Mike Shedlock is suggesting that US treasuries are a good buy at this point. Let's see if he's right...

Currently yields are at 4%. If yields drop to 2%, that means the price of 30-year treasuries would be double the current price. Could it happen? Short-term, based on this chart, it sure looks like a possibility.

Short-term (i.e. within the next 12-18 months), the outlook for US treasuries is quite bullish.

But let's look at the longer term. Since 1980, yields on US treasuries have been going down. We have a 29-year unbroken uptrend (bull market) in treasuries (downtrend in yields). The current bull market in treasuries seems just a tad ancient. When this trend finally reverses, look out below.

Fundamentally, you'd be mad to own US treasuries right now. The average rate of inflation in the US since 1971 has been 7% per year. A long-term yield of 4% makes absolutely no sense. Ignoring inflation when buying bonds is like ignoring P/E ratios when buying stocks.

Buying US treasuries now would be like buying dot-com stocks in 1999. Sure it might go up 100% in three months, but if you don't time the trade perfectly you'll be wiped out. You better get the timing exactly right, or else you could lose your money.

By 1999, the US stock market had been in an unbroken uptrend for 16 years. In 2000 the trend finally reversed, and all the suckers that got in after 1997 have yet to make any return on their investments.

Don't be a sucker.