Optimism, Optimism…
Optimism is a flavor of the day. Nice article by Bloomberg showing disparity between analysts and economists. Bloomberg link: Stocks Show Why Analysts Dismiss Economists on Growth. Not that I think that either of them will be right at the end of the day, but it’s interesting to look at the dilemmas the market is in. Its pretty obvious, given the run we had, no analyst wants to look like an idiot having bearish reports so they are chasing the market. On the other side you have economists who are analytical guys; who don’t want to believe that anything beside predicted by their models will happen and those prospects don’t look good. And we have also corporate insiders who are selling and companies that are issuing shares. Bloomberg link: Mobius Spurns Brazil Share Offers as Gol Seeks Sale. (disregard Mr. Mobius statements as he probably trades opposite his statements). Being skeptical and contrarian by nature the market looks overly optimistic to me, but given the sentiment it could go further higher.
Gold, given the dollar weakness, is trying to hit new highs. Also a equity bullish signal, as in theory, economic growth combined with loose monetary policy will lead to inflation. It is a little bit ahead of itself, I think, but despite that gold looks set to go even higher.
Chart 1. Gold Futures
Looking at the treasuries, we have at least one asset class that’s moving in opposite direction. Bloomberg link: Anything-But-Treasuries Credit Gaining After AIG Ruin Enigma to me is how the US Treasury intends to finance 1.6 trillion budget deficit this year and many other trillions in subsequent years, if the FED keeps low interest rates environment and the dollar is weakening. Maybe some fear?