Maybe you remember news stories like this from last December, when it seemed the entire world's economic system was about to break down.
Dec. 9 (Bloomberg) -- Treasuries rose, pushing rates on the three-month bill negative for the first time, as investors gravitate toward the safety of U.S. government debt amid the worst financial crisis since the Great Depression.
Negative yields essentially mean that you are paying the government to loan it money. It's a flight to safety at any cost. Buying bonds with negative yields makes absolutely no sense except in the most desperate of times.
Last December was the first time it had happened since the Great Depression.
It happened again today.
(Dow Jones)--Demand for the three-month Treasury bill is ramping up as investors seeking safety heading into the end of the year stock up on the safest possible securities at a time when Treasury bills are in short supply.
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Bill yields last fell below zero in late 2008 amid the financial market panic that was triggered by the Lehman Brothers bankruptcy. The decline now isn't driven by the same sorts of fears though - it's more about a scarce supply of T-bills amid strong demand for safe assets given the hazy economic outlook.
Scarce supply? Do they think we are morons? The Federal Government is issuing debt like it grows on trees. There are enormous mountains of treasury debt out there in the financial world because of America's unprecedented deficits.
It was only two days ago that a Federal Reserve bank president had this to say.
Fisher told a group of bankers and business executives that he was surprised at how low rates have remained despite what he termed a "significant" increase in debt issuance.
Even if we all lived in the WSJ alternate universe where treasury bills were in short supply, it still wouldn't make sense to buy bonds with negative yields unless the economy was about to crash.
Does the WSJ think we didn't notice? Perhaps they think we also didn't notice that gold, the other safe haven investment that people run to when they expect a financial collapse, was hitting new all-time records.
Negative treasury yields and rising gold prices was exactly what was happening last December. If it was just one of those things but not the other, then you might have reason to believe the WSJ. But the combination of both of these events has to concern us.
To put it simply, while the financial media keeps feeding us happy-talk about an economic recovery, the big money, the smart money, Da Boyz on Wall Street are running to safe havens.
It's like when you are standing on a sidewalk and you see the bomb disposal team run by you in a panic. You have a choice of finding out what they are running away from, or you can run after them as fast as you can.