The Economist: World debt map & table

The Economist has a world debt map in this article. The U. K. and Japan are in red. In the table, the U. S. is listed 7th in terms of sustainability of debt.

Those worried about the massive U. S. deficits can see a hint of the future by watching how events unfold in Britain and Japan. While their situations are not exactly the same, the overall debt loads are higher than in the U. S. With Japan having already lost its AAA sovereign debt status.

Gold, bonds and stocks (SPY at least) all moved up on Friday. Gold and bonds moving up together are a conundrum. If there is inflation it will be terrible for long term bond holders. At some point, most observers expect opposite movements. However, for now both gold and bonds are rallying together.

U. S. bond owners are still at the party, still drinking from the punch bowl. Virtually every commentator and pundit is screaming that bonds have to fall, yields have to rise. So far that chorus has been dead wrong, as is often the case when everyone is on one side of the fence. Part of the explanation of why bonds continue to rally, is low CD yields at banks. Yield hungry consumers are moving out in time to get a bit of yield.

Again, at some point, bond owners are going to suffer losses, possibly big losses. The small fish public has been pouring money into bond funds, and ETFs. For now the party rolls on, but it is a good idea to stay near the exit, instead of near the punch bowl for another drink.

It reminds me of other market situations where commentators warn of a bubble or of imminent collapse two years or so ahead of a much higher top. No one knows the exact timing, but for now public commentator sentiment and the chart still favors the bullish side for bonds.

One aside about the debt map is that Russia, India, China, Brazil, all are in green, all having relatively low overall debt levels. If the future unfolds such that investments in countries with "dry financial powder" do best, these are some ETFs specializing in those countries: RSX, EPI, FXI, EWZ.