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Our concise coffee shop analysis of world financial markets reveals that all the macro trends that began late last year remain well “entrenched”. Last week (click here for the article) we said:
“we are reasonably confident that a new multi-week low will be achieved in the USD Index and we should see meaningful downside in US Treasuries. Of course, this is nothing new. It is merely a continuation of the trends that started back in November last year.”
Whilst we cannot rule out some retracement over the coming days, especially with equities and the USD, we would see this as merely short term profit taking nothing more. The trend is our friend.
We recently listened to Marc Faber’s latest enlightening rampage on Bloomberg. In essence he said that “Bernanke and co are determined to make cash trash…..forcing people to do something with their cash rather than holding it in the bank”.
From our observations in the markets we tend to agree with what Faber is saying. From a currency equity and bond perspective anything with a yield is still being sought out and bid up by market participants.
It seems the one market that is bunking the global trend is commodities. Broad commodity indices continue to move sideways and have done so for some 13 weeks. A few weeks ago we started to hear murmurings of the commodity or inflation trade being “crowded”. Well all we will say is so much for the “crowded” trade. Yes gold, silver and platinum may well be at multi-week highs but many other of the widely traded commodities have either gone nowhere over the last few months or are either at multi-week lows (like wheat and corn) or near multi-week lows (such as livestock). So whilst we certainly are commodity bulls, we are far from being part of a large crowd!
It is particularly encouraging to note the strength of the real estate sector because it was the one asset class that led to the implosion last year. For whatever reason it appears well supported in its bullish trend.
