Tue 12 Jan 2010
Posted by Prieur du Plessis under Investment, Markets, Money
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The diagram below comes courtesy of FallStreet (hat tip: The Big Picture). I suppose until such time as a “Bull Index” sees the light of day, one could argue that the “wall of worry” phase of the stock market is still in place and therefore give the bull the benefit of the doubt.
Source: Fallstreet.com, January 8, 2010 (hat tip: The Big Picture).
Tue 12 Jan 2010
Posted by Prieur du Plessis under Economy, Investment
No Comments
Richard Russell, old-timer writer of the Dow Theory Letters, this morning had the following to say about the US Federal Reserve:
“We must never again allow a sinister group of individuals to seize control of our money system. The Founding Fathers foresaw the danger of paper money issued with no connection to gold. Moreover, it’s imperative that the discipline of gold be taught to all Americans so that the immoral concept of a Federal Reserve can never again be sneaked or thrust upon the American people.
“All Congressmen and Senators must be taught a class in money, fiat money, gold and the Constitution. The course must be mandatory. President Obama is said to have taught Constitutional law. As Obama surveys the Fed, and the results of fiat money in the US today, what in God’s name is he thinking?”
On cue, Ron Paul and Steve Forbes discuss what is encompassed by the congressman’s bill to audit the Fed.
Source: Forbes, January 9, 2010.
Tue 12 Jan 2010
Posted by Prieur du Plessis under Investment, Markets, Money
No Comments
This post provides links to a number of interesting articles I have read over the past few days that you may also enjoy.
• The Economist: Bubble warning, January 7, 2010.
The effect of free money is remarkable. A year ago investors were panicking and there was talk of another Depression. Now the MSCI world index of global share prices is more than 70% higher than its low in March 2009. That’s largely thanks to interest rates of 1% or less in America, Japan, Britain and the euro zone, which have persuaded investors to take their money out of cash and to buy risky assets. Markets are too dependent on unsustainable government stimulus. Something’s got to give
• Michael Santoli (Barron’s): Dispelling some common new year’s notions, January 11, 2010.
A good way to cut through all the forced good cheer of the holiday season is to enter the New Year with a peevish and disputatious spirit. As an excuse to take up a few relevant market themes, here are a couple of complaints about some notions that are getting far more play than they deserve.
• Steven Abrahams (Forbes): The top 10 items shaping interest rates in 2010, January 8, 2010.
Where will interest rates go this year? Keep an eye on the economy, the banks and foreign investors, for starters.
• John Taylor (The Wall Street Journal): The Fed and the crisis: A reply to Ben Bernanke, January 10, 2010.
In his recent speech, the Fed chairman denied that too-low interest rates were responsible. Does this mean we’re headed for a new boom-bust cycle?
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Reading break: Considering the short-term technical picture of US stock markets, Brad Stafford (in Adam Hewison’s absence) (INO.com) provides valuable insight with short analyses of gold, silver and platinum respectively. Click here to access the presentations. |
• Gideon Rachman (Financial Times): Bankruptcy could be good for America, January 11, 2010.
If the US keeps running huge deficits, sooner or later the country will start flirting with bankruptcy. Oddly, it might be best if the crisis came sooner rather than later. For a surprising number of countries, running out of money has been the prelude to national renewal.
• Henny Sender (Financial Times): US commercial property attracts new wave of money, January 10, 2010.
The beleaguered US commercial real estate sector has been attracting a new wave of money from sources including foreign banks, US private equity firms, and a leading Chinese sovereign wealth fund.
• Paul Krugman (The New York Times): Learning from Europe, January 10, 2010.
Europe has its economic troubles; who doesn’t? But the story you hear all the time - of a stagnant economy in which high taxes and generous social benefits have undermined incentives, stalling growth and innovation - bears little resemblance to the surprisingly positive facts. The real lesson from Europe is actually the opposite of what conservatives claim: Europe is an economic success, and that success shows that social democracy works.
• Desmond Lachman (Financial Times): Why Greece will have to leave the eurozone, January 11, 2010.
Much like Argentina a decade ago, Greece is approaching the final stages of its currency arrangement. There is every prospect that its euro membership will end with a bang.
Tue 12 Jan 2010
Posted by Prieur du Plessis under Economy, Investment
No Comments
On the burning issue of inflationary pressures, Asha Banglore (Northern Trust) yesterday remarked as follows: “Inflation expectations as measured by the difference between yields of the nominal US 10-year Treasury note and the 10-year inflation protected security are now at levels seen prior to the onset of the financial crisis in August 2007. As of January 8, the difference between the nominal yield and yield on the inflation protected 10-year US Treasury securities was 245 bps. Inflation expectations have climbed 28 bps during the last 20 trading days.
“The movements of inflation expectations will be watched closely in the near term. The Fed’s ability to influence the course of economic growth will be prevented if inflation expectations become unhinged,” she said.
The minutes of the December 2009 FOMC meeting indicate that the staff did a special presentation on inflation and inflation expectations. The highlights of this discussion were reported as follows: “Evidence suggested that sizable shifts in the longer-run inflation expectations of households and firms had influenced the evolution of inflation over previous decades; in contrast, the anchoring of inflation expectations in recent years likely had damped somewhat the response of actual inflation to the recent economic downturn and to fluctuations in the prices of energy and other commodities. In discussing these issues, participants noted that they bear in mind the shocks hitting the economy and regularly monitor more than one measure of resource slack as they assess the outlook for economic activity and inflation. They also noted the importance of formulating monetary policy in ways that would work well across a range of possible economic structures rather than relying on any one analytical framework. Finally, they underscored the importance of keeping longer-run inflation expectations firmly anchored to help achieve the Federal Reserve’s dual mandate for maximum employment and price stability.”
Meanwile Peter Boockvar reported on The Big Picture blog as follows: “The 10 yr TIPS auction was good as the yield was about in line with expectations but the bid to cover at 2.65 is above the ‘09 average of 2.59 and the average over the past 2 yrs of 2.30. It’s the 2nd highest going back to 2000. Ahead of the auction, the implied inflation rate in the 10 yr TIPS was 2.45% which means if one believes inflation will run above that over the next 10 yrs on average then buy inflation protection and vice versa.”
“Bullish economic reports are most likely to lead to pressure on long-term interest rates and push inflation expectations into a new range. Having said that, a caveat is necessary, final demand in the US economy is significantly weak and it is unlikely to post robust growth until the final three months of the year. Therefore, it is reasonable to expect that inflation expectations will remain anchored in the months ahead,” concluded Bangalore.
Perhaps, but I am in no hurry to see my gold holdings protecting my portfolio against the biggest monetary reflation in human history.
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| Current call: January 08, 2010 |
![[Most Recent Charts from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_4.gif)
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