Long time gold bull, David Rosenberg, is pulling in his horns. In this morning’s note he said:
It would seem as though investors are putting down their money on a big inflation bet.
- Gold is up 20% this year alone.
- The gap between the long bond yield and the 10-year note yield has widened to an eight-year high of 129bps from 92bps just six-months ago. This is the third highest spread in the past three decades.
- Since the end of August, 10-year TIPS breakevens have risen from 1.5% to 1.8%.
I’ve made my position on inflation pretty clear. In the long-term I firmly believe gold is headed in the direction of an irrational bubble as investors misinterpret the Fed’s actions as being inflationary and they continue to view the Euro as a condemnation of fiat money. It’s also clear that, in the near-term, investors are voraciously buying up anything and everything as a hedge against inflation and a falling dollar. Investors believe the Fed can generate inflation and economic recovery via quantitative easing. I believe this is highly flawed thinking. In the near-term, I have to agree with David Rosenberg. However, any significant pullback is likely to present a buying opportunity as economic weakness persists and government’s continue to meddle in markets.
Source: Gluskin Sheff
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.