ContraryInvestor<JUNE NEWSLETTER>Of Currencies And Global Capital Flows
As we move into the summer of 2012, we once again find ourselves in a world of heightened asset price volatility, concerns over European governments and the Euro banking system as a whole, as well as clear economic slowing in the emerging economies. As you’ll remember, we lived with very similar concerns and circumstances during the summers of 2010 and 2011. Is it déjà vu all over again?
In this discussion we look at what we believe to be a very important topic receiving far too little attention in the mainstream financial media that happens to have direct bearing on short term investment decision making and outcomes. We want to discuss the role and importance of currencies and global capital flows in the current environment. Quick word of warning. For many of you this may seem incredibly simplistic. This of those discussions where we’re trying to address those that do not work in the investment industry and do not follow the financial markets on a constant basis.
One of the most important big picture issues in the current environment is to remember that we are in a completely interconnected world. Amidst a period of sovereign debt crisis (in Europe for now), it’s not just the reality of the interconnected physical global economies that is important in determining short to intermediate term broad asset class or specific asset price outcomes, but the nature of continually adjusting global currency cross rates as well as the actual movement of global capital flows also very much influences asset prices. A bit of a three dimensional chessboard? Yes.
Let’s start with important facts that we know.
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