke to clueless Obama Treasury Secretary Tim Geithner and his ideas in relationship to overhauling the bailout of the financial system in the U.S. Rogers in an interview on CNBC said Geithner, who was in charge of the NY Federal Reserve, was wrong for 15 years in a row, and continues to be wrong now. He adds that the Obama plan via Geithner will cause U.S. debt to surge even higher, and is creating an even worse scenario by the same people who didn't identify the crisis coming that we're in. Rogers concludes that Geithner has no idea what he's doing.

Consequently, similar to the insight concerning U.S. debt as Peter Schiff and the
Treasury bond market bubble bursting, Rogers said he has been shorting bonds, although he was ambushed by the Feds when they declared they were going to be buying Treasury bonds, causing Rogers to have to pay out when the Treasury bonds ended up going artificially higher. Just because the government is buying up bonds doesn't mean any of us should buy government bonds, and we shouldn't. Investing in U.S. Treasury bonds for the long term at this time is one of the poorest investment idea out there now.

Rogers added that he is still watching the long term Treasury bond market, and plans on shorting it again, as the amount of debt the U.S. is issuing and the huge amount of money being printed makes inflation almost a certainty. It will also push down the value of the U.S. dollar, making government bonds a risky financial instrument going forward. Another factor making the bond bubble being burst a reality is the low interest rate policy of central banks, which will deflate of cause the bubble to burst.

When the Federal Reserve announced they were going to buy up long term U.S. Treasury bonds, speculators zoomed into the market to buy them up, causing them to hold in value, when in fact they should have been dropping in value. That has added to the bubble being ready to burst, as who's going to be stupid enough to buy Treasury bonds when the government is holding them. They're going to overall get stuck with them, and then what will they do?

Jim Rogers has said in the past he's one of the worst market timers, and doesn't attempt to time the market, and in relationship to bonds said he doesn't know when he'll short long term Treasury bonds again, as it could be sometime this quarter or maybe not till next year.

Government bond prices and bond yields are worthless and meaningless at this time, especially with the 30 year Treasury bond. The only ones buying those bonds are the clueless or the speculators. Long term bonds are dead in the water, and we need to know that before thinking of putting our money down to buy government bonds.

Some people unbelievably think buying bonds is a safe bet at this time, and they'll learn the hard way that they aren't if they go that route. Forced liquidation has been one of the artificial props keeping bonds floating, as well as the U.S. dollar for a short time. That seems to be winding down now, and gold is looking to be the best safety hedge and protection against inflation like it usually is. Forced liquidation has kept gold from performing in its usual manner, but is now starting to act and move like it usually does in difficult economic times.

On a little bit of a different note for Jim Rogers, he started up the Macquarie and Rogers China Agriculture Index fund recently in order to take advantage of the enormous upside potential of China. The China fund measures the consumption of agricultural products by the Chinese, and floats or moves in conjunction with that. The growing middle class in China guarantees that once economic times start to recover, they'll be ready to resume their consumption habits which should make the Macquarie and Rogers China Agriculture Index a good place to put your money for those looking at the long term.

Commenting on Central- and Eastern-Europe, Rogers also said he's not going to put a dime into those areas, as the economic conditions are bad, and they're probably going to get worse before getting better. Currency rates in Eastern Europe especially have fallen since the beginning of 2009.

The key reason Jim Rogers asserts for buying commodities is the inevitable increase in inflation resulting from the misguided government bailout plans. Commodities will resume their bull run and become hot again and extend out longer than he expected because of the temporary lull in buying by consumers and governments.

Back to investing, or rather, not investing in government bonds - specifically the 30 year Treasury bond - Jim Rogers, as I said, is watching the bond market for opportunities to short it. He's also looking at equities in the U.S. the same way, as he's shorting a number of bellwhether companies like IBM, JP Morgan Chase and General Electric, among others. Anything connected to the U.S. dollar, which we should all be moving out of, is looked upon as week, and not something to put our investment money into. General Electric has plunged in value by 65 percent from last year at the same time. Most of the reasoning behind this is the horrid government economic bailout plan which will prolong and deepen the economic conditions.

U.S. Dollar and FOREX in 2009

This year promises to be a very interesting year for the FOREX in connection with the U.S. dollar, as everyone is expecting the collapse of the dollar, but the obvious question is when that process begins, and which currency will exploit that weakness, to the benefit of those participating in foreign currency trading. Now that online currency trading has made it so much easier to trade the U.S. dollar against other currencies, many more traders are doing their forex trading online, making it a very busy business, even more thant currency trading of the past. As far as the forex goes in 2009, it promises to be a wild year this year, and there are probably a lot of opportunities to make a lot of money on the coming collapse of the U.S. dollar if we're patient and willing to wait. Eventually we'll benefit from the fall of the U.S. dollar and U.S. Treasury bond market if we watch things closely and enter the foreign exchange in a timely manner.

2009 should be a good year to put our money in the forex, and the online forex should help those of you who are looking to move in and out of the market with little difficulty, by using the software offered by a number of online forex trading companies.

We may see more currency fluctuation this year on the forex market, and so while their could be more risk, there'll also be more reward for those trading the dollar on the forex. If you're not too familiar with currency trading, the forex market, or even online forex trading, you should probably get yourself a good commodities broker while you learn about forex trading strategy and how to even trade currency in the forex market.

To me, the greatest thing to know this year for trading foreign currency, is simply watching how the currencies interact with the U.S. dollar, and simply watch and wait until the downward trend of the dollar begins. We're probably already at the beginning stage of this, so getting familiar with the forex exchange or if you know what you're doing, getting ready for your 2009 currency trading, because it's going to be a whoper this year, and a lot of money will be lost and made by trading the forex.

Other than tracking the strength of the U.S. dollar, also watching the interest rates other nations set for their currency will partly determine how they may fall or rise against the dollar, and currencies will respond strongly to what nations determine there. Build your forex trading strategy aroudn that this year, as it simplifies things, and unless you're completely in the forex market, and immersed in how it operates, that should be the determining factors going forward for investing in currencies via currency trading.

You can of course trade outside the U.S. dollar as coupled with other currencies, but even if you have knowledge of other currencies and their strengths or weaknesses against one another, the U.S. dollar, for now, will continue to have an impact on currency trading, whether its online currency trading or directly through a commodities broker. So trading the forex doesn't have to be complicated, but you do have to keep up with trends and the general economic and financial states of the nations' currency you're looking to invest in. How they specifically relate to the dollar in that context is the key to foreign currency trading.

If you're comfortable with it, I would definitely look at the way you can formulate an online currency trading strategy on the forex market. Forex trading online is pretty simple, fast, and you can get immediate feedback on the market and currency you're trading in, and many times you can get a dummy account to trade the forex and practice before committing your cash to it. I've seen a number of these online forex software programs and websites, and many of them do a great job. You do have to watch to make sure you close you online forex trades, as forex trading online doesn't ensure those things, and you could make a trade thinking you've locked in profits, and then forgot to close it with the software. Trading the forex online means you're dealing with something mechanical and not human, so you've got to realize it's dumb, and online currency trading can be risky if you forget the proper steps to take that you would otherwise simply tell a currency broker to do. The best thing in that case for forex trading online is to make a cheat sheet list and have it right beside your computer. Once you learn the process of online forex currency trading, you can then put them in a list and just follow it step by step as you make the proper currency trade inputs on your computer.

This year, in spite of the economic turndown, promises to be exciting, and as gold and silver start to move upward, and the U.S. dollar starts to collapse along with U.S Treasurey bonds, we'll see all sorts of opportunities to partcipate in foreign exchange trading. The forex and the dollar will do a lot of business this year, and we need to get a basket of currencies to watch as the story of the collapse of the U.S. dollar unfolds, and we are ready with a forex exchange trading strategy that can be very profitable for us in 2009.

U.S. Dollar Drops against Euro, British Pound

The U.S. dollar fluctuated against other major currencies Friday, dropping against the euro and British pouond after data showed that U.S. non-farm payrolls fell in January by the largest amount in 34 years, while the market turned its attention to President Barack Obama's misguided fiscal stimulus package and bank-rescue plan.
The dollar index, which measures the U.S. unit against a trade-weighted basket of six major currencies, was at 85.78 in recent action, compared with 85.73 in North American trading late Thursday.
The greenback rose 0.6% against the Japanese yen to 91.68 yen, but fell against the euro and the British pound.
The euro rose 0.6% to $1.2862 and the British pound gained 0.7% to $1.4726.
"The dollar's rally against the Japanese yen suggests that traders believe the bad number will probably push the Obama administration to act quickly on passing the stimulus plan," said Kathy Lien, director of currency research at GFT.
'These numbers are dreadful but does it matter? No. All the prior labor market indicators, notably the claims data gave a feeling of foreboding before these numbers. The data broadly delivered.'

— Alan Ruskin, RBS Greenwich Capital
The Labor Department reported Friday that non-farm payrolls fell by a seasonally adjusted 598,000 in January after a revised loss of 577,000 in December, the government said. It's the largest payroll loss since December 1974.
The unemployment rate soared to 7.6%, compared with 7.2% in December. It's the highest unemployment rate since September 1992.
"These numbers are dreadful but does it matter? No," said Alan Ruskin of RBS Greenwich Capital in a note. "All the prior labor market indicators, notably the claims data, gave a feeling of foreboding before these numbers. The data broadly delivered."
About 3.6 million jobs have been lost since the recession began just over a year ago, representing about 2.6% of employment. About half of the jobs disappeared in the three months following the Sept. 14 collapse of Lehman Brothers Holding Inc. (LEH) .
On Wall Street, U.S. stocks surged, with the Dow Jones Industrial Average rising 151 points, or 1.9%, to 8,214.
"Global markets further stabilize as the escalating superlatives in the U.S. unemployment gloom increase the likelihood that the Senate will pass the $920 billion fiscal stimulus package as early as today," said Ashraf Laidi, chief market strategist at CMC Markets.
Stabilizing risk appetite has weighed on the U.S. dollar, the Swiss franc, the Japanese yen, and the Canadian dollar, while the biggest gainers have been the Australian dollar, the New Zealand dollar and the British pound, Laidi said.
Eyes on Washington
The Senate could vote on a huge economic stimulus plan on Friday if a bipartisan group of senators can reach an agreement on a compromise that would trim the size of the tax and spending bill, Senate Majority Leader Harry Reid said Thursday evening. See full story.
"Despite the staggering job losses, the markets are not terribly focused on the non-farm payrolls numbers today," Lien said. "Traders are hopeful about developments in Washington including a possible Senate vote today and a bank rescue package on Monday."
The Obama administration on Monday will release its "comprehensive plan" to revitalize the financial markets, which is expected to include a new strategy to deal with banks' bad assets and a new program to help troubled homeowners avoid foreclosure.
Secretary Timothy Geithner will unveil the plan in a speech on how Treasury will employ the second half of a $700 billion bank bailout package as well as other new programs to shock the financial markets out of the recession. Read more.
"From a risk appetite perspective, the market is unwilling to sell risk trades ahead of Geithner providing clarity on his plans for the U.S. financial sector," Ruskin said. "Currencies like the yen will fail to get any lift before then, while it will offer the emerging world some near-term protection."
Canadian dollar under pressure
The U.S. dollar was last up 0.8% against the Canadian dollar after surging to an intraday high of C$1.2539.
The loonie is "the worst performing currency after Canada's December payrolls fell by a record 129,000," Laidi said.
Employment fell by 129,000 in January, pushing the unemployment rate up 0.6 percentage points to 7.2%, Statistics Canada reported Friday.
This drop in employment exceeds any monthly decline during the previous economic downturns of the 1980s and 1990s, according to Statistics Canada.
Elsewhere in the currency markets, the British pound surged 0.7% against the greenback after hitting an intraday high of $1.4766.
Sterling also rallied in the previous session after the Bank of England cut its key interest rate to 1%. But data also came out from the lender Halifax, showing the first monthly house price rise in 11 months.
"Markets will not be confident that rates have reached their lowest point, but there will be speculation over a period of stability," said analysts at Sucden Financial.
The British pound also has been a beneficiary from growing global risk appetite. As one of the countries seen suffering the most from the credit crunch, the pound tends to rise when fears over the global economy abate, while the euro may also experience a similar move.

U.S. Dollar: Falls Against Yen

Although the U.S. dollar was the strongest against the Japanese yen in a month earlier on Thursday, later in the day it dropped slightly as investors wait for key jobs data which should confirm the U.S. labor market is under extreme stress.

FOREX trade had the dollar declining against the yen later on Thursday, in anticipation of the expected weak jobs report. It fell from its high to drop by 0.2 percent to 90.94 yen on FOREX trading.

I'm not sure why currency traders are looking to the stimulus plan as a measure of what the U.S. dollar is going to do, as it will make little difference. Socialism isn't going to strengthen the U.S. dollar whatever way you look at it.

As a matter of fact, it'll hasten the collapse of the U.S. dollar as the Federal Reserve will have to print out its fiat money in order to pay for the outrageous sum of debt. That will eventually result in inflation and the dollar plunging in value.

Even the goofy idea that changing an accounting rule would make investors be more adverse to risk is a ridiculous assertion. Playing with numbers won't change the dollar in any way, or the current recession.

The so-called accounting fix could keep banks from generally marking down all assets to prices a badly run nationalized bank could have to pay. Welcome to the new socialist United States.

Tinkering and playing with accounting rules changes nothing, and the value of the U.S. dollar or yen, or any other currency always relates to the underlying fundamentals and nothing else, even when things temporarily get mixed up like in the recent forced liquidation period which made the dollar seem to be strengthening, even though there was no reason it should have been.

Sources say that neither the U.S. Securities and Exchange Commission or Treasury Department were talking about suspending the fair value accounting rule.

Nations and investors will slowly back out of investing in the U.S. dollar through buying Treasuries, as exports no longer make sense when consumers aren't buying products any longer. The motivation is thus no longer there to buy up U.S. debt to finance consumers' purchases.

As far as currencies go, the yen should perform as a place of safety again, along with gold and silver. The U.S. dollar will continue to weaken and collapse, leaving the usual havens of safety the place to go.

The euro also dropped slightly against the yen, while sterling made a slight gain.

Currency trading will be extremely important going forward, and the FOREX market a place to make a lot of money for those who understand what they're doing and that the U.S. dollar is set for a long term plunge in value, collapsing to low levels.

The yen should remain strong during the time the dollar falls.

U.S. Dollar: Haven No More?

The idea that refuses to die is that the strength of the U.S. dollar over the last several months has been because investors are seeking it as a haven. I think that couldn't be a more wrong assessment of the reality happening.

What has happened is the shortage of access to cash put hedge funds and companies into positions of forced liquidation, which made them sell off their gold and other commodity positions in order to temporarily halt the bleeding and get some access to cash.

It was never a trust in the US dollar that made that happen, but the absolute need of cash that drove the actions.

The ICE's Dollar Index, which tracks the U.S. dollar against the yen, euro, British pound, Swiss franc, Canadian dollar and the Swedish krona, fell today as cash becomes more readily available, and Americans start to buy up available homes that have been abandoned. People feel safer putting their dollars there than in the greenback itself.

Pending home resales have risen by 6.3 percent to 87.7, the first growth since August 2008. In November pending home resales stood at 82.5.

As far as a haven of safety for investors, we'll see gold take up the usual role, as forced liquidation unwinds and investors put their money into what performs well in difficult economic times.

As I mentioned, investment funds and large companies had to sell off their gold in order to raise cash, that is why gold performed in an abnormal way. It's also why some of the projections of the collapse of the U.S. dollar have been put on hold for a period of time. Even so, it will collapse, along with the bond market collapse. It's only a matter of when, not if.

What all of this says about the U.S. dollar, is it's immediate and long term future is connected to the sentiment of people and their economic concerns. We've seen gold start to rise, as expected, because fear and concerns over the health of the economy are pushing people to invest in gold as the real safety outlet.

Gold will be the real haven going forward, not the U.S. dollar, which never can or should be. Caution is ruling the day, and it will for some time. That means gold will surge in 2009, while the U.S. dollar continues to fall.

The question must be put forth on why the financial press, especially in the U.S. continues to make it look like the U.S. dollar has some type of fundamental that makes it a place of safety. Everything that can happen to make the dollar weak is the underlying reality, not the opposite.

So the idea that it is a haven is bizarre at minimum, and reckless at best, as far as making it look like people should be investing in the dollar rather than running from it as fast as they can.

Against every currency the greenback has fallen today in the ICE Dollar Index, dropping against the yen, euro, British pound, Swiss franc, Canadian dollar and the Swedish krona by mid-afternoon.

In other dollar-related news, the Federal Reserve announced it would extend its currency swaps with 13 other central banks through October 30. That extends the currency swaps from the end of April.

Now that the artificial propping up of the dollar has come to an end with cash and credit flowing stronger, the days of the U.S. dollar being considered a haven or place of safety are over. It never was that, but people misinterpreted, and continue to misinterpret the period of forced liquidation which propped up the dollar because of the sell off of dollar denominated commodities.