Advertise | Bookmark | Contact Us | E-Mail List |  | Update Page | UraniumSeek.com 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

Gold Seeker Closing Report: Gold and Silver Fall with Stocks and Euro
By: Chris Mullen, Gold Seeker Report

Ira Epstein's Metals Video 11 12 2018
By: Ira Epstein

Gold: Back Below Its 50-Day Moving Average
By: Ed Steer

JPMorgan Chase Trader Pleads Guilty to Gold Manipulation, Turns State's Evidence
By: Clint Siegner

SWOT Analysis: China Demand on the Rise
By: Frank Holmes

Gold Inflation
By: Steven Saville

Prices When Gold Is Money
By: Alasdair Macleod

Technical Scoop - Weekend Update November 12 2018
By: David Chapman

Warning: Precious Metals’ Prices are about to Collapse
By: Przemyslaw Radomski, CFA

Yet Another Trillion-Dollar Unfunded Liability, California Wildfires Edition
By: John Rubino

 
Search

GoldSeek Web

 
Elevating markets: A signal of reviving bank lending?


 -- Published: Friday, 7 March 2014 | Print  | Disqus 

By Alasdair Macleod

Earlier this week Bill Gross who runs Pimco's bond fund made a conditional case for investing in high-yielding bonds, even though on first cut the yield benefit appears insufficient to justify the extra risk. Put bluntly, he suggests that investing in bonds issued by insolvent Eurozone governments or second-rank corporate borrowers could be profitable.

Mr Gross is following some other smart and usually sceptical fund managers in appearing to throw in the towel against persistently low bond yields and equity markets that defy gravity. He is unlikely to take this stance without good reasons.

One reason could be value judgements hardly matter in this market. Investors have always bought into mutual funds on the basis that a fund manager will run their money better than they can themselves. By passing their bucks as it were to a professional, investors seem to think they are eliminating investment risk. However, they often confuse the risk that comes from a lack of their own investment skills with the price risk in the markets.

This is why mutual funds are in a tricky position when fundamentals do not support an investment case and the money keeps flowing in. And it is not just bond funds: the chart below shows the S&P 500 index, which since the dot-com bubble burst has entertained us with some pretty wild swings.

S&P 500 monthly

It should be obvious to the man in the street that things are not as good as a near tripling of the S&P since the Lehman Crisis would suggest. Yet his savings still go into stocks and bonds, irrespective of price. And as Mr Gross writes in his newsletter, it all depends on confidence in policymakers and the effectiveness of their policies.

This is a second reason. The fact that fund managers depend on policymakers to not to drop the ball is the same as saying free markets are a myth. Capital markets are no longer where buyers and sellers meet to buy and sell things based on perceptions of value; instead it is all about trends and trusting the Fed.

Asset classes from bonds to fine art are rising, underwritten by zero interest rates. The underlying bubble is the biggest and deliberately synchronised bubble in history, of currency itself. The rate at which it inflates does not appear to be slowing, despite the Fed's tapering. Otherwise markets would be stalling. Instead the Fed's tapering programme must be being offset by something like a pick-up in bank lending. If so, then all classes of investment assets can continue to rise in price and the party goes on. Indeed, if the Fed continues to taper, we can take it as a reasonable indication that growth in bank lending is fully compensating.

There is of course a significant danger that a bank credit revival will lead to price inflation before long, but that has always been tomorrow's problem. There are also huge risks involved with surfing on a credit wave, not least knowing when to get off. For these reasons, the very experienced and well-informed Mr Gross is wise to heavily qualify his new-found optimism.

NOTES TO EDITOR

For more information, and to arrange interviews, please call Gwyn Garfield-Bennett on 01534 715411, or email gwyn@directinput.je

GoldMoney is one of the world’s leading providers of physical gold, silver, platinum and palladium for retail and corporate customers. Customers can trade and store precious metal online easily and securely, 24 hours a day.


| Digg This Article
 -- Published: Friday, 7 March 2014 | E-Mail  | Print  | Source: GoldSeek.com

comments powered by Disqus



 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2018



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer

The views contained here may not represent the views of GoldSeek.com, its affiliates or advertisers. GoldSeek.com makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, is strictly prohibited. In no event shall GoldSeek.com or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.