A.I.M. Users Bulletin Board

[ls7550]

Hi Tom

IAU, a gold surrogate, quit rising which was also a surprise

I see it as forced gold sellers to raise cash to cover margins. Also even though yields are down, so conceptually even more negative real yields - when gold tends to rise, the concern is contraction (deflation) in which case real (after inflation) yields could actually be tended towards more positive real yields. The market just doesn't know yet how many businesses may collapse due to Corona virus. 2% inflation, 0% long dated bond yield (-2% real yield) seeing that transition over to -2% deflation has 0% long dated bond yield rise to +2% real (declining long dated bond yields = rising/higher prices, rising bond yields = declining/lower prices).

Long dated bonds, gold and stocks can at times all move in the same direction. What tends to occur is later one of them snaps sharply upwards when the actual outcome is more certain/known.

I'm looking forward to being 100% invested again. I've not been that deeply invested since late 2008. It will be another chance to be on a par with Mr. Buynhold. With AIM these times don't come along very often.

When/if you track a stock index it wont collapse to zero, firms that go bust are replaced by others. If economies see 5% deaths of mostly ill/old economic activities will resume post virus. Contraction may relatively quickly (year or two) resume back to 'normal'. Fundamentally IMO it is stocks that are more inclined to see the large snap to the upside post virus. But where bonds/gold/cash helped avoid larger downside hits than might otherwise occur with stock heavy asset allocations. My guess is the financial low/bottom will occur sometime before June (peak virus contraction). Could be a year of buy-in-May rather than the more usual sell-in-May.

Seems the relatively rare events have been more frequent since dot com (2000) bubble bursting. 2003/4 dot com lows, 2008/9 financial crisis lows, now 2019 virus lows - whilst still relatively infrequent seems more frequent than 'usual'. That fits well with AIM though.

Clive