Thursday, June 4, 2009
On Friday, the Chicago Purchasing Managers Index fell by more than 5 percentage points from its April level, approaching its low for the downturn. The employment component of the index did hit a new low.
These reports might have led to gloomy news stories, but not in the US media. The folks who could not see an $8tn housing bubble are still determined to find the silver lining in even the worst economic news. (more)
Since its March 10 low of 666, the S&P 500 has rallied more than 20%. Pundits and media commentators alike have taken this to mean that the bear market is over and that stocks should once again be the primary asset class for investors.
The bullish bias has taken professional money managers as well.
Barron's "Big Money Poll" (a survey of 100 money managers nationwide) produced an overwhelmingly bullish skew: 60% of respondents were either bullish or extremely bullish about stocks for 2009. All told, 66% expect to put more money to work in equities within 12 months.
Lest you start believing these guys know what they're talking about, let's consider their collective track record for the financial crisis thus far: (more)
Last week, the U.S. bond market fell substantially and yields rose as investors finally began to see the obvious: Quantitative Easing (the purchase of U.S. Treasury bonds by the Federal Reserve) and its potential inflationary pressures are weakening the U.S. dollar.
As most economists will tell you, the U.S. economy is in a depression. Statistically speaking, most depressions are deflationary and therefore accompanied by a fall in interest rates. However, the bond market’s recent behavior provides evidence that the current depression is not deflationary. On the contrary, inflationary pressures are building and interest rates are rising. Bond investors, looking ahead and seeing a light, are realizing that it is the headlight of an oncoming train…and this oncoming train is the trillions of dollars of U.S. bonds which must be floated by the Federal Reserve in the next few years. The consequences of this flotation will include a weakening of the dollar and an increase in interest rates. Investors are finally awakening to this trend which we believe will continue for some time. (more)
May 26, 2009
Within the inflation debate, few investment topics stoke such contentious discussions as gold. Whatever Fools think about the metal, they hold those views strongly. As the relevance of gold in the context of macroeconomic developments grows even clearer, I offer this consolidated treatment of the top 10 reasons to hold gold through the next several years.
1. Awash in a sea of trillions
First, retire the notion that gold is a commodity. With its pedigree as an ancient and universally recognized physical store of value, gold is held by central banks as a reserve currency. Gold remains a crucial anchor for the planet's relatively short-lived and frankly unimpressive experiment with unbacked fiat paper money. While paper money can become encumbered by debt, obligations, and the ravages of a printing press, gold cannot. (more)
Jochen Sanio, BaFin's president, said the danger is a series of "brutal" downgrades of mortgage securities by the rating agencies, which would eat into the depleted capital reserves of the banks and cause broader stress across the credit system. "We must make the banks immune against the changes in ratings," he said. (more)
Monday, June 01, 2009
You are going to have to get used to the fact that you will have to spend a greater proportion of your income on food in the future - after decades of spending less.
That's according to Joakim Helenius, chairman of Trigon Agri, an integrated soft commodities producer in the Ukraine and Russia. He believes that food inflation has only just started - and he is not alone.
Commodities perma-bull Jim Rogers thinks people should not buy shares - he says they should buy commodities instead, especially agricultural commodities. (more)