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Friday, March 12, 2010

Markets Turning

This is meant to be a political blog, but sometimes money has more to say than words. Today, when the dollar fell against nearly all currencies, commodity prices fell. This is the first time that has happened. If the dollar fell, previously commodities kicked up. Gold, for example, is sitting like a wounded bird, perched nervously on $1100 after thinking new highs were beckoning only a week ago.

The moment the dollar rise kicks back in, commodities look like being blown away.

Interest rate rises are now the talk on the street. Deflation, not inflation, is awakening, as demand for cash accelerates.

Somehow I think this will be the story of 2010. In a few days stock markets will follow commodities downwards. The dollar and the yen will rise.

UPDATE - a friend called and says he's selling his shares after reading this. I told him that it's his money and it's up to him what he does with it. Some things will always be going up. One currency falls. Another rises. Equities down. Treasuries up and so on. It's just that the current rapid rises in shares and commodities, fuelled by hedge funds on borrowed money might be taking a breather. And of course, I could be wrong. But there is a differentg look and feel than there was. That's all. Things were always changing. Why should the current period only be one way traffic?

2 comments:

Twig said...

@Tapestry
Which currency do you favour for next couple of years (and why) ?

tapestry said...

That's a tall order, Twig.

US Dollar. Japanese Yen. But not all one way traffic.

If deflation kicks in, these currencies seem to be the ones.

US 30 Year Treasuries are paying 4.6% p.a. which is a thirty year high. If long term interest rates fall, these will also be rising.

Japanese and Chinese sovereign funds are not as dumb as you think.