Sell stocks and buy Treasuries – recession is confirmed and Federal Reserve will be forced to cut rates
Karen Zuba
Jun. 7, 2007

The consensus in market is that economic growth is here and Fed will raise rates. U.S. Treasuries fell; pushing the 10- year yield above 5 percent for the first time since August, as traders added to bets interest rates will rise around the world. However, economy is US is following trail of Japan in late eighties. Stagnation and deflation is what will dominate for the next twenty years. Stagnation can as a matter of fact get transformed into deep recession or even depression.

The yield on the benchmark 10-year note rose up 4 basis points to 5.01 percent as of 11:42 a.m. in London, according to bond broker Cantor Fitzgerald LP. The yield is the highest since August 15. The price of the 4 1/2 percent bond due May 2017 fell 10/32, or $3.13 per $1,000 face amount, to 96 1/16. Bond yields move inversely to prices.

The US Treasuries represent an excellent opportunity at 5% yield. The stock market will go down for the rest of the year and Treasuries will rise. The inverse relationship between Bonds and Stocks manifests the economic weakness and a possible recession in the next three to six months. The recession will accelerate fast into deep recession and possibly depression by 2010.

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