In this Week’s Issue: July 15, 2011
• U.S. consumer prices decreased 0.2% in June on a seasonally adjusted basis (BLS)
• S&P says there is 50% chance it will cut the U.S. AAA rating within three months (WSJ)
• Euro area annual inflation was 2.7% in June, unchanged compared to May (Eurostat)
• Moody’s said it was placing U.S. debt on review for a potential downgrade (WSJ)
• Italy approved austerity budget worth nearly €48 billion on Thursday (AP)
• The Swiss Franc reached another record high against the Dollar at 0.8080 (eSignal)
• Spot gold extended its record highs and hit a fresh record of $1,594.16 (Reuters)
• Ben Bernanke: Fed is ready to ease monetary policy if the economy flags (Reuters)
• PIMCO, the world’s largest bond fund, scales back bets against U.S. Treasuries (FT)
• Saudi Arabia increased its oil production in June to 9.7m barrels a day (IEA)
• China’s GDP expanded 9.5% in the 2nd quarter from the same period a year ago (WSJ)
• Bank of Japan kept monetary policy on hold and upgrades view on the economy (Reuters)
• The U.S. trade deficit in May increased 15.1% to $50.2 billion (ESA)
In the midst of the current U.S. debt ceiling debate, Ben Bernanke’s comments about the possibility of another round of quantitative easing (QE3) gave a clear market signal. Bond prices shot up again bringing the yield on the 10-year T-note safely below 3% this week. Meanwhile, the price of Gold shot up to yet another all-time record finishing the week just a tad below $1,600. The gold rally clearly isn’t over yet and the debate about the next realistic target has been revised upward to $2,000 (to most traders, the $1,600 level is just a matter of time, perhaps only days away). The more relevant question though, what happens next? Will the markets cool down before $2,000 is reached or is nirvana in sight for those who claim to see gold prices of up to $5,000 an ounce?
Please consider School Daze, School Daze Good Old Golden Rule Days, another excellent piece by the bond-Guru Mr. Bill Gross. Very timely considering the current budget ceiling debate and the increase of tuition fees at many universities, particularly in California.
Please consider “Why Italy?”, a discussion between John Authors and Vincent Boland about a possible contagion of the Greek crisis to Italy and other European countries by clicking on the image below. Notable comments: Time to say to the banks: tough luck, time to take your “hair-cut.”
Clemens Kownatzki, MBA is an adjunct professor of financial risk management at the Graziadio School of Business and Management, as well as the founder and CEO of FX Investment Strategies, a Registered Investment Advisor. In addition to running his investment advisory firm, he is a contributing author at SeekingAlpha.com and BusinessInsider.com. He also authored the book, Money Music 101, available on Amazon and Kindle, in addition to publishing the popular investment blog www.fxinvestmentstrategies.com along with a weekly newsletter.Disclaimer
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