Morning Note: Historically-Lofty

Only one Asian equity index, of the 16 we track, closed higher last night, Japan. And that was apparently thanks to news that Warren Buffett is snatching up stock ($6 billion worth) in Japanese commodities traders. That, plus his recent foray into gold miners suggests that he sympathizes with the base case that happens to presently have us more in commodities than we’ve ever been. 

Europe’s not much better so far this morning; 13 of the 19 bourses we track are in the red. 

U.S. equities are troubled a bit this morning as well: Dow down 211 points (-0.74%). S&P 500 flat, -0.09%. Nasdaq up 0.55%. Russell 2000 down 0.65%.

The VIX (SP500 volatility) is once again signaling potential stress on the horizon, it’s up 8.62% as I type. VXN (Nasdaq vol) is as well, up 5.15%.

Oil futures are up 0.51%, gold’s up 0.35%, silver’s up 2.23%, copper futures are up 1.22% and the ag complex (in the aggregate) is up 0.41%.

The 10-yr treasury is higher (yield lower) and the dollar is getting taken down once again this morning, -0.38%.

Our core portfolio is off a titch, -0.19%, with silver, base metals, utilities, healthcare and ag commodities leading the winners (7 in total). The 11 losers so far this morning are being led lower by emerging markets, energy, banks, industrials and Eurozone equities. 

I’ll keep it brief this morning and leave you with this from the essential work on the early days of central banking/bankers, Lords of Finance:    Emphasis mine…

“…bubbles and crises seem to be deep-rooted in human nature and inherent to the capitalist system. By one count there have been sixty different crises since the early seventeenth century—the first documented bank panic can, however, be dated to A.D. 33 when the Emperor Tiberius had to inject one million gold pieces of public money into the Roman financial system to keep it from collapsing. Each of these episodes differed in detail. Some originated in the stock market, some in the credit market, some in the foreign exchange market, occasionally even in the world of commodities. Sometimes they affected a single country, sometimes a group of countries, very occasionally the whole world. All, however, shared a common pattern: an eerily similar cycle from greed to fear.

Financial crises would generally begin innocently enough with a surge of healthy optimism among investors. Over time, reinforced by cavalier attitudes to risk among bankers, this optimism would transform itself into overconfidence, occasionally even into a mania.

The accompanying boom would go on for much longer than anyone expected. Then would come a sudden shock—a bankruptcy, a surprisingly large loss, a financial scandal involving fraud. Whatever the event, it would provoke a sudden and dramatic shift in sentiment. Panic would ensue. As investors were forced to liquidate into a falling market…”

So, will the present boom end in a panicky bust, or will the equity market continue to float at its historically lofty altitude, waiting for the fundamentals to rise up to meet it? 

Well, only time will tell… What yours truly will tell is that risk right here is historically-lofty as well…

Stay tuned, and stay hedged!

Have a great day!


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