Rising Interest Rate Concern

Everything was down this week except commodities (Rogers Raw Materials Index) and by my Inflation/Deflation Watch). This is evidence of rising prices in the real economy rather than financial market inflation and it seems the Bond Market (TLT) is responding with higher rates. The 10-Year U.S. Treasury rose this week to another high of 1.34% since the rise began last August.

It’s pretty amazing that my IDW eked out a gain this week despite the fact that virtually all stock indexes in the Watch fell. But copper surged by 7.64%. That along with the Rogers Fund was sufficient to increase my IDW from 182.05 last week to 182.13 this week. 

Also, note that in this letter’s Model Portfolio shown above left, the only positive sector is the Base Metals Energy & Tech stocks. Alliance Bioenergy has been a portfolio savior this year. It’s up 626% thanks in part to an emphasis to “green energy” and recognition of the technology this company is bringing into the market. But the other notable gainers were Uranium Energy and Arianne Phosphate.

There is certainly growing concern about rising rates, which led Danielle DiMartino Booth to send out the tweet shown on your left. The chart on your left is the ratio of the MOVE index to the VIX index. The MOVE index measures 

concerns that rates may be about to rise much higher. What its ratio shows is that investors are at this time becoming very worried about rising 

rates more than they are concerned about rising volatility in stock prices. Of course, if rates are truly on the rise, they will provide considerable competition for stocks.

As Michael Oliver pointed out on my show this past week, his work is suggesting that rising rates may trigger a decline in stocks but that there will be one more major move back into U.S. Treasuries as a safe haven. He thinks that will also benefit gold as well. Then at some point after that, perhaps when panic at the Fed and in the country as a whole sets in due to the public finally recognizing that the U.S. is a bankrupt country and the PhD standard at the Fed has no answers, the tables will finally turn to a violent surge higher in rates that then triggers massive money creation that will make even the trillions recently generated out of thin air seem like a walk in the park.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.