There are three things i am paying particular attention to lately and they are gold, treasuries, and the dollar. The price action has been extremely weird for all three. First of all dollar is rising with gold, what the hell is that all about? I am rather convinced that the recent dollar strength is just a massive short covering from massive short positions that have been accumulated the past 7-8 yrs. Gold is going up because of fear of inflation and also fear of fiat currencies. The price action in treasury bonds have been ridiculous. I am pretty sure the rise in treasury(thus causing lower yield) is because of the deflation fear which personally i think its non sense. Increase in money supply under any economic environment equals inflation. Remember inflation occurred during the 70s through a very difficult economic period. Contrary to popular belief, inflation in a bad economy is very realistic. If you want data go check out the CPI data that came out today. Although the core was up a mere 0.1%, if you check out the underlying data such as gasoline(up 6%), food, and energy, you can see that inflation is definitely still the story.
Conclusion:
Gold: Personally i don't think its a bubble because there is solid fundamental supporting the price appreciation. Even if gold is a bubble its not going to pop until at a lot higher price.
Dollar- the appreciation of dollar is definitely mostly short covering and when thats done people will flock out. Its a bubble
Treasuries- When people realize that deflation is non sense, they will flock out to get yield that beats inflation. Its a bubble
1 comment:
So... our common sense is right.
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