What the experts say…

Things certainly seem to be heating up lately.  We are seeing wild gyrations in global bond markets, continual disappointing US economic data making any talk of tightening seem unlikely, and gold and silver rallying strongly last week.  So let’s hear what a few experts had to say last week:

HSBC chief economist Stephen King is warning about the next recession.  In a note to clients Wednesday, he warns: "The world economy is like an ocean liner without lifeboats. If another recession hits, it could be a truly titanic struggle for policymakers."….. “Whereas previous recoveries have enabled monetary and fiscal policymakers to replenish their ammunition, this recovery — both in the US and elsewhere — has been distinguished by a persistent munitions shortage. This is a major problem. In all recessions since the 1970s, the U.S. Fed funds rate has fallen by a minimum of 5 percentage points. That kind of traditional stimulus is now completely ruled out.”  (i.e. the very stimulus that got us into this mess trying to fix the GFC means there is nowhere to go when it crashes)

ScotiaMocatta analysts has this to say:  “We are still of the view that the most bullish aspect of the gold market is that other assets are already expensive – notably the dollar, treasuries and equities,” ….. “When these correct, as indeed may be starting to happen, then investors may look for a cheap safe–haven and gold looks well placed to fill that role. With the financial system still suffering many stresses including uncertainty over Greece, competitive currency devaluation and unmanageable amounts of government debt, we feel investment demand for gold could pick up at relatively short notice.”  (FYI ScotiaBank has one of the worlds largest futures positions in gold and silver at present).

And finally we ended Friday’s Weekly Wrap with this quote but for those who missed it Ray Dallio, head of a $150b hedge fund had this to say…

"If you don't own gold...there is no sensible reason other than you don't know history or you don't know the economics of it..."