U.S. bonds hit 8 month low

U.S. bonds have finally broken down and from here on it's only going downwards as resistance is broken.

The funny thing is that Ben Bernanke has shot himself in the foot by telling everyone he's going to stop buying bonds at the end of 2013. The result, everyone flees U.S. bonds today. I guess Jim Rogers' call for a collapse in bonds was a hit right on the head of the nail.

Chart 1: 10 year U.S. bonds

The even odder thing we saw today is that the U.S. dollar went up 1% against the euro which is very contradictory. Normally the U.S. dollar goes down when the bond market goes down as seen in this correlation. So I think this is a temporary phenomenon. U.S. dollar strength won't last long with a weak bond market. Max Keiser is even predicting the end of the U.S. dollar in 2013. I think he's onto something.

If the Federal Reserve really were to stop buying U.S. bonds, bond yields would spike, mortgage rates would spike. The debt burden would increase tremendously with higher yields, which will bring interest payments much higher. If interest payments go higher, the budget deficit will increase when social security, defense, health care, education and pension spending isn't cut. Higher budget deficits asks for higher taxes to reign in the budget deficits and that will make stocks decline. That would lead to a start of a depression era.

You would think that the U.S. dollar would strengthen, but how can a currency strengthen with an exponentially higher debt burden and higher interest payments? It can't. First, the bond holders need to lose big before a recovery can even start. The only true safe haven will be precious metals.

Max Keiser with Peter Schiff

Max Keiser is one of my favorite reporters ever since his take on Goldman Sachs which went viral on Youtube. I always follow the Keiser Report every week.

It's an exceptional occurrence to see Peter Schiff and Max Keiser together on the screen so I can't ignore to put up the video here.

J.P. Morgan crashing on high volume, silver manipulation over

J.P. Morgan is crashing on high volume as losses keep piling up. After 2 billion last week, it hit 3 billion this week and I think it will keep increasing.

Chart 1: J.P. Morgan Chase & Co. (JPM)

This interview with Bix Weir discusses the squeeze in J.P. Morgan. 

As Max Keiser points out how the silver market is being manipulated by J.P. Morgan, finally, we see a weakening J.P. Morgan. As all banks were up today, J.P. Morgan was the only bank going down, with news about the cancellation of a share repurchase program. They won't even buy their own shares anymore.

As J.P. Morgan weakens, I predict that the silver price will be unleashed to the upside once the black swan appears.