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KDavitt
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Kevin brings a wealth of derivatives experience to RCM Asset Management. Following graduation (Marquette University – Evans Scholar 1999) Kevin started working for LETCO Trading on the CBOE floor. Between 2000 and 2007 Kevin traded a variety of Equity and Index options products as a market maker... More
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  • Why I'll Remain Bullish The Precious Metals  0 comments
    May 9, 2013 8:04 AM

     

     

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    10 Largest/Most Advanced Economies (2011 - based on nominal GDP):

    US - actively engaged in QE w/no end date. 2 year yield = 0.22%

    DJIA, S&Ps, and RUT at all time highs.

    FOMC buying $85 billion/month.

    Japan - actively engaged in QE w/no end date. 2 year yield = 0.11%.

    After months and months of talking, the Japanese announced that they will buy $190 billion USD equivalents of ETFs/REITS/JGBs. Nikkei up over 3% overnight and back to June 2008 levels. Congrats Shinzo.

    Nikkei.jpg

    Germany - Chastising QE types (but dependent upon weak Euro for export led growth). 2 year yield = (0.01%). That's correct, a NEGATIVE yield.....you pay Germany to give your money back in 2015.

    France - pushing for more QE. 2 year yield = 0.12%

    UK - actively engaged in QE. 2 year yield = 0.29%

    Expected to leave their Asset Purchase program unchanged on Thursday.

    Italy - pushing for more QE. 2 year yield = 1.25%

    Canada - 2 year yield = 0.98%

    Spain - pushing for more QE (27% unemployment with 50% youth unemployment). 2 year yield = 1.57%

    South Korea - 2 year yield = 2.54%

    Others:

    Austria. 2 year yield = 0.132%

    Australia - cut rates overnight. 2 year yield = 2.53%

    Denmark 2 year yield = 0.147%

    Israel 2 year yield = 1.16%

    Netherlands 2 year yield = 0.06%

    Singapore 2 year yield = .204%

    Switzerland 2 year yield = (0.054). Yup, another negative yield.

    Economics or the Dismal Science is about relationships and incentives. Central Bankers have incented chasing yield for years now.....and it's working. We also have a tendency to think in nominal terms (as opposed to purchasing power). Choices in life and in Economics/monetary policy have consequences and that's why I'll remain friendly to the Precious Metals.

    To be clear, I'm not advocating being blindly long......to everything turn, turn, turn. Also, I wish the global QE would END because the longer it goes on the greater the ancillary perversions become, but I don't believe somebody (or something - Central Banks) that tell me one thing and do the opposite.

    The negative yields in Germany/Switzerland and low yields across the rest of the "developed" world give new perspective to the conversation about return ON investment v. return OF investment.

    Best,

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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