RANDALL W. FORSYTH in Barrons writes a good piece on what can go wrong with the reflationary trade that governs the markets at this point in time. As he writes:
GOLD SET ANOTHER RECORD MONDAY while the Dow Jones Industrial Average gained 1% to a 13-month high, supposedly based on the cheery thought that the U.S. dollar would inevitably collapse to zero.
And as if to underscore the public’s interest in the latest gold rush, the five most-read stories on Marketwatch.com were all about gold. (Marketwatch is owned by News Corp., which also is the publisher of Barrons.com.)
Indeed, Albert Edwards, Societe Generale’s global strategist, sees the risks running quite the opposite of the consensus, which has a global recovery on track with a steadily falling dollar. Instead, he looks for a double-dip back into recession leading to a surging greenback, with a collapse of “the China economic bubble” resulting in a double whammy for commodity prices. Worth a read at Barrons here (By subscription)
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