A key concept for investors to grasp is that money, once created, will always find a home and the two primary places are the economy and monetary assets. While the economy is moving along at a decent clip it certainly is not matching the roaring growth rate of the Fed’s balance sheet, indicating that much of the Fed’s largesse is finding a home somewhere else.
Creative destruction for a 'greater middle east'?
On February 11, Egyptian President, Hosni Mubarak fled Egypt and turned all power over to the Egyptian military in what is a de facto military coup d’etat. Ominously for many, only days after the flight of Mubarak Egypt’s outlawed Muslim Brotherhood movement, described as “the world's most influential Islamist movement,” announced plans to form a legal political party. It is unclear what policy changes if any in terms of Egypt’s Middle East diplomacy and its relationship with Washington will result.
With very limited excess capacity in Saudi Arabia and the rest of OPEC, further production shutdowns in the convulsing Middle East will soon push oil prices to new record highs. The Brent futures contract, the world’s benchmark price, almost reached $120 per barrel in London last week. With gasoline soon to cost six pounds a gallon (£1.32 pounds/liter), the British government is already considering alternative rationing systems to the brute price mechanism at the pumps.
In the world of precious metals, silver spends a lot of time in the shadow of its big brother gold. Gold, with its high price-to-weight and distinctive yellow tint, has always occupied a special place in the human psyche. To many people across many ages, gold is simply the ultimate form of money - and, as a long-term, stable store of value for one's personal wealth, I agree it's hard to beat.
What a month it has been in the oil markets! Brent crude prices accelerated their price trend, breaking above their trading band, while WTI broke $100 for the first time since 2008. The price increases were due to the market’s indigestion of Middle East riots, civil war and regime changes.
From earthquakes in New Zealand to revolutions in the Middle East, natural and man-made disasters are rocking the world. We are all too often made to believe that in times of crisis there’s a flight to the U.S. dollar. However, the U.S. dollar has instead had a rocky ride of its own thus allowing the crisis-ridden Eurozone to shine. What’s going on? Is there no crisis, or has the U.S. dollar lost its appeal as a safe haven?
I decided to continue last week’s article with another technical update as of today. Last Tuesday’s 90% down day (more than 90% of stocks on the NYSE – common stocks only – were down) that enveloped 10-days worth of gains was the kickoff to a short-term correction.
If we set aside ideological biases and seek financial common sense, we can see that the public sector costs are simply unsustainable.