Who is the Money Flowing to -- Mr. Yellow Metal
Take note of Gold today, as indicated and discussed on Running Alpha's September 6th post -- should advance dramatically higher into next year and beyond ( next $1300 to 1400, then $1900, a consolidation, then $3300 ) under either of the following scenarios that are relevant to today's tug-of-war between domestic U.S. growth and emerging market weakness.
Scenario 1: Yields continue to go lower or stagnate near term, while latent reflationary pressures in the U.S. continue to build up under the vagaries of loose monetary environment; or
Scenario 2: More likely, going into next year and beyond, rates start rising persistently as the open market speaks out to normalize rates -- that should cause treasury inflation protection securities to rise as assets start repositioning from the very liquid US long bond & debt market into hard asset classes, particularly gold. With so many currencies around the world defending their exports through currency manipulation and/or loose monetary policy regime mechanisms of epic magnitude, given that liquidity drives markets, and that the gold market is much less liquid than the bond giants, just a small repositioning out of bonds can fuel much high prices in safe haven categories.
Rising rates should benefit money-center banks, like Citi, which has a particularly attractive balance sheet, flush with cash. With a more robust US growth taking shape, along with improving employment numbers, American Express also looks particularly compelling in the financial services space right now. With all the fast-changing regulatory requirements fast approaching, financial institutions will be in a race to accommodate the changes; and as a result FinTech companies should strongly benefit.
Scenario 1: Yields continue to go lower or stagnate near term, while latent reflationary pressures in the U.S. continue to build up under the vagaries of loose monetary environment; or
Scenario 2: More likely, going into next year and beyond, rates start rising persistently as the open market speaks out to normalize rates -- that should cause treasury inflation protection securities to rise as assets start repositioning from the very liquid US long bond & debt market into hard asset classes, particularly gold. With so many currencies around the world defending their exports through currency manipulation and/or loose monetary policy regime mechanisms of epic magnitude, given that liquidity drives markets, and that the gold market is much less liquid than the bond giants, just a small repositioning out of bonds can fuel much high prices in safe haven categories.
Rising rates should benefit money-center banks, like Citi, which has a particularly attractive balance sheet, flush with cash. With a more robust US growth taking shape, along with improving employment numbers, American Express also looks particularly compelling in the financial services space right now. With all the fast-changing regulatory requirements fast approaching, financial institutions will be in a race to accommodate the changes; and as a result FinTech companies should strongly benefit.
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