This week had every single asset category showing a loss. The smallest drop was in the Canadian Dollar, while the largest drops were in coffee, down 9.0%, and gold stocks, off 3.9%. Meanwhile, the mainstream media has been full of articles trumpeting new all-time highs for the Dow Jones Industrials and the S&P 500 stocks. Of course, these are meaningless statements, as the dollars used to define these markets are heavily manipulated by the Federal Reserve. As the chart below shows, stocks in the real world are nowhere near new highs; in fact, despite a very good year in 2013, they are about 30% below their 2007 highs, and a whopping 70% down from their 2001 highs.
Over the last week, and over the last month, assets have followed the same basic pattern: stocks mostly higher and currencies, bonds, and commodities mostly lower. Bitcoin has been the biggest winner by far, rising 29% in the last week and 179% over the last month. In addition to the fast rising price, global trading patterns are shifting as well. Read more below.
Although nobody wants to use the "N" word, more and more economists, including Nobel Prize winners, are saying that this is really our only choice. Of course it will only be "temporary". Maybe it will be "partial". But any way you slice it, it will be ugly. Thanks to a tip from Seeker Blog editor Steve Darden, I recently came across a great opinion piece in the Financial Times called "To Save the Banks We Must Stand Up to the Bankers". In this article, Peter Boone, a researcher at the London School of Economics and Simon Johnson, former IMF chief economist, and professor at the MIT Sloan School of Management, give us the following memorable quote:
The first part of this interview covered Paul van Eeden's background and laid out his views on gold, inflation and interest rates. In this final segment, we'll discuss what to do about this situation – how to translate this view of the world into investment action.
I recently came across a presentation made on May 20th to the US Senate Committee on Homeland Security and Governmental Affairs by Dr. Benn Steil, a Senior Fellow and Director of International Economics at the Council on Foreign Relations in New York, entitled "Financial Speculation in Commodity Markets" (pdf). Dr. Steil also gave a speech the week before at the New York Hard Assets Investment Conference entitled "Is the Dollar Doomed?" (text and audio).
You might have noticed that my previous post on Silver and Stocks didn't once mention the US Dollar. Why? Because it's irrelevant. It may go up, it may go down. Most likely down, but so what? I try not to hold any more of it than necessary, unless I have reason to believe it's in an extended uptrend and decide to speculate.
Another story that caught my fancy, restated in terms of gold for your entertainment. Enjoy!
From a March 11, 2008 story in the Financial Times:
As stated in dollars:
Wall St enjoys best one-day rise since 2002
By Chris Bryant in New York
Published: March 11 2008 13:01 | Last updated: March 11 2008 20:41
Here are excerpts from three news stories from 7-Mar-2008 Marketwatch.com, as they were written, and as I would read them. In each case, I have simply taken the USD figures given in the story and converted them to gold grams, then reworded the story to fit the new numbers. In some cases, I've added YTD data to put the reported figures in a larger perspective.