Check this out.... some rather disturbing statistics in here. We've gone from a record surplus to a record deficit in 4 years. Deficit now is approaching one-half TRILLION. That's a TON of debt, absolutely unprecedented. That's like getting a bunch of credit cards and running up a couple million in debt. Not very wise. Personally, I think some of the things touched on here will contribute significantly to the end of the current bull market. I don't think that will happen until next year at the earliest, but it will happen. There are a number of other contributing factors, but out-of-control deficits hardly promote robust long-term economic expansion.
I haven't really posted about this much, but one of the reasons I have been following QQQQ so closely is that I think this may be one of the last great opportunities on the long side for many many years. When this bull market ends, things look very bleak to me after that. I think it will be at least a decade, probably two, before we see the highs of 2000 revisited and finally exceeded:
bigcharts.marketwatch.com
This is really ballpark, and will depend on a lot of things that have not yet even developed... but in between now and then, I think we'll see a bull market, the end of that bull run, then a long-term correction probably lasting a year or more; after that, a period of consolidation lasting several years. Finally after that, a more orderly, methodical, sustainable bull market that will be rather prolonged and will consist of much more modest annual gains than we have become accustomed to.
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AP
U.S. May Bring Back 30-Year Treasury Bond
Thursday May 5, 2:18 am ET
By Martin Crutsinger, AP Economics Writer
30-Year Treasury Bond May Be Coming Back as Government Faces Record Financing Needs
WASHINGTON (AP) -- The 30-year Treasury bond may be making a comeback. The Bush administration, which had stopped selling the bonds in October 2001, said on Wednesday that it was seriously considering bringing them back as the government faces the need to finance record budget deficits.
Bond traders hailed the announcement, saying the action was overdue and would provide investors with a fresh supply of long-term bonds. The price of existing 30-year bonds, which continue to be traded, plunged on Wednesday immediately after the announcement.
Officials said that drop in price, which pushed the yield of the bonds higher, was likely only a temporary reaction to the prospect that the supply of the bonds will soon be increasing. The price fell $18.13 per $1,000 Wednesday, pushing the yield 4.59 percent, up from 4.48 percent a day earlier, according to Moneyline Telerate.
The government stopped selling the bond in October 2001, the fourth and last year the government ran a budget surplus. It was a time when the government felt it did not need as many different types of securities since borrowing needs were falling.
When President Bush took office, the government was projecting budget surpluses would total $5.6 trillion over the next 10 years. Those surpluses never happened, the victim of a bursting stock market bubble, the 2001 recession, the need to finance a global war on terrorism, and Bush's four rounds of tax cuts.
Instead, the government recorded record budget deficits in 2003 and 2004. The administration is projecting another record deficit of $427 billion this year, although private forecasters believe the red ink will be lower.
Timothy S. Bitsberger, assistant Treasury secretary for financial markets, said that after taking public comments, Treasury will decide whether to bring back the bond on Aug. 3, the date the government will announce its borrowing plans for that quarter.
If the answer is yes -- and private market officials believe it will be -- then the first auction will take place in February 2006 with auctions held twice a year, Bitsberger told reporters.
If the auctions are held next year, Bitsberger said, the amount of 30-year bonds offered for sale will between $20 billion and $30 billion.
The Treasury started selling the 30-year bond in 1977 as rising deficits made it necessary for the government to look for new ways to package the debt.
The government stopped selling the 30-year bond during a period when the government was running a string of four surpluses, something that had not happened since the 1920s.
Because of the surpluses, there was not as much need for so many maturity lengths of Treasury bills, notes and bonds.
While Treasury is now selling a 20-year, inflation-indexed bond, it is offered only in limited amounts. The benchmark long-term security now is the 10-year Treasury note.
Micah S. Green, president of the Bond Market Association, praised the government's announcement, saying a survey done by the association indicated there would be heavy demand.
"Investors such as pension funds and insurance companies have a strong appetite for long dated securities," Green said.
Analysts noted that the U.S. move would follow moves in other countries to meet this demand. France this year auctioned a 50-year bond.
"The market wants a 30-year bond," said David Wyss, chief economist at Standard & Poor's.
Wyss compared the proposal to a homeowner refinancing a mortgage when interest rates drop. But he said it would have made more sense to make the change two years ago, when long-term rates were even lower.
The national debt totals $7.76 trillion and will continue rising even if Bush succeeds in his pledge of cutting the annual deficit in half by 2009.
Bitsberger said the consideration of bringing back the 30-year bond was not linked to Bush's Social Security overhaul proposal that would allow younger workers to set up private investment accounts. Diverting money into the private funds will require the government to borrow an extra $100 billion or more annually to meet payments to current retirees.
Treasury's Office of Debt Management: ustreas.gov
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