Archive for Dan Denning

Now, there is a very good reason investors are reducing their allocation to stocks. As we’ve said before, we think the equity premium – what people are willing to pay for stocks – is regressing to the mean. It was so high for so long because corporate cash flows in the second half of the last century benefitted so much from low interest rates and globalisation.

India’s central bank is now the proud owner of 557 tonnes of gold. That gives it the tenth largest gold holdings among central banks. But it probably isn’t finished. Gold makes up just six percent of India’s foreign exchange reserves. There’s plenty of room for that to grow.

But don’t forget China. China has $2.3 trillion in foreign exchange reserves…

One quick note about this: there is obviously plenty of inflation in the prices you pay every day. But most consumer price indices are rigged to understate inflation, as our colleague David Evans pointed out yesterday in Canberra at the Gold Standard Institute conference in Canberra. Trimmed medians…hedonic adjustments…

That’s just what happened last year. Only then, it was both a dollar and yen carry trade that led to a rise in Aussie assets. Once the credit crisis set in, the yen carry got dropped and investors fled risk assets and piled right back into the greenback and U.S. Treasuries.

But as you’ll learn today, the bankers, the Fed, the media…the whole lot of them…have learned nothing from last year. The hangover was just beginning to set in, so everyone began drinking again heavily. And now the party is wild and out of control. Even the cops are drunk.