European Perils, FlopBook, and Gold – May 25, 2012

Here’s the news of the week – and how we see it here at McAlvany Wealth Management:

European Perils, FlopBook, and Gold

We are reminded this week that there is never a dull moment in Europe. Bank runs in Greece picked up in pace as an exit appears close, in spite of the secretly approved ECB €100 billion intervention in the banking system.

In Spain, the bailout resources needed for a local lender (Bankia) went from €9 billion on Wednesday to €19 billion on Friday.

The EU composite PMI fell at its fastest pace since 2009, with Germany and France sliding in sync (along with China – thus, the supportive announcements out this week).

Big European funds are in a wait-and-see mode as they cut exposure to the euro, unsure of how the ball will bounce as and when Greece declares monetary independence. In the short run, we’d take the minority view and view Greece’s move on down the road as euro-positive. Longer term, of course, other countries might be lining up for the exits as politicians do a 180 on EMU commitments rather than face the scourge of disgruntled and austerity-weary voters. Even though austerity has been more discussed than implemented, crowds have already gathered in the public square.

To see the issue in larger context, be sure to view the first segment of this year’s video “The Fuse is Lit: European Perils” over the weekend. If you find it valuable, forward it to others, as well.

FB, otherwise known as FlopBook, hit Wall Street’s credibility hard this week, even as consumer sentiment reached highs not seen since 2007. The farther the man on the street gets from the hype of Wall Street, the happier he/she seems!

Durable goods rose .2% in April, alongside existing home sales. The median home price rose 10% to $177,000.00. We will continue to avoid balance sheet scrutiny here in the US as long as we stink less than our European counterparts (not intended as a Parisian jab).

Gold has found support in the low $1530s for two weeks running. While we are still in an extended consolidation, we are seeing buying at the most predictable levels. The CME lowered margin requirements on gold by 10% this week, (not to be interpreted as CME manipulation of the metals higher), adding to the attractiveness of the asset for speculators. Long-term investors are firmly grounded in the fundamentals driving gold higher, and simply wonder “when will the pain end?” to which we have no precise answer – only that it will end, if it hasn’t already. In retrospect, any consolidation period will seem both short and tolerable, even if in real time it is uncomfortable.

For those of you who were unable to join the two-hour conference call Wednesday night, you can access the audio recording by clicking here, or by calling 888-284-7564 and entering the reference number of 2784451, followed by the # sign.

Heart-felt appreciation goes out from our team to the men and women who are serving or have served in the armed forces. To the many we cannot thank, let us solemnly remember . . .

Best regards,

David McAlvany
President and CEO
MWM LLLP

 

2014-10-06T20:12:14+00:00