Clearly net worth has come under attack. The ‘wealth’ effect strategy for managing the economy is nearing an end. The gap has widened considerably with the median wealth down by 40% and the top by at most 10%.
As deposit rates are low at 0.3%, demand for gov’t bonds remains strong. They can be held for many many years and will continue to outperform asset classes long term. Zero coupon long gov’t bonds have continued to beat all interest paying classes.
However, for short term trading I use TLT to Oil
as a Risk ‘ON/OFF’ trading vehicle. Currently, I am entering risk ‘on’. So I sell TLT for short term gains on SPY.
As noted before:
I am not responsible for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein and blog.
As I do not charge for my web site/blog, it provides information “as is” for informational purposes only, not intended for trading purposes or advice.
I have remade credit flow investor into a blog.
My original analysis holds true and long-term US treasuries have done well over the past 3 years. Notice now how USD is also rallying due to USD being the worst currency except for all the other currencies. Insurance gold 5-10% is still a good idea but I’m not a fan of gold as inflation remains subdued. We continue to have ‘mild’ inflation but no high inflation or deflation (yet). Deflation will kill gold prices so it remains a risky prospect.
BTW, non-financial credit continues to grow at $2 for $1 of GDP growth (this would include student loans and gov’t backed mortgages which are growing rapidly now). This value is down from $5 in 2007…if you can call this progress. Of course, $1:$1 is necessary otherwise you are simply borrowing from the future. As politicians would say ‘the future cannot complain.’
Next year will be up/down with 3 month cycles as higher taxes and ‘reduced’ deficits lead to austerity style contractions. QE3 shows signs of weakening but I have no doubt that should a recession arise in Q4 or Q1 that congress will initiate a new stimulus as QE does not primarily ‘recover’ anything. There’s a chance of QE3b in Feb as well.
All this may take a few months in 2013 to realize. The up/down volatility will continue until a new stimulus is entertained/austerity abandoned.
This is a test of the wordpress blog.
<http://jugglingdynamite.com/2012/11/10/a-plutocrat-calls-bs-on-his-peer-group/
See absolute demand index has fallen 10 points. See also rail traffic on pragcap.com. Gas buddy keeps falling so demand is falling…
http://www.consumerindexes.com/
We are now beyond election and sandy but still demand is depressed. I think baby boomers dont want to spend if their taxes are going up. In addition reducing the deficit is a policy 'zig-zag' a la Richard Koo. At the least, the stock market sells off to take profits before taxes rise!!! Unfortunately for politicians their timing could not be worse as a shift in a weak economy will lead to recession.
The last stimulus was passed by 62 in senate 3 republican. This time it will be harder so recession first…then a policy reversal. Q4 earnings estimates SP500 show precipitous fall….
Market should be choppy in Jan and Feb as well due to Q4 numbers being bad.
Credit Flow Investor 