Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
So, Where Is Gold's Corrective Upswing? - 7th Mar 21
US Treasury Yields Rally May Trigger Stock Market Crazy Ivan Event - 7th Mar 21
The Great Reset Is Coming for the Currency - 7th Mar 21
Gold Continues Declines on Bond Yield Jitters - 7th Mar 21
The Case for Inflation - 7th Mar 21
Dow Short-term Stock Market Trend Analysis - 6th Mar 21
Intel Rocket Lake EXPLODE on Launch - 11th Gen CPU's RUN VERY HOT Bad Cinebench R20 Scores - 6th Mar 21
US & UK Head for Post Coronavirus Pandemic Lockdown Inflationary Economic BOOM - 6th Mar 21
FED Balance Sheet Current State - 5th Mar 21
The Global Vaccine Race Against Time and Variants - 5th Mar 21
US Treasury Yields Rally May Trigger A Crazy Ivan Event (Again) In Stock Market - 5th Mar 21
After Gold’s Slide, What Happens to Miners? - 5th Mar 21
Racism Pandemic Why UK Black and Asians NOT Getting Vaccinated - NHS Covid-19 BAME - 5th Mar 21
Get Ready for Inflation Mega-trend to Surge 2021 - 4th Mar 21
Stocks, Gold – Rebound or Dead Cat Bounce? - 4th Mar 21
The Top Technologies That Are Transforming the Casino Industry - 4th Mar 21
How to Get RICH Crypto Mining Bitcoin, Ethereum With NiceHash - 4th Mar 21
Coronavirus Pandemic Vaccines Indicator Current State - 3rd Mar 21
AI Tech Stocks Investing 2021 Buy Ratings, Levels and Valuations Explained - 3rd Mar 21
Stock Market Bull Trend in Jeopardy - 3rd Mar 21
New Global Reserve Currency? - 3rd Mar 21
Gold To Monetary Base Ratio Says No Hyperinflation - 3rd Mar 21
US Fed Grilled about Its Unsound Currency, Digital Currency Schemes - 3rd Mar 21
The Case Against Inflation - 3rd Mar 21
How to Start Crypto Mining Bitcoins, Ethereum with Your Desktop PC, Laptop with NiceHash - 3rd Mar 21
AI Tech Stocks Investing Portfolio Buying Levels and Valuations 2021 Explained - 2nd Mar 21
There’s A “Chip” Shortage: And TSMC Holds All The Cards - 2nd Mar 21
Why now might be a good time to buy gold and gold juniors - 2nd Mar 21
Silver Is Close To Something Big - 2nd Mar 21
Bitcoin: Let's Put 2 Heart-Pounding Price Drops into Perspective - 2nd Mar 21
Gold Stocks Spring Rally 2021 - 2nd Mar 21
US Housing Market Trend Forecast 2021 - 2nd Mar 21
Covid-19 Vaccinations US House Prices Trend Indicator 2021 - 2nd Mar 21
How blockchain technology will change the online casino - 2nd Mar 21
How Much PC RAM Memory is Good in 2021, 16gb, 32gb or 64gb? - 2nd Mar 21
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

China Sends Obama a Clear Message on U.S. Debt

Politics / US Bonds Mar 19, 2009 - 02:43 AM GMT

By: Money_and_Markets


Best Financial Markets Analysis ArticleTony Sagami writes: What would happen if your boss cut your salary, you had no savings, and none of the banks or credit card companies would lend you any money? You'd be in some deep doo-doo, wouldn't you?

Well … that's exactly the situation the U.S. is potentially staring at if foreign governments decide they don't want to loan us any more money by buying U.S. Treasury and other government-backed bonds.

And who buys most of our bonds? China and Japan …

At the end of 2008, China owned $727.4 billion worth of U.S. Treasury bonds. And Japan was second, at $626 billion.

Japan has drastically curtailed buying U.S. bonds now that its economy is in shambles. But China has been — and continues to be — the most important lender to the U.S., essentially funding a big chunk of President Obama's $787-billion economic stimulus plan.

The problem is …

China is Re-Thinking the Wisdom Of Holding So Much U.S. Debt

Chinese Premier Wen Jiabao is worried about the stability of China's huge portfolio of U.S. government bonds.
Chinese Premier Wen Jiabao is worried about the stability of China's huge portfolio of U.S. government bonds.

Chinese Premier Wen Jiabao, speaking at the closing press conference of China's National People's Congress — China's annual legislative session — dropped this verbal bomb on the Obama administration last week:

“To be honest, I am definitely a little worried. We have loaned huge amounts of money to the United States, so of course, we have to be concerned. We hope the United States honors its word and ensures the safety of Chinese assets.”

I highly doubt that those remarks were impromptu. They are a clear message to the Obama administration that it needs to stop spending like a drunken sailor if it expects the rest of the world to buy U.S. government bonds.

The line of Chinese policymakers, economists, and scholars voicing concerns about investing too much of their country's $2 trillion surplus in U.S. debt is growing longer and longer. Many are urging diversifying out of U.S. bonds and into more tangible assets such as natural resources and gold.

The reason is simple:

There is an expectation that U.S. bonds are headed for a big drop in value because we are simply printing too much money to fund our stimulus spending spree.

In fact, the Chinese are already starting to move out of U.S. bonds …

Last summer, China's big state-owned banks — such as the Bank of China and the Bank of Communications — began dramatically reducing their holdings in Fannie Mae and Freddie Mac debt.

It turns out the Chinese made a pretty savvy move … Fannie Mae and Freddie Mac bonds have gotten annihilated since then.

Now, the Chinese are concerned that U.S. Treasury debt could suffer as well.  

So what can you do if you think the Chinese and Premier Wen Jiaboa are right?

Four Safe Hiding Spots To Consider:

Safe Hiding Spot #1 — Shorten-up on maturities …

Long-term bonds are the last thing you'll want to be holding if Obama's administration keeps spending like a drunken sailor.
Long-term bonds are the last thing you'll want to be holding if Obama's administration keeps spending like a drunken sailor.

If you're a fixed-income investor, you could shorten the maturities of your bond portfolio. The Obama administration can't spend, spend, spend without creating a big inflationary problem down the road. That means long-term bonds are the very last thing you want to be holding when inflation takes off.

Safe Hiding Spot #2 — Funds that profit from rising interest rates …

As the mountain of debt shoots to the moon and the safety of U.S. obligations comes under attack, the Treasury will likely have to boost interest rates to get investors to buy its bonds. And there are mutual funds that could make you richer along the way. For example, the Rydex Inverse Gov Long Bond Strategy (RYJUX) fund and the ProFunds Rising Rates Opportunity (RRPIX) fund are meant to profit from rising Treasury bond interest rates.

Safe Hiding Spot #3 — This fund offers protection against a tumbling U.S. dollar …

Another high-profit strategy is to bet that the U.S. dollar is headed for trouble. The Merck Hard Currency (MERKX) fund invests in the currencies of countries with the strongest economies and budget surpluses and could do very well if the U.S. dollar falls. Subscribers of my Asia Stock Alert already own this fund.

Safe Hiding Spot #4 — Non-dollar debt …

I believe the most lucrative strategy of all will be investing in long-term, non-dollar denominated debt of countries with prudent fiscal and monetary practices. International bond funds, like the T. Rowe Price International Bond (RPIBX) or the American Century International Bond (BEGBX), could be big winners.

To sum it up: If I could make one and only one prediction for the next year, it would be that the U.S. dollar is going lower. A lot lower.

And if I'm right, any of the above safe hiding spots should do very, very well.

Best wishes,


P.S. For the latest on the tremendous, money-making opportunities available in Asia, sign up for our new free e-zine, Uncommon Wisdom , with daily updates and recommendations to preserve and grow your wealth.

The best part? A subscription to Uncommon Wisdom won't cost you one red cent! Click here to subscribe.

This investment news is brought to you by Money and Markets . Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit .

Money and Markets Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules