China dumped $47.8 billion worth U.S. debt in December. Read this before touching another stock.
From Matthew Rizvi at Stansberry & Associates:
In his campaign for president in 2008, President Obama called George W. Bush unpatriotic for taking “out a credit card from the Bank of China in the name of our children” and driving up U.S. debt.
However Obama has done the exact same thing over his past 5 years in office and is on track to double the debt by the end of his presidency.
Under his watch the U.S. debt has risen from $10 trillion to a whopping $17 trillion today… all while China has remained the largest foreign U.S. creditor.
But that could all be changing… which means Obama’s spending spree could be coming to an abrupt halt.
According to Bloomberg, in December, China dumped a record number of U.S. treasury bonds. Only once in their entire history has China ever sold more U.S. debt in a single month.
The Treasury reports that China sold off a total of $47.8 billion worth of U.S. debt in December alone.
The chief China economist at Royal Bank of Scotland Group, Plc confirmed the move signals China’s desire to “reduce its dependency on Treasuries.”
And according to an interest-rate strategist in New York, “The Chinese move to sell suggests central banks are becoming more wary of taking duration risk… and if China continues to sell again in the next month or two, then more worries will arise as to who will buy the country’s debt.”
CNN also reports China is obviously trying to limit its exposure to U.S. debt and it will likely make fewer purchases of U.S. Treasuries going forward.
This however could bring about some pretty serious consequences.
Nick Stamenkovic, a fixed income strategist in Edinburgh commented that, “If the U.S. can’t rely on China to be the biggest holder, it might mean they yields have to rise.”
This concern was also confirmed during the selloff as interest rates on 10-year treasury notes had their biggest increase since July 2011.
Many investors fear these rising interest rates are just the beginning. They believe they could cause the U.S. to spiral into another recession.
The New York Times shared this concern in a recent article: “The world, evidently, is not prepared [for higher interest rates]. And it’s even less prepared for the bigger crisis that we seem doomed to suffer after this one.”
While average investors typically love low interest rates because of how they can stimulate the economy, very few understand how to net big returns when interest rates start to spike.
For years, Porter Stansberry has told Crux readers about the threat of rising interest rates on the economy. To help alert the public to this trend, Porter’s updated a free educational video on protecting your wealth and alternative ways to make money in a high interest rate economy. If you haven’t already, you can watch it here.
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