Bond Breakdown Gathers Momentum Ep. 353

Published: May 16, 2018, 12:30 a.m.

b'Las Vegas to Vancouver to Las Vegas
\\nI\'m recording today\'s podcast from my hotel room in Vancouver, Canada.\\xa0 I\'m up here for a couple of days at the\\xa02018 Vancouver Resource Investment Conference\\xa0and actually I left Las Vegas to come here; I am at the Las Vegas Money Show,\\xa0I was there yesterday and I will be back again tomorrow for another talk, and on Thursday I am flying to Puerto Rico for another conference before heading back to Weston, Connecticut for the summer.
\\nDebating Bonds with Gary Shilling
\\nI was on a panel yesterday in Las Vegas at the Money Show and it was moderated by Mark Skousen, and one of the guys on the panel with me was Gary Shilling. And I\'ve been arguing with Gary Shilling for a long time; there are plenty of YouTube videos of Shilling and myself over the years, arguing. He is basically a perma-bull when it comes to U.S. Treasuries. He is always bearish on the stock market and he\'s always bullish on the bond market.\\xa0 For a while, he was right to be bullish on the bond market, because we had a huge bull market in bonds. But the bull market appears to be over, yet Gary Shilling is as bullish as I have ever seen him on the U.S. bond market. He is also bullish on the dollar; I guess if you are always bullish on the bond market you are also bullish in the dollar because bonds are dollar I.O.U.\'s.
\\nShilling: China Would Never Sell U.S. Bonds
\\nNow I think this is one of the times when Gary Shilling is dead wrong.\\xa0 One if the points that he made that I challenged him on was when he started talking about China.\\xa0 He said the Chinese would never sell their U.S. Treasuries because if they sold them, the prices would collapse, and they would be destroying their own portfolio; therefore they are not going to sell because they do not want to destroy the value of the assets they might want to sell.
\\nChina Can Just Let Their T-Bills Mature
\\nI pointed out to Gary that the Chinese don\'t have to sell any Treasuries to get out of them.\\xa0 They simply have to let them mature. Then it is not China who has to sell the Treasuries, but the U.S. Treasury who has to find a new buyer to replace China.\\xa0 If China were dumb enough to own a lot of 30-year government bonds, then they would have to put those bonds on the market.\\xa0 That would affect the price.\\xa0 In fact, if you were China, and you owned a trillion dollars worth of 30-year bonds, and you did try to sell, the price would collapse.\\xa0 China may be dumb, but they are not that dumb. They own a lot of T-bills, so they will mature in 30 days, 60 days, 90 days; they don\'t have to sell anything.
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