Monday, Dec 07, 2009

V shaped housing and stock market recovery unlikely

MoneyWeek: A warning from the bond markets

"We have long said that inflation is unlikely unless economic recovery gains momentum. In our view there are serious reasons to doubt the validity of a V-shaped recovery."

Posted by mountain goat @ 01:24 PM (1421 views)
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5 Comments

1. mr g said...

Quote from the article:
"We have long said that inflation is unlikely unless economic recovery gains momentum. In our view there are serious reasons to doubt the validity of a V-shaped recovery."

I usually consider Money Week to be among the more rational observers of the financial scene. However, to me, this does not stack up, as MW as ramped gold to some tune as a hedge against inflation and currency devaluation plus forecasting a W shaped recovery, yet here they are saying that inflation is unlikely.

I must be missing the point somewhere.

Monday, December 7, 2009 02:06PM Report Comment
 

2. mountain goat said...

mr g - well spotted.

bottom of article: This article was written by Full Circle Asset Management, and was published in the threesixty Newsletter on 4 December 2009.

Monday, December 7, 2009 02:13PM Report Comment
 

3. general congreve said...

Inflation is not as important as many would have you believe when it comes to bullish data for gold. The inability of governments to dish out the much needed hard medicine to correct the economic faults of the past is the main drive of gold price rises. While governments rack up record debts, and undermine their currencies in the process, the outlook for gold remains positive. Gold should primarily be viewed as another currency, rather than a resource.

Monday, December 7, 2009 03:34PM Report Comment
 

4. Fallingbuzzard said...

I don't see what you're missing. The W shape in MS's forecast refers to growth, not output. So their forecast of a W shaped recovery is entirely consistent with low or even negative inflation. Gold is still a hedge against currency devaluation and inflation, even if inflation is zero or low. Just because MS ramped gold as an inflation hedge doesn't mean that they think there is going to be inflation.

Monday, December 7, 2009 04:40PM Report Comment
 

5. Fallingbuzzard said...

As for the overall sense of the article, it misses the most important point and I doubt that MS have spoken with their bond trading team (Chinese walls and all that). There simply aren't enough gilts out there at the moment to satisfy even the weakest of demand. The BOE are buying lots up and at the same time commercial banks themselves are having to buy them to boost their capital ratios. Even more next year. So the chance of a bond strike is unlikely. The problem comes when banks no longer need to increase capital ratios and the BOE stops buying. Then yields will shoot uplike a rocket.

Monday, December 7, 2009 04:53PM Report Comment
 

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