Thursday, August 18, 2011

Societe Generale Economist: Treasury Securities are a Horrible Investment

Societe Generale economist Alan Edwards,who predicted the Asian financial crisis of 1997-98, the U.S. housing implosion and who sees China's economy suffering a hard landing, is warning on Treasury securities.

Edwards sees Treasury yields falling further over the next six-months because, he says, the economy will weaken, but then, "On a 10-year view I think government bonds are a horrible investment," Edwards told Reuters in an interview. "My view is that the end game for all this is monetization and trade war and very rapid inflation."

My thinking is pretty much in line with that of Edwards, but I don't see the six-month down turn. The Fed is allowing the money supply to grow now, which will prevent a slow down in the economy and the price inflation is already perking up. It's much too dangerous to be long bonds now, the downward break could come at any time.


  1. I don't know if I would take advice from them Societe General is leveraged 50 to 1

  2. Bob Wenzel on Feburary 2011:

    "Now, that the this desire to hold rates thaws, as the Bernanke manipulated recovery intensifies, many are moving their funds away from the perceived safety of Treasury securities, thus, resulting in further supply on the market, which translates in even higher rates.

    I see nothing in the near future that will change this. In fact, I expect the rate climb to intensify. The thawing of the demand to hold cash will escalate as price inflation expands to more sectors.

    Once mainstream Keynesian economists recognize that rates aren't going lower, I fully expect them to be way off on how high rates go. They may project a 50 basis point to 100 basis point increase in rates, but they will be dramatically low. Long-term rates are going to climb by hundreds of basis points. In fact, I wouldn't be surprised to see rates at double digit levels by the end of 2011."

    Current US Generic Govt 10 Year Yield: 2.05

  3. @anon 11:14am

    in the EPJ Daily Alert, Mr. Wenzel warned, loudly and clearly, that the slowing money supply growth, beginning in Q1 and continuing through the first part of Q2 would result in lagging economic numbers and that the stock market could falter in the near time, with an ensuing kneejerk reaction of flight to safety in treasuries. He further warned that the eurozone's slowing of money supply growth would result in a collapse of the eurozone stock markets and, likewise, trigger a kneejerk reaction of flight to safety in treasuries.

    His long term view has not changed, but you're missing dearly if you're not subscribed to the daily alerts, which give excellent info on short-mid term gyrations

  4. Robert Wenzel,

    Do you think the pick-me-up from Mr. Bernanke's latest round of money printing will cause a (temporary) drop in gold prices?