This article attempts to outline all the macro forces and trends that are currently impacting the global economy and financial markets. It is only by understanding all of these forces (and the interplay between them) that investors can begin to see the inevitable path from banking crisis to sovereign debt crisis to currency crisis.
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Trend followers are not concerned with balance sheets, income statements, supply and demand, the outcome of Fed meetings, or even the news. That’s because they don’t try to predict the direction of markets, they simply react to market movements and follow along.
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For a number of weeks the Fed has been talking about “tapering” its asset purchases, and from the recent spike in US government bond yields and the decline in US equities it seems as though investors them at their word. This does however raise an interesting question: If the Fed really is going to begin taking away the punchbowl why is the dollar tanking?
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In 2002 Warren Buffet proclaimed that derivatives were ‘financial weapons of mass destruction’ (FWMDs). And he was proven correct. But who cause crises? And why? And can so-called ‘liquidity regulation’ prevent the next crisis? Let’s take a closer look at proposed liquidity regulation as a response to the growing use of ‘collateral transformation’: the latest, greatest FWMD in the arsenal.
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The spot gold price rose as high as $1394 per ounce during Thursday’s Asian trading, before easing back by lunchtime in London, as European stock markets also fell, following selloffs in the US and Asia. Silver dropped back below $21.90 an ounce after briefly touching $22, while other commodities were also down on the day.
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For those that have been sitting in cash and have missed the 25% rise in the S&P 500 since November 2012, the recent 5.3% correction likely represents the best buying opportunity you’re going to get. The index bounced perfectly off its uptrend line and the outlook for US equities remains bullish.
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U.S. equity sector performance suggests that a re-pricing of Fed expectations is slowly developing.
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Investors expect the Fed to begin reducing QE as early as this summer. However, whether or not the Fed follows through on “tapering” largely depends on whether the US economy can stand on its own two feet without support from the central bank? Our view is that it cannot and this article examines why that’s the case and why talk of “tapering” is just talk.
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Gold prices hovered just below $1380 an ounce Wednesday morning in London, with silver trading around $21.80, after the metals failed to break through $1380 and $22 respectively. European stock markets ticked higher by lunchtime – with the exception of Germany’s DAX – regaining some of yesterday’s losses, which were followed by sell offs in the US and Asia.
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Friday was one of those days when so many markets move so dramatically that it’s hard to know what to focus on. But in this case the headline numbers – US stocks way up, gold way down, foreign markets all over the place — matter less than the interest rate on 10-year Treasuries, which spiked.
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The average London home is now worth more than it was at the height of the property boom in the fourth quarter of 2007. However, while property prices in the capital have recovered what they lost during the financial crisis, property in the rest of the UK has not.
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Spot gold fell to three week lows below $1370 an ounce Tuesday, as stocks and commodities also fell amid ongoing speculation over when the US Federal Reserve might begin reducing the size of its quantitative easing program. “Gold remains bearish while trading below the $1424 current June high,” reckons Commerzbank senior technical analyst Axel Rudolph.
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The “cleanest” dirty shirt, the U.S. dollar, is down versus the euro so far this year; and was down last year. If this is a strong dollar environment, are investors prepared for a weak one? With plenty of dirty laundry in the world, we ponder how investors might be able to profit from actively managing currency risk.
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Both Keynesians and monetarists believe that increased government spending is sometimes necessary. The intervention is in the form of unfunded government spending, artificially low interest rates, or a drive to make the currency “competitive”. These methods have been tried unsuccessfully time and again, and they must be denounced if we are to understand our true economic condition.
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In response to the 2008 global financial crisis the government in Britain slashed interest rates to 0.5%, a policy known as ZIRP (zero interest rate policy), and embarked on a £375 billion program of QE (quantitative easing). These measures arrested the fall in property prices, but the question is, where would UK property prices be without QE & ZIRP?
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The gold price rallied from a 1-week low at $1376 per ounce Monday morning in London, edging back up to $1383 as world stock markets rose. Silver fell within 20¢ of mid-May’s 30-month low, before rallying to $21.80 per ounce.
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