The Flight to Quality Still = Bonds

Flight-To-Quality

For all the rantings about hyperinflation and the demise of the dollar as the reserve currency, the fallacy of this constant preaching is quite plain and straight forward. WHERE DOES MONEY GO IN THE ALTERNATIVE? While the gold promoters tell you it is only gold, after the German Hyperinflation the new currency was backed by tangible assets – real estate.

While smart money has been trying to get off the grid buying tangible assets including real estate, the majority of the money is NOT SMART and that still runs into bonds. Investors shifted record amounts out of U.S. stock funds and emerging markets and into bonds for nearly 4 months now. I have been reporting that the average RETAIL investor was NOT yet in the stock market. Most of the advance has been fund buying including pensions.

The KEY to watch is the FLIGHT TO QUALITY. As long as the majority still run into bonds, this demonstrates that the confidence in government is STILL INTACT. Those that keep preaching about the demise of the dollar and the United States have no clue of the historical context in which they speak. If we continually see this rise in geopolitical tensions, do you really think people would sell the dollar and buy China, Russia, or Europe? There is simply no other game in town.

The strange correlation of geopolitical events and the Olympics is yet another interesting observation. The Olympics were held in Berlin in August 1936 and Hitler invaded Poland September 6th, 1939. This timing lines up with our models for 2017 – three years following the Olympics. This correlation is only interesting, for it cannot be established over extended periods of time due to the lack of continual Olympic games.

Nonetheless, it is the Flight to Quality that is indicative of CONFIDENCE. Pay attention to its direction for until that changes, there is no serious decline in the CONFIDENCE behind the dollar or the United States.