The only change of trend between the major “asset classes” appears to be in the US treasury market. For now at least equities, commodities, real estate, and currencies are all well within their respective trends that are now some 10 months old. This is going to be a rather telling week for the bond market with record auctions install for the market – so much for living within one’s means! Anyway that is a story for another day. To us, lending money to the US Government for some 4.4% return p.a. over 30 years, seems like complete insanity, in fact it reminds us of a certain children’s novel titled “The Emperor Has No Clothes”. We think that even high school students would turn their noses up at the prospect of a return of a mere 4.4%!
Notice how the Vanguard Total Market index has held up above its previous low in early October. Until we see evidence of a lower low or lower high we will remain on the bullish side.
Is this the start of a move that will take long dated US Treasuries to a multi-week low (i.e. TLT below the 87 level)? We wouldn’t be surprised!
The commodity market has been a little frustrating for commodity bulls but at least broad based commodity indices remain above support. We think that the weakness as of late is merely profit taking. There is too much evidence of rising inflationary expectations to support lower commodity prices.
Despite what we are led to believe by popular opinion the real estate sector has been one of the strongest as of late and is only a few percent away from a multi-week high. Is the performance of the real estate sector telling us something? We think it maybe hinting of inflationary pressures!
As much as the USD Index is in an oversold condition something tells us that it will remain that way for longer than the average trader could ever anticipate! Something also tells us that someone is increasing the supply of money at an unprecedented pace! These are not “normal” conditions.
We were somewhat amused by Geithner’s remarks today regarding the US Dollar. As reported b y Bloomberg he said “I believe deeply that it’s very important to the United States, to the economic health of the United States, that we maintain a strong dollar”. Of course if one were to believe his comments then I guess you could believe that aliens built the pyramids of Egypt! Actions speak louder than words and the action of the USD Index suggests that further downside is a near certainty and Geithner is either clueless or is dumb enough to think that we can be hoodwinked!
