Envision if you will a man with a bright red face … at first glance you might think he is in excellent health, glowing even … and on the other hand, it might suggest he has a fever … two completely opposite interpretations from the same facts … so to decide, you fall back on context. The same might be said of financial markets. Inflation can signal a robust economy or it could also signal trouble. The same might be said of bond yields.
On the face of it (pun intended), gold’s decline seems to be because it has held a long-term inverse binary relationship with declining bond yields (with a correlation co-efficiency of over 93%) and the recent rally in the 10 year rate has prompted 120 tonnes of ETF selling by Western institutions YTD (or 3.6% of total holdings) … but maybe markets are mis-reading events. Read more…..
Chart of the Day
As Berkshire’s Vice Chairman, the 95-year-old Munger is Warren Buffett’s right-hand man. He’s also an investing legend in his own right. Munger ran a firm in the 1960s and ’70s that scored returns of over 24% per year. He’s here to talk about how to make investment decisions and life choices that help secure prosperity and longevity.