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Posts Tagged ‘Financial TImes’

2012/11/23: Weekend Thought: There is NO Bond Bubble… more so Cash

November 23, 2012 Leave a comment

© 2012 ROHR International, Inc. All International rights reserved.

It has been the bane of the ‘Bond Vigilantes’ (adamant bond bears) that all of the fiscal crises and incipient signs of economic growth have not led to a major capitulation of the primary government bond markets. Another short term round of that is apparent today. Equities are spurred higher in this week’s recovery from the midmonth break, yet govvies are holding steady… just as they did yesterday in the face of the higher equities. And due to better than expected German economic numbers, today’s rally would seem more than just technical. Likely even more frustrating for the bond bears.

While we will get back to more current market discussion below, the current intermarket asset class performance must be taken in a twofold broader context. The first is that the immediate threat to the equities is less from a still troubled Europe, and more so on the question of whether the US Fiscal Cliff issues can be resolved timely. The far broader and more meaningful aspect for the sometimes seemingly mindless resilience of the govvies is the question of whether there actually is a Bond Bubble? Our assessment for some time has been that as long as equities appear risky due to government policy interference and instability, equities are indeed at risk due to the potential for significant global economic weakening.

This is our classical Taxulationism1 fear. While many assert that the US election clarifying the path forward is constructive, we are not at all sure. What it guarantees is that the ‘Obama program’ will mostly proceed according plan. Possibly business will indeed be able to plan around the higher taxes and aggressive regulatory enforcement. On the other hand, the Obama health care reform and other measures might just lead to layoffs, closures, and at the very least many individuals facing the higher expense of shifting to personal health care plans from company-sponsored ‘group’ policies. Also to say the least, not good for consumer discretionary spending.

1Taxulationism © 2010 Alan Rohrbach & Jack Bouroudjian. All rights reserved unless explicitly waived

 Def.: Combined impact of taxation, regulation and protectionism to an oppressive degree as official policy

If that is going to weigh on the US economy, the one developed economy showing some growth now is going to weaken once again into next year. And that is a good reason why people still feel more comfortable in bonds than equities. All of the capital flow data on fund investment tends to back that up as well. And yet, there isn’t really any ‘Bond Bubble’ as such. If anything, there is a ‘Cash Bubble’. That was brought home to roost in a Financial Times video report on Monday.

While the title of the piece is Marooned in a bond ‘safety bubble’ and the opening discussion focuses on bond vs. equities flows, the point which eminently come to the fore is there no historic basis for this. As the graph below illustrates…
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2012/05/18: Courtesy ‘Brief Update’ and Correction on FT link

May 18, 2012 Leave a comment

© 2012 ROHR International, Inc. All International rights reserved.

Short & Sweet on the specific market comments in this post, because today’s TrendView Brief Update was an extended discussion of the various price trend at a psychologically important juncture after the recent market ‘disconnect’. In fact, quite a bit of that is follow-up on the other asset classes (i.e. outside of equities) psychology and technical trend structure after the extensive background in yesterday’s post.

And that includes an important correction for a link in yesterday’s post. After our glowing reference for James Mackintosh’s coverage of the weakness in Gold reflecting some broader tendencies we had been anticipating for some time, the link provided for the online version of his Short View column was incorrect. That has now been addressed, and we still encourage even those who had read the post to revisit the link into the video embedded in the online version of his assessment. Apologies for the error and any duplication of effort, but the video is well worth viewing.

And the technical aspect of the evolution of the ‘macro-technical’ perspective is still very important with such fraught fundamental tendencies still affecting the markets. After all of the background factor assessment yesterday, we cover some very interesting specific technical aspects in today’s Brief Update…

 

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