All Posts Tagged With: "investors"

You cannot alter one piece of it without causing effects elsewhere in the system. Investors who understand this reality can also understand (and avoid) the hazards of over-confident investing.

But there are some strange and perplexing crumbs to collect from news reports this morning. Yesterday we learned that for the first time in 70 years, yields on 90-day U.S. government securities were briefly negative. Investors – if you can call them that – were happy to loan money to the U.S. government for 90 days – and lose money.

Meanwhile, the news two days ago was that homebuilding took a dive in October. Work began on 11% fewer houses than the month before.

The week began with your editor wondering how the bond market would choke down another $81 billion in U.S. Treasury debt. On Monday, it swallowed $40 billion in three-year notes with gusto, and even belched in satisfaction. Demand, analysts said, hadn’t been that strong since 1990-when the bond vigilantes used the bond market as a weapon to discipline government spending.

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.

Okay. Who put the financial world in a time machine and took us all back to 2007? Seriously. Oil traded above $80 overnight. Gold is hovering near $1,060. Stocks are up. Bonds are up. The Aussie dollar is up. Will anything ever go down again?

“In the last big boom in gold – in the late ’70s – gold followed inflation…and the central bank. Investors saw inflation increasing. And they saw the central bank failing to react fast enough. They bought gold to protect themselves.

There are now about 131 million jobs in the United States…and about 15 million people who would like a job but can’t find one.