|Dow||-36.94 to 18,068.23|
|S&P 500||-6.21 to 2,099.12|
|Nasdaq||-17.38 to 4,976.19|
|10-YR Yield||-.014 to 2.26%|
|Gold||+$9.40 to $1,192.40|
|Crude Oil||+$1.31 to $60.56|
Crude and nat gas are rocking … while bonds and the dollar are getting rocked!
That’s been the trend for the past few months, and it only accelerated today. Oil jumped around a buck and a half on the day, while natural gas surged as much as 5 percent to within a few pennies of $3 per million British Thermal Units (BTUs).
Bond futures plunged as much as a point and a half before flattening out into the day’s end. That move came on top of a huge three-point mauling yesterday.
As for interest rates, which move in the opposite direction of bond prices, the 10-year Treasury yield jumped as high as 2.34 percent before easing back. That left the 10-year at its highest since November, up a whopping 42 percent from its 2015 low of 1.65 percent!
Meanwhile, the dollar got dumped as foreign currencies resumed their march higher. The British pound in particular exploded to a five-month high, notching its best weekly performance in a half decade.
What the heck is going on? Why is this happening?
Well, remember what I said earlier this year: Everyone and his sister’s cousin’s roommate’s barber had put on the same trades over the past year. They all were long the dollar, long bonds, short oil and energy stocks, and bearish on the global economy. It was literally one of the most crowded bunches of “macro” trades I had ever seen.
|Earlier this year, everyone was short energy stocks.|
Me? I took the other side! I saw a recipe for a massive “Big Reversal” in several asset classes, driven by two major factors: 1) Changes in global and U.S. monetary policy and 2) An improvement in global economic growth, particularly in Europe.
That meant you had to position for “Bloody Wednesday” routs in the interest rate market, get long energy and energy stocks, take profits on all pro-dollar positions, and start scooping up beaten down emerging market assets. None of this is revisionist history — it’s right there in cyberink for anyone to read.
Now that all of those forecasts are coming true, the obvious question is: Will these trends continue? I believe the answer is “Yes,” even as corrective moves and pullbacks can and will happen along the way.
Why? Well, no one is talking about it really. But in the U.K., industrial production just jumped at the fastest pace in six months.
In Germany, the largest economy in Europe, unemployment just sank to 6.5 percent in April. The number of unemployed there sank to the lowest level in 24 years!
Heck, GDP growth in Spain of all places just hit 0.9 percent in the first quarter. That was the strongest since 2007, before the global financial crisis struck and before Spain came thisclose to a gigantic sovereign bankruptcy!
I’m not saying everything is hunky-dory everywhere. Greece remains a mess. Chinese growth has slowed quite a bit. Here in the U.S., things have gotten “less good” overall. Don’t even get me started on some of the other big-picture threats, from serious disease outbreaks to the rising tide of war and conflict in the Middle East.
|“The trick is to remain nimble, take profits along the way, and keep a reserve of cash.”|
But if we continue to see inflationary moves in asset classes like energy, bonds, and currencies, rather than deflationary collapses, you have to be constructive and focus on investing in companies that can prosper nonetheless. They are out there, just as I explained a few days ago.
In sum, the trick is to remain nimble, take profits along the way, and keep a reserve of cash. Most importantly: Re-jigger your portfolio to take advantage of the market environment we have in 2015 … NOT get stuck investing in what worked in 2014!
Are you taking those steps? Are you looking forward, not backward? What do you think about the latest moves in the dollar, bonds, and stocks? Is the “Big Reversal” thesis on target, or am I missing something here? Where do you see the most opportunity in the remainder of 2015? Hit up the Money and Markets website, and make your voice heard!
|Our Readers Speak|
Yesterday, I asked whether I was the only one who felt our Middle East policy was in tatters. Based on the comments at the website, the answer is a resounding “No!”
Reader Oliver said: “No Mike, you’re not ‘overly pessimistic’. Frankly, you couldn’t be. Now Obama’s own Muslim allies have turned their backs on him, expressing total disappointment with his lack of leadership.
“The Europeans are equally frustrated. What they (and we) should have long ago known is that either Obama doesn’t know what to do, or knows but doesn’t want to do it. The proper action to take is to discontinue the Iran plans, to not negotiate further, and to bring the scum to their knees with force … the only thing they recognize. Why do we keep giving while they just keep taking?”
Reader Iverson M. also thinks we’re on the wrong path by trying to normalize relations with Iran. His take: “The government seems to be focusing on alienating friendly governments and trying to make nice with hostile ones like Iran, who continue to follow a policy of making trouble for the United States and for the region, indeed internationally.
“The Deputy Chief of Naval Operations is on record as saying, ‘The best ambassador is a warship.’ Wouldn’t it be so much better to negotiate from a position of strength and with consistent principles? Instead, our approach is confused, weak and does not inspire confidence or respect. It’s hard to imagine any positive result from the course we are following.”
Bur Reader Rahul M. said that allying ourselves with the Saudis, rather than Iran, is counterproductive. His view:
“We have got to face reality that we have our alliances and relationships in the Middle East completely backwards, and we have to do some serious soul searching to do an ‘about face’ and re-orient our relationships out there.
“Saudi Arabia is an arch human rights violator that actively supports and funds global terrorist networks around the world from Chechnya to Mexico in their pursuit of Wahabbi Jihadist Islam and according to the FBI, the government of Saudi Arabia, not just a few stragglers, attacked us on 9/11 as evidenced by the 911 Commission Report.
“Iran is now a cash strapped, thoroughly weakened, sanction weary, secular Muslim society where there are churches and synagogues alongside mosques all over the country (illegal in Saudi Arabia) and all they want to do is trade with the outside world, grow and improve their economy, have regional stability, reduce unemployment, and help to police the Middle East and purge it of its crazy fundamentalists.
“Which one would make a better ally to the United States?”
Reader Al H. picked up on the same theme, saying: “With respect to Iran, I see two paths: Support Israel’s constant path of control by war (forever or until they can make it happen) … or try to develop new alliances, perhaps avert pushing Iran as an important chess piece toward Russia, perhaps develop a mutually beneficial trading relationship and much more.
“Consider that if what we are doing with Iran goes astray, it is probably a lot easier to correct than setting up for probably an ultimate war. Saudi Arabia and the Sunni oil cartel showed their colors in their attack on our fracking and other energy production advantages that we are developing. They will continue to do that to their best interests, which doesn’t sound like a friendly or worthy ally.”
Finally, Reader Will R. said a full, hands-off policy may be the only way to best serve our interests. His comment: “No one can fix this Middle East problem, and we’ve obviously made things worse for decades. We just have to let them fight it out and monitor what’s going on. We can’t tell them how to govern themselves!”
Bottom line: There are lots of different perspectives out there about what is going on in the Middle East — few of them optimistic. If you want to comment on what’s been shared here, or add your own thoughts, here’s the link where you can do so.
|Other Developments of the Day|
Nepal can’t seem to catch a break, with yet another major earthquake striking the South Asian nation today. The 7.3-magnitude quake was centered roughly 50 miles east of the capital city of Kathmandu, killing at least another 42, according to early estimates from Nepalese officials.
Verizon Communications (VZ, Weiss Ratings: B-) is buying AOL Inc. (AOL, Weiss Ratings: B) for $4.4 billion. That works out to $50 a share, 17 percent more than AOL was trading for before the deal news hit.
AOL is much more of a digital advertising technology firm these days, rather than the Internet access company we used to know as American Online. Verizon wants it in the fold to boost mobile revenue.
I’m not a connoisseur of fine art. But a lot of wealthy individuals are — and one of them ponied up big-time for the Pablo Picasso painting “Women of Algiers (Version O).” The painting fetched a record $179.4 million at a Christie’s auction in New York, with the anonymous bidder dialing in by telephone. It last changed hands at a price of $31.9 million 18 years ago.
So be honest with me — was that YOU who bought the painting? C’mon, don’t hold back. Let me know at the website. If not, then feel free to weigh in on the latest tech sector merger, the catastrophe in Nepal, or any other news story that caught your eye today.
Until next time,