This article originally appeared on RealMoney.com on Sept. 3, 2014 at 5:00 p.m. To read more content like this AND see inside Jim Cramer's multi-million dollar portfolio for FREE... Click Here NOW.
For the first time in history, the yield on the 30-year U.S. Treasury bond has fallen below the real GDP growth rate. The closest these two have ever come in the past was October 1998 when the spread was down to only 0.09%. The median spread, going back to 1977 (earliest data available), has historically been 3.63% with the average 4.26%.
So what's going on here? In a QE-flush world Treasury yields correlate more closely with rates across the pond in the primary eurozone economies than with domestic economic trends. U.S. Treasury yields, and all rates that flow from them, are the lucky beneficiaries of the economic malaise throughout Europe (July's retail sales volume fell 0.4% vs. expectations of flat), proof that silver linings do sometimes occur, particularly these days for borrowers. A great deal of attention will be paid to the ECB's comments on Thursday, with mounting pressure to announce something that will inject some serious caffeine into an economy that is looking more and more like Charlie Sheen around 10 a.m ... on any day, let alone any given Sunday. This could be an enormous boon to those at the Fed, as the removal of one central bank from the sovereign bond trough may elegantly coincide with the arrival of yet another. Even Japan is sampling the sovereign delicacies, slurping up nearly $37 billion in Treasuries in the past six months. STOCKS TO BUY: TheStreet Quant Ratings and Dave Peltier's Stocks Under $10 has identified a handful of stocks that can potentially TRIPLE in the next 12 months. See them FREE today... Click Here NOW. While the engine of U.S. economy is starting to get a nice V8 purr, around the globe economies are starting to sputter like my college Suzuki Samurai.
- The eurozone is perilously close to being back in a recession, with Italy already back in one.
- Japan is flailing after the crushing sales tax increase in April.
- Brazil is in contraction, with Q2 GDP dropping 0.6%.
- Argentina is in default, again.
- China is slowing, with rising fears over the magnitude of bad debt and even Hong Kong's GDP contracted last quarter.
- Russia is suffering notably under the economic sanctions imposed due to its dalliances with Ukraine.
- Inflation-adjusted investment in equipment to grow 5.7% in 2014, 8.3% in 2015 and 7.2% in 2016.
- Inflation-adjusted expenditures for information processing equipment are anticipated to increase 4.0% in 2014 and by double digits in each of the next two years -- 11.9% in 2015 and 10.2% in 2016.
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