Monday, April 18, 2011

U.S Fiscal Status …. Oh Myyyy …

The U.S. has accumulated huge deficits and somebody has to pay the bill, I do believe the first “payer” will be the long term U.S. government bonds, in other words I think that interest rates will rise.

I think in the following fashion: as the U.S has accumulated more than 14 Trillion of deficits (currently almost at par from the GDP) and as company that leverages more and more , the risk of default increases, therefore the rates should increase.

The Quantitative Easing 2 will end in June and I honestly think that demand for U.S. Debt (T-notes, T-bill, T-bons) will decrease . Today the U.S. outlook was changed from stable to negative, 5 years ago was unimaginable, now is a reality , we are living in a world were the poor saved the rich….. One for a change.

Unless the U.S. Budget shrinks (diminishing the role in the economy) debts will increase and the value of the dollar will continue eroding (as I stated 2 years ago in my dumping dollars article, being right so far). So if you are relying in the U.S. dollar I would be all in , maybe not in at all (in fixed income)

Disclosure : I currently hold short positions in U.S. Debt or synthetics of U.S. Debt

*this article or any of the previous or following ones does not constitutes any investment advice or suggestion.

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