Yesterday, we suffered a very painful day. All, I say again, all our portfolio went down, bonds, shares, gold... Yields on long-term bonds increased from 10 to 50% depending on the country (it's not a typo), a stable German BASF -4%, gold down more than 5%, gold mines -7% if we were lucky, if not more than -8%... How is it possible?
Simply, because the World thinks CASH has gone up. As we pay with USD, EUR, etc., if the currency goes up (denominator of a fraction), the asset we buy with it goes down (fraction). The FED and others have shown their power, somehow broadcasting a message: "investors should trust our fiat currencies, it doesn't matter how much money we create out of thin air."
The situation for emerging markets has been even worse. Indian rupee at minimum ever (USDINR almost 60), Brazilian real going down (USDBRL from 1.55 two years ago to 2.24), China with serious problems in its banks... The only one that has escaped from this trend is Russia. The ruble is not being volatile at all, as we see on the chart above (EURRUB). Besides, Russia's stock market is really cheap right now with an amazing P/E ratio of less than 6.
There are strong forces outside, but at the end we all feel in our own lives that only sound and painful policies can make a change. More booze to an alcoholic and the rest of his friends is not the solution.
Simply, because the World thinks CASH has gone up. As we pay with USD, EUR, etc., if the currency goes up (denominator of a fraction), the asset we buy with it goes down (fraction). The FED and others have shown their power, somehow broadcasting a message: "investors should trust our fiat currencies, it doesn't matter how much money we create out of thin air."
There are strong forces outside, but at the end we all feel in our own lives that only sound and painful policies can make a change. More booze to an alcoholic and the rest of his friends is not the solution.
