Gold is @ 1300, Swiss franc is at 0.9800 vs.USD, Australian Dollar is @ 0.9700 vs. USD, Interest rates are lower than ever.
Stocks are above pre crisis levels and up for the year.
Lower interest rates will not help. They do not help the economy as the final consumer does not benefit at all.
Access to “cheap money” is only given to investors who are leveraging their balance sheet to buy cheap assets. What is going to happen when those assets will not be cheap any more as global growth will be under 2%
The risk that we will live a double dip, severe or moderate are quite high, as we could see a bubble in assets price soon, if there are no new buyers arriving.
We will see defaults in credit, yes. If some goverments are , don’t you think that some “great companies” are also.
in term of investments the risk appetite could be transformed soon in risk aversion. QE will continue and deflation risk is high.
In term of porfolio, the translation is
- avoid commodities, at least for now
- stay long Gold
- stay long CHF, JPY, USD, AUD and avoid EUR and GBP
- avoid Emerging Markets currencies and bonds, as they will be hit by risk aversion
- avoid high yield in Developped Markets, as default risk will grow
- avoid Equities until you see 850/900 in SP
Not bright for the time being, but better time will come and we can still make money with the right asset allocation
Good luck
