The great commodity bubble has been steadily bursting since mid-2008, but has taken a nosedive since early 2011. It’s now down 70% overall, and 80%-plus in industrial commodities like iron ore.
Real estate has seen its first bubble burst and it clearly looks like a second one is on the way.
Stocks have now seen a third bubble and the largest burst is still just ahead… but, the question remains: when does it begin in this  endless realm of QE and stimulus?
The bond and gold markets may give us some clues here. Look at the 10-year Treasury bond yield below:
The last major spike in yields peaked at 5.3% in mid-2007, just ahead of the great financial crisis.
That crisis brought yields down to 2% in late 2008 – both from recession fears and U.S. bonds becoming the safe-haven play along with the U.S. dollar – not gold!
But QE brought yields back up to just over 4% by early 2010 and they’ve been falling ever since. Gold is following right along with it, with inflation unexpectedly sinking, rather than rising, after unprecedented QE.
By mid-2012, the first fall in yields was down to 1.37%. We’re now at levels even lower than that, with interest on the 10-year Treasury reaching 1.34% Wednesday morning.
This should be a strong endorsement, especially with Lance Gaitan’s Treasury Profits Accelerator predicting a snap-back, near-term move down in bonds (up in yields).
I think a major, or at least substantial, reversal in yields going back up could come soon – just as everyone now expects yields to keep going down towards zero.
And that’s the problem.
The “dumb money,†or large specs (mostly failing hedge fund managers that have become the trend followers instead of the trend leaders), are at near-record bullish levels long on futures while the commercials (insiders), or smart money, are at record short levels.
They’re the ones that are right at major turning points like this. If the shorts are right, then yields will go up substantially… likely for many months.
