As I have repeated many times in this blog, the UK is the real epicenter of this financial crisis. The following article highlights a report from Morgan Stanley that backs up my opinion:
Look at a recent chart of the AUD. It has now given up all of it’s QE3 gains. This is not indicative of an impulsive move, hence has to be labelled a correction. The crowd is now very long this currency, which has a very high correlation to equities. So, in other words, equities are in trouble, if we use AUD as a leading indicator. Could this be the FINAL top for equities? Certainly the heavily bullish market sentiment indicators suggests it’s a possibility. So watch out, as the price will likely fall very hard and fast from the top (in coming days and weeks). If you’re a bull, I’d be lightening up big time. If you’re a bear, I’d be backing the truck up on a short position (in equities or AUD).
The below article talks about the growing movement out of Spanish cities and into the countryside. I believe it is the start of a much larger movement (in western society) that will grow stronger as economies struggle and eventually collapse. As I have previously mentioned, everything moves in cycles, and this the beginning of the reversal of the decades (and possibly centuries) long trend of rapid urbanization in the western world. Astute investors, take note – rural land is the safest place to be.
I do believe that peak oil theory has some merit, in as far as the world is clearly beyond the point where energy supply is cheap and abundant (easily accessible). Every time the market rallies, oil rallies. The correlation with equity markets is very high, and rising. It wasn’t always this way, however. What this increasing correlation means is that oil is just another risk asset, and the fate of all risk assets is closely tied together now that the economy is on the precipice. Unfortunately the world is trapped in this pattern whereby if the global economy is strong, energy prices rise sharply. And when equities tumble, oil falls a little. In other words, it is a lose-lose proposition, as global growth is slowly being choked off by this rising cost of business. So what does this mean for my long term views on energy? And do we face a possible energy armageddon as some pundits will have you believe?
I do believe that over the long term (30 year time frame), the world is very much in for an energy shock, as a rising population clashes with a dwindling supply. However that long term time frame does provide ample time for the world to come up with some possible solutions or lower the cost of existing technologies such as solar.
However in the short/medium term I believe the world does not have to worry too much about energy prices- because global growth is going to get smashed, which in turn will smash the demand for energy. In other words, I believe people are underestimating how much global demand is going to be crushed. The freezing up of the world’s ability to finance new projects will be like a bullet through the heart of the global economy.
The big drop in trading volume since the rally that began in March of ’09 shows that this is a counter-trend rally (albeit a big one). The coming crash will bring back the real money trading volume, I have no doubt whatsoever. See the below article: