Some hedge funds find it worthwhile stepping back and looking at where money is flowing around the globe. I believe this is a useful exercise for all investors. In doing this today, you can appreciate the massive repricng that markets have undertaken and may be in the midst of. For example, the U.S. $ has shot up versus the Euro, as fears of contagion from Greece's debt problems have spread and riots have indicated that a neat solution might be difficult to pull off. This, of course, makes Europe's goods a lot cheaper on world markets. It is also getting stock managers to move out of multinational companies. At the same time, the Yen has risen against the U.S. $.
Commodities have cheapened significantly, led by oil which is $75.11/barrel versus $86.15/barrel last week. Japan is benefited greatly by a drop in oil, and Russia, for one, suffers. For those with a long-term view and looking to pick up something like FSLR (First Solar) on the cheap, this is worth following.
Gold shot through $1200/ounce. If you need an indicator of whether the fear is real in the market, this is it. It now takes 16.12 barrels of oil to buy an ounce of gold - last week it took 13.81 barrels.
Yields in the U.S. dropped sharply as "flight-to-quality" money obviously sought a refuge. It is worth noting that some pros are probably getting picked off because the layup trade of 2010 was supposed to be a rise in rates. It is not unusual for a big player in the market to be caught swimming naked (as Buffett would put it) because of these types of moves.
Reflecting a changing view of the world, inflation expectations dropped sharply to 2.17% from 2.40% ( difference between 10 year Treasury yield and 10 year Treasury TIP).
Thoughts and observations for those investing on their own or contemplating doing it themselves.
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Saturday, May 8, 2010
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