Norcini – If This Happens, It Will Signal A Collapse
May 11, 2012
With global investors concerned about key markets, today King World News interviewed legendary Jim Sinclair’s colleague and fellow trader, Dan Norcini. Norcini told KWN that a decisive break below the 1.8% level on the US Ten-Year Note would signal that a tsunami of deflation could engulf the globe. Norcini said this could trigger “a collapse in tax revenue” and budget deficits would “blow out of control.” Here is how Norcini described the precarious situation: “If we see the yield on the US 10-Year Note break below the 1.8% level, what it’s to signal to bond traders around the world is that we have a deflationary wave coming. I think the reason the 1.8% level has been a floor so far is because most traders are convinced the Bernanke-led Fed will not allow deflation to occur.”
Dan Norcini continues:
“If you look at the following weekly chart of the US Ten-Year Note, notice the yield has never closed, on a weekly basis, below the 1.8% level. It has penetrated that level on more than once occasion, but always recovered to close back above that level by Friday.
If we were to see a weekly close below the 1.8% level, that would definitely confirm the market would be expecting a serious bout of deflation. When the Citibank analyst, Fitzpatrick, mentioned in his KWN interview that the US Ten-Year yield could fall to as low as 1.15%, people have to understand that the conditions around the world would have to be absolutely horrific for that to occur (see chart below).