Tag Archives: corporate bonds

The Deteriorating Economic Outlook

I wrote an article with Dr. Paul Craig Roberts and John Williams (Shadowstats.com) which details why the negative 2.9% GDP contraction for Q1 as measured by the Government was likely a gross misrepresentation of the real GDP decline which occurred.  We also explain why this will likely lead to a further measure decline in GDP for Q2, despite Wall Street’s interminable optimism in calling for a 3% rise in GDP.   Finally, we explain the implications for real wealth being generated by the economy in relation to the inexorable rise in Government debt:

Years of understatement of inflation has resulted in years of overstatement of GDP growth. Thinking about the many years of misstatement, we realized that the typical computation in nominal terms of the ratio of debt to GDP is seriously misleading.

You can read the article here:  The Deteriorating Economic Outlook

With the economy starting to contract, corporate profits and cash flow will continue to dry up.   This will place the highly overvalued corporate bond at risk for a devastating sell-off.  Corporate bond spreads are the tightest they’ve been to Treasuries since 2007.  Anyone remember what notable credit market event followed 2007?

You need to dump your bond fund investments now.  As in, call you investment advisor or retirement fund administrator and get out.  ASAP.  Don’t put the money into money market funds because they blow up too – see 2008 for reference (they all have derivatives in them).  Move as much money as you can into precious metals and junior mining stocks:  Junior Mining Stock Research Reports.

While every chart and technical analyst under the sun has been screaming that the metals and miners are going to sell-off here, they just keep bouncing back and going higher – climbing that wall of worry…