'Free Irwin' Road Show

I can't withold you from this free video of the Peter Schiff show. As you might have noticed, I'm a Peter Schiff fan. 

U.S. Second Quarter GDP Growth Slows Down

Today the second quarter GDP numbers came out. Real GDP growth slowed down to 1.5% from 2% in the first quarter (Chart 1).

Chart 1: U.S. GDP Growth

This is a significant drop in GDP growth and is conform with the slowdown in the U.S. PMI of which I talked here. As the U.S. PMI went below 50 for the month of June 2012, we can expect a further contraction in GDP growth in the months ahead of us.  This bad news increases the odds of further quantitative easing from the federal reserve to prevent an entire collapse in GDP as we saw in 2008.

To see more about zero hour debt, read the analysis here.

Silver off to the races

As I predicted before, silver is having a breakout these days. And the evidence is piling up. One of the evidences of a bullish scenario is the silver stock at the CME. 

As you can see on chart 1, the silver stock at the CME is declining, ever since Eric Sprott did his PSLV offering of $US 200 million on the market on 12 July 2012. I predict that registered silver will start to decline soon (blue dots).

Once the silver price breaks the $US 30/ounce level, it's off to the races.

Chart 1: Silver stock at CME

Although the CME numbers amount only to 140 million troy ounces (Chart 1) (30 million ounces held by dealers at COMEX), while the silver supply from miners is around 760 million ounces a year, the decline in silver stock at the CME can be a small secondary indicator of declining supply (or increasing demand) in the silver market.

How low can negative yields on Swiss bonds go?

We have been seeing negative bond yields in Switzerland and Germany. Which is very odd if you ask me. The question begs to be asked: "How low can negative yields go?".

To give an answer to this you need to have an understanding of the price-yield curve of bonds. You can gain money if yields go lower (bond price rises), but you will lose money because you need to pay interest on the negative yield. So there should be an equilibrium point and as a scientist I very much want to find that equilibrium point.

There is a very nice online tool for the price-yield curve on this site: Wolfram: Price-Yield Bond Curve.

Inputs for this tool are:
1) Years to maturity (if you buy a new 2 year bond it has 2 years to maturity)
2) Annual Coupon payment (the amount of cash you get per annum)
3) Yield (the annual percentage cash you get on the principal)

I will analyze the 2 year Swiss government bonds in this article.

Chart 1: Swiss 2 year Government Bonds

Gold Price at Record Highs in Euro

Just a little update to tell everyone that gold is likely to reach an all time high today and possibly break out in the next months.

Chart 1: Gold Chart in Euro

Spain is following Greece in its path to bankruptcy

The situation in Spain is looking worse every day. I believe Spain is following the path of Greece into bankruptcy.

Let's take a look at the Spanish bond yields. At the end of 2011 we got the massive ECB bailout package named Long Term Refinancing Operation (LTRO). This relieved the bonds of certain peripheral governments like Italy, Greece and Spain. Lately though, with many Spanish regions on the verge of bankruptcy, Spanish bond yields are rising again. Let's take a quick look at these.

The best way to look at stress in the bond yields is to look at the bond spread between long term maturities (Chart 1) versus short term maturities (Chart 2). If the spread narrows, it means there is stress, because the shorter maturity is about to rise above the longer maturity bond yield. Normally in a healthy economy, longer maturities always have higher yields than shorter maturities. If this is not the case, this means that defaults are looming (see Greece bond yields: shorter maturities have higher yields than longer maturities).

To read the analysis go HERE.

Chart 1: Spanish 10 year bonds

Chart 2: Spanish 2 year bonds