Thursday, June 15, 2006
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?
Posted by Roger Nusbaum at 6:03 AM