Gold was up 2+% along with a record low closing yield on the 10-year Treasury bond today as news out of Europe deteriorated. Yet, inflation-linked assets such as oil and copper were down in price. Thus we are seeing a rerun of periods in 2008 and 2011. In both those summers and into the fall, gold and high-quality bonds got marked up in price as credits once thought to be strong ones were unmasked as weaklings. The pattern of a simultaneous flight to hard money and to the credit of the national governments with the best credit in the world is consistent a perceived deterioration of business prospects.
The overvalued Facebook IPO today shows insiders distributing their cheaply-acquired stock to the ’99%’. LOL, haha, ROTFL. It is as much a sign of an Internet 2.0 bubble top as the Glencore IPO last year was for most commodities. But the top does not usually happen immediately. Some stocks top before others. The “real deal” assets such as gold do not really crash, though their market prices fluctuate.
We here at TDC mostly focus on the big picture. I think Jeff Harding and I have done a (much) better than average job in assessing macroeconomic and major market trends over the past few years since we began blogging around the time the financial hurricane hit in 2008. Shorter-term trading-related comments are really not appropriate for this site, and I will be providing them as I once did at my blog, econblogreview.blogspot.com. These may or may not be updated daily; you may want to RSS the site. More macro-related comments and thoughts will continue to be posted here.
Please do not think that QE3 will bail bad assets out. Prior Fed actions have not done so, and in any case, sometimes past is not quite prologue.
Asian stocks are down a good deal as of now, but unlike in 2008 and 2009, they have not been very predictive of what American markets will do the next day.
We are now even deeper in financial Extremistan. I am therefore cautious and looking for high-quality investment opportunities, having had a pretty good run the past three as well as the past thirty years in markets that generally made more sense than these.
I posted this link in the comments to Keith’s latest article but you may not have seen it;
http://www.bloomberg.com/news/2012-05-14/treasury-demand-shows-deficits-irrelevant-with-record-yields-1-.html
It’s different this time! A new paradigm! A permanently high plateau!
Mind you, I’m not calling a top. What’s the collective stupidity of the human race? Most people don’t have a clue that “all the riches that they boast consists in scraps of paper….” as to London they are travelling, to sell Welsh copper, & buy South Sea.
You should nevertheless think about your statement – “high-quality bonds”.
JR: I responded on that thread. Or you can email me at weiner (dot) keith (at) gmail.
Let’s leave this thread for discussion of Doc’s article.
Ahh… Keith, this article refers to government bonds, which is directly related to the Bloomberg article. I may not agree with you on the efficacy of this basis at explaining anything but how about you leave your opinion of my comment to your article?
JR: I thought I was talking about market perception of the quality of bonds. Clearly, as risk has been perceived to increase for a number of European govvies, the price of various other govvies has been pushed to record highs (record low rates). I wasn’t trying to say or imply anything dumb that the U.S. is the same quality borrower it was in 1999, when people worried about a “shortage of bonds”. LOL