At the start of 2012 we publicly proposed two pair trades for 2012.
Nine months later and with huge changes in the
market having occurred, we are revisiting our recommendation for the
GLD/TIP compression pair trade, which has performed well over this
period.
Our argument for this trade at the time was as follows:
“Historically US real interest rates have an
inverse relationship with gold prices, a relationship which we have
written about frequently. The basic premise is that when monetary
policy becomes more accommodative, US real interest rates decline and
gold prices rise due to the ease in monetary policy.”
Our explanation for the inverse relationship between gold and U.S. real rates is as follows:
When US monetary policy is looser, real rates fall
and therefore investors buy gold for a number of reasons.
Firstly, lower real rates could imply higher
inflationary expectations in the future therefore gold is bought as a
hedge against this possible inflation. (more)
When in 1994 Business Week exclaimed “They’re back!” about teenagers,
the United States was a different place. Their baby boomer parents
could afford teenagers buying pizzas, going to concerts, purchasing
clothes, cosmetics, CDs, cars and computer games like never before.
Today, the country is stricken by poverty, as 50% of the population
sits at or below the poverty line. Since the market collapse in 2008,
while pundits and “authorities” pushed dope-like propaganda about
“Greenshoots” and the “Recovery” incomes fell more than ever in American history.The teenager in 1994 was an advertiser’s wet dream – a consumer group with loads of free time and the disposable income of their parents to pursue a life leisure. In 2012, it had fallen to the wayside, a battered corpse of diminishing returns as the teenager went from worrying about social norms to lamenting public education and work as a teenager..
Although the teenager declined in numbers from 1977-1992, starting in the mid nineties it began to ride a population crest that guaranteed young adults the spotlight in American consumer culture. After all, the teenagers’ most valuable purpose is to be a blank slate and a consumer or so popular mythology sways us to believe.
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