Anxiety levels are rising and Treasury yields are falling. The pairing isn’t unrelated, but the depth of the fall in government yields is astounding nonetheless.
Strategic Briefing | 8.23.2011 | Soaring Gold Prices
Gold Tops $1,910 for First Time
Bloomberg | Aug 23
“Gold has continued to blast ahead even with a relatively strengthening U.S. dollar, strongly performing treasuries and other safe havens,” Peter Richardson, chief metals economist at Morgan Stanley Australia Ltd., said by phone from Melbourne. “All of that tells me that this is really all about preserving real purchasing-power.”
Gold futures drop after strong run higher
MarketWatch | Aug 23
Citigroup strategists raised their price forecasts for gold, a move they said was made “to accommodate the impact that global financial tension is having on the metal. Fears about sovereign defaults and currency debasement have left many investors concerned about switching from equities into government bonds, and cash hardly looks an attractive alternative when real rates are negative. Gold has therefore been the main beneficiary of all these concerns,” they said.
Tactical ETF Review: 8.22.2011
Risk is out, safety is in. That’s the message in market action this month, as you’ll see in the following review of ETF proxies for the major asset classes. Bond prices are generally up (and yields are down) while selling dominates trading in stocks, REITs and commodities. The week ahead may bring more churning as the crowd digests the scheduled economic updates: new home sales (Tuesday), durable goods orders (Wednesday), jobless claims (Thursday), and revisions to Q2 GDP and the Reuters/University of Michigan’s consumer sentiment index (Friday). Fed chairman Ben Bernanke also speaks on Friday at the annual Jackson Hole conference. With the recent wave of selling still thick in the air, combined with questions about the economy’s strength, the stakes are high. Will the Fed head outline a new round of monetary stimulus? “If the Fed really is going to go down the route of another round of unconventional policy making, I think they’ve got to go in for, what I called, shock and awe,” Russell Jones, Global Head of Fixed Income Strategy at Westpac Institutional Bank, tells CNBC. Meantime, here’s how the shock and awe in the major asset classes stacks up.
Book Bits For Saturday: 8.20.2011
● Extreme Money: Masters of the Universe and the Cult of Risk
By Satyajit Das
Review via The Globe and Mail
Forget the hand-wringing over the United States losing its triple-A credit rating. The real threat to the global economy is Europe. That’s the no-nonsense view from Satyajit Das, a global risk expert based in Sydney, Australia, and author of Extreme Money: The Masters of the Universe and the Cult of Risk. Mr. Das is counted among the few who predicted the meltdown of toxic credit derivatives that fuelled the financial crisis of 2008. Now the former financial industry wunderkind is warning of new dangers that are threatening the very future the 17-country euro zone.
One More Summer Fling…
I’m taking the rest of the week off (my boss is a generous soul) and so the usual fun may suffer. But I’ll be back in the saddle at the world headquarters of The Capital Spectator come Monday morning.
Still Wondering About Recession Risk
The debate about whether the U.S. economy is destined for a new recession remains unsettled, thanks to a mixed bag of numbers in the latest round of updates. The strongest case for thinking positively resides, ironically, in the labor market. Initial jobless claims, a key leading indicator, is moving in the right direction again, albeit from elevated levels. As I noted last week, the annual percentage decline in the raw data isn’t normally associated with broad economic contraction, and that’s a good thing. But confidence hangs on a thread these days and so tomorrow’s update will be closely watched. One bad number and the crowd may run for cover once more.
Is Obama The New Hoover?
In the early days after Obama’s inauguration, there were many who saw the president as the new FDR. But is the Hoover reference an easier sell in the current climate? It is if you look through the prism of monetary affairs, according to one dismal scientist.
The Politics Of Economics
Texas Governor Rick Perry is running for president and is eager to take credit for his state’s relatively strong economic performance. But just how much accountability should we assign to politicians for economic outcomes? The answer is sure to be warm and fuzzy, reflecting the strange intersection of politics and economics. Rightly or wrongly, politicians usually receive the blame for their cities, states and countries when the economy suffers. Shouldn’t they also enjoy some of the glory in the good times?
An Old Debate, A Familiar Response
Is the rebalancing bonus a myth? A number of readers told me so after I briefly mentioned the concept last week. The charge that rebalancing isn’t guaranteed to deliver a performance premium over the same portfolio that’s left to wander is, of course, true. Much depends on when and how you rebalance, along with the composition of your portfolio. But this caveat isn’t terribly surprising, nor is it particularly helpful in the cause of looking for productive strategies in money management. There are no sure things in finance, for the simple reason that the future’s uncertain. Even “cash” comes with a sliver of risk.
Book Bits For Saturday: 8.13.2011
● Pinched: How the Great Recession Has Narrowed Our Futures and What We Can Do About It
By Don Peck
Interview with author via Marketplace/NPR
Author Don Peck examines how the Great Recession has affected individual Americans financially and psychologically, and discusses what impact those changes will have on American society overall…
“…the average duration of unemployment now is over nine months. And millions of people have been unemployed for a year or two years or more. And I think that what Gus’s story shows is not just the financial loss that results from unemployment, but the psychological loss. Happiness researchers have shown that being out of work for six months or more is really the worst thing that can happen to you psychologically. It’s the psychological equivalent of losing a spouse. So today in the U.S. we have millions of people who are in exactly that situation, and millions more with each year that goes by before we find recovery. And one of the big questions for the U.S., I think, is not just how do we recover, but even once we recover, what are we going to do to get these people — people have become chronically unemployed, whose behaviors have changes, whose skill have eroded — what are we going to do to get them back into the workplace?”
