Peak faith in central bankers has come and gone, at long last. While foolish beliefs always eventually pass, the staggering costs from this episode will linger.
Following Switzerland’s decision to remove its cap on the franc, James Grant of Grant’s Interest Rate Observer, says it is a day to take the measure of our infatuation with central banking. Here is a direct video link.
The concept of risk-adjusted returns is so rarely mentioned by finance types and yet the concept is so critical to real life assessments. Holding on to over-valued, over-bought risk assets in a world of unprecedented leverage is like trying to ride a bucking broncho to work. With a lot of luck, there is a small chance you might get there in one piece, but the more likely result is that you will suffer serious, perhaps permanent injury. Given the grave stakes at risk with one’s life savings, even if one in a million riders manages to hang on through an extremely volatile ride, the question remains, is it a wise method to chose for rational people?
Bob Janjuah, co-head of cross-asset allocation strategy at Nomura, says he expects Italian and Spanish 10-year bond yields to fall to 1 percent, adding that fixed income is “the place to be” rather than equities” in a world dominated by deflation.
Here is a direct video link.
I will be traveling to Vancouver this weekend to speak at the 20th annual Vancouver Resource Investment Conference. Always fun to be on the west coast. You can see more about the show, or register to attend, here on line.
Recent moves in oil and gold are certain to be the topics du jour. My partner Cory’s charts offer a bird’s eye view of recent moves. Here is WTIC since 1985.
And here is the barbarous relic itself since 2007…
Today we are seeing fresh highs on the US dollar and inflows to gold. Clearly a world of over-valued assets, contracting economies, increasing deficits and weak currencies are all making ‘safe havens’ in short supply. Inflationary pressures are weak but gold may benefit from a renewed thirst for currency alternatives…
The Canadian TSX Composite meanwhile is convulsing higher today even as the loonie falls some more. It’s quite a mess out there. This chart of the TSX captures the mayhem since September. Nasty, negative bias still in play…
