Michael Campbell wanted Greg Weldon to boil all the current turmoil down to its essence. What’s happening, and what to do about it. Greg’s delivered, which is why he is one of Michael’s favorite analysts. Here’s what he said:
1. The whole sovereign debt issue is dramatically ending the welfare state as we know it in the West.
2. Current times are more interesting, and circumstances in the market more frustrating than its ever been in his 30 years in the business. “It’s about as wild as it gets and it’s going to get wilder.”
3. The EU fiscal crisis is a global problem.The debt deficit debacle in Europe will effect everybody. 25 out of 27 EU nations are in violation of European rules on debt and deficits, the countries can’t bail each other out and the near term dynamic of these countries trying to roll over their debt puts all countries at risk. “They are competing with one another which is one of the things that puts the US at risk if we have to sell all this debt that we have.”
4. The differences between now and the 2008/2009 crisis is that things have intensified. The debt is now coming due and that is the reality we really didn’t face two years ago. With the competition for capital rates rise everywhere, and with the amount of debt we have to sell this is problematic in terms of crowding out the private sector and really putting the clamps down on the global economy
1. Borrowers: If you are a borrower, rates are going to rise everywhere, so fix your rates here while they are still pretty low.
2. Bonds: If you invest in interest bearing securities its much more difficult. “Right now protection is really the buzz word”. Rates are rising, “There doesn’t seem to be any place to hide there right now.”
3. Commodities: “Its almost dare I say kind of a perfect storm brewing here. So I mean we are short on commodities frankly.” “I see trouble in the next six months and I see a lot of opportunities on the short side of commodities and stocks and currencies.”
4. Safety: “It very difficult to try and find a place to be comfortable. I don’t see one right now, I really don’t.”
5. US Dollar: Playing the dollar up move to me is one of the more clear cut moves right here and in doing that I think it also allows investors take advantage of this broader scope. I mean if you are long the dollar its just like being short stocks, commodities, it’s the same trade so I think its a great idea, I like it. You know ETF’s allow individual investors to operate more like a commodity trading advisor; to be short, to be long, to be flexible. To have access to areas that they didn’t necessarily have access to before. The [UUP] is the dollar ETF, that’s certainly a good one in my opinion right here.
6. Gold: “I don’t like gold right here, I am short as a trader. I do look for a deeper correction in gold. I think gold has scoped down to the $1,300 zone. It’s a pretty significant decline yet that would only represent a 50% retracement of $1,192 move from the 2008 low. Without a central bank that’s pumping a trillion dollars or more on some kind of regular basis, it’s difficult to see where the inflation trend is going to be maintained and that applies to gold as well.
What’s really amazing Michael is I get calls, everyone wants to hear something bullish on gold. I think that that shows some people are becoming maybe a little too emotionally attached to this trade. They don’t want to give up the gold and they are out there groping, searching, dying, hoping for someone to tell something bullish and I think that’s a little troubling as well.
Weldon Financial Global Macro Research & Money Managent: produces global macro research for the sophisticated investor/trader and offers investment management solutions that capitalize on global market trends. Greg Weldon is the founder and sole producer of all the research and money management services.
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