Perhaps the selling has abated for the time being? Lower highs become a concern now. While the market could make a new high, effectively shrugging off the last month's decline, it feels like that would be a very big mountain to climb.
The TIC data was $46 billion, way short of what is needed to cover the trade deficit and down from the March reading of $70 billion. This should be dollar negative and interest rates moved up right away.
I have been generally concerned about less demand for dollars and treasuries for a long time now and while this report supports that concern, the number was so low that I wonder if it doesn't get revised up next month.
If not, yikes that's a bad number.
A lot of people say the selloff in gold means there is no inflation problem. This could be true but the selling in all asset classes, I think, has been more about widespread confusion and dislocation. Further, gold ran up a lot, too much, and so this move down perhaps is also too much and maybe it works higher to the mid or low $600s and then settles down some?
This seems reasonable even if it turns out to be wrong. Even at today's level gold is up a lot in the last couple of years. Could that move up be an expression of inflation worries and that last move up to its high was maybe just a final blowoff panic that has now corrected?
If this seems plausible then the gold move has been inflationary. The other day Art Laffer said there was no inflation and cited computers and TVs as evidence. How often does the average person buy a TV? How often does the average person pay a health insurance premium?
6 comments:
Although I personally tend to think of it as just another commodity it may be that gold is still psychologically linked to maintaining purchasing power by enough people that whether the source of doubt concerns inflation or currency or just a sense that trouble is coming (or already here) doesn't matter; doubt there is, so people retreat to what they believe will hold value. Whatever the reason I am starting to average back in to the stronger miners with proven (and relatively unhedged) reserves in politically stable regions.
This feels like a real pushme-pullu economic environment to me, some elements appear deflationary others inflationary, hard to know where to jump. Regardless I remain convinced we are in a bear market and there will be better bargains later. If I'm wrong (no surprise) I'm willing to pay the opportunity cost.
Heard Laffer's comment on Kudlow & Co. -- silly -- the other guest, Barry Ritholtz, responded appropriately. Ritholtz's group is also looking for a relatively short-term market bounce for the next 4-6 weeks but I'm already pretty much where I want to be in terms of longs, hedging and cash and 4-6 weeks is too short a time frame for me in any case.
Barry gets a lot of these multi week calls correct.
Supposedly 1245 and 1260 were support we'll see if they are now resistance.
I will lag, not miss, a whoosh up to a new high I suspect.
As for gold, fair point but peopel do perceive it as currency which accounts for something, I think.
Ironically, health insurance premium had double digit increase in 04' and 05', and has moderated in 06', same as tuition, utility bills, etc.
I find myself with another comment. I think inflation is a given, because of the energy and commidity prices. The only question is how much.
Larry Kudlow is a perma bull coke-head.
He provides no useful purpose.
How often do you HAVE to buy a TV or a computer. Many people have been trading up every few years so the answer to many people has appeared skewed. I have been saying for years that most computer users are not using anywhere near the computer's full capacity and trading up is a status/fashion thing. If times got tough, people may find that their good ole' desktop is fine for a few more years.
I short I agree with several blog writers have noted. Inflation is in the things we NEED to buy and deflation is in the things that are discretionary. That appears to form a good basis for a nice long/short strategy. Buy stocks of things we need and short discretionary stocks (not high end as it will take time for the rich to feel the pinch).
So how about long Walmart short Dell?
Post a Comment