Stock Market Breadth Signals Correction Ahead

*******************************

'Everybody' hates Treasuries...and then there's Gary Shilling

Nevertheless, the conventional wisdom on Wall Street is bond yields are set to rise as the Federal Reserve winds down its quantitative easing program next month and (presumably) starts to actually tighten policy next year. Goldman Sachs Asset Management predicts yields on the 10-year will rise to as high as 4% in the next 12 months, Bloomberg reports. 

Of course, predictions of rising Treasury yields have been a mainstay of Wall Street forecasts in recent years and -- save for the "taper tantrum" last spring -- have proven greatly exaggerated. In short, the continued strength in U.S. Treasury prices (which move in opposition to yields) has been one of the most surprising developments in financial markets in recent years -- certainly in 2014. 

But while "everybody" has been wrong about Treasuries, Gary Shilling has remain steadfastly bullish -- and right.

DYI Comments:  DYI doesn't hate Treasuries only that with yields are so low the capital gains possibility is now subdued or long gone.  Of course if the U.S. economy moves into ardent deflation Treasuries will be a great bargain despite the low interest rate.  A possibility is 2% deflation with 10 year Treasuries at 2% you will have a 4% real return; a great solace with stocks in a long term secular decline.  This is why our two model portfolios are shy of long term bonds as the large capital gains possibilities are now long gone. Unfortunately it will be the Great Wait before our formula pushes us systematically  back into long bonds.  Low inflation and/or deflation will be with us for at least the next 3 to 5 years.

********************************

The Wizard of Oz: a tale of monetary politics?

Like much of the world, the United States operated on the Gold Standard in the 19th century, where its paper currency was backed by a limited and fixed amount of the metal. 

Recession in the 1880s and 90s saw the country gripped by deflation. Prices fell by almost a quarter as the money supply contracted and people were lumbered with rising debts. The groups most affected by the downturn were US farmers and labourers. They joined forces to establish the Populistpolitical movement to campaign for their economic interests. 

One of their key demands was the move towards a bi-metallic monetary system, where silver would be added to the currency reserves in order to increase the money supply and ease austerity. This was a demand known as 'Free Silver', and ever since, the fate of the Populists has come to be associated with Dorothy, Toto, and their journey on the yellow-brick road.

*****************************

Nearly one third of the American labor force works on the weekend

4. Nearly a third of Americans work on the weekend.

The U.S. has the highest incidence of people reporting any paid weekend work. 29 percent of Americans reported performing such work in the American Time Use Survey, more than three times the rate among Spanish workers.

5. More than a quarter of Americans work at night.

27 percent of American workers report working nights, which the study defines rather strictly as any work performed between 10 PM and 6 AM. If the definition of "night" were expanded earlier into the evening, say 7 PM, this number would be considerably higher.

DYI