Sell bonds and buy gold

Sell bonds and buy gold

After the Battle of Waterloo in 1815, when Great Britain, Austria and Germany beat Napoleon, the House of Rothschild, the equivalent of more than one billion U.S. Dollar today by selling gold and bonds to buy the exact opposite of the strategy They are probably busy now.

What happened in 1815 was that the Rothschilds had vast quantities of gold, because they thought that Napoleon once again there is a long war. The defeat of Napoleon, therefore, looked like a financial disaster for them as the gold price would fall without soldiers willing to pay.

But the patriarch Nathaniel Rothschild that this strategic error to their advantage by quickly buying bonds - which are depressed in price - and selling of gold. The gold price fell back significantly and bonds because the government no longer needed for the exhibition of several of them to finance the war.

Buy gold, sell bonds

Now in modern markets, it is striking that exactly the opposite of the trade applies. Governments around the world are on the flood of paper with the bond markets to finance its bank rescue operations and plans to stimulate the economy, and the final bill could be extended to more than $ 6 trillion to some estimates much higher, for a full derivatives rescue plan.

In fact, the governments on the need to increase funding to fight another Napoleon. These new supply of bonds will press the price of existing bonds, and that is also in the recent decline in the 10-year bond and its yield rising.

The inflation of the money, we also know that they are a natural enemy of bonds, with a fixed interest rate and are therefore very sensitive to the rise in inflation, which rapidly eroded the coupon, and even negative in real terms. And we know, governments around the world have focused on massive money creation. This can not be good news for bonds, although in the short term, quick return of deflation will help them.

Gold and inflation

On the other hand, inflation is the friend of Gold, since it is an almost fixed supply, and silver is quite possible, even better than its supply is still tight. Gold prices are still relatively depressed in comparison to other commodity-price trends over the past three decades, and silver is probably the most depressed of all the commodity price.

Thus the modern Rothschilds could advise to bet their Waterloo and sell bonds and buy gold and silver. Timing is always a devil in the financial markets - and the reversal of the recent bear market rally in equities bonds would be another short pulses - but also the right foundation. That is how the Rothschilds, the one billion after Waterloo.