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The Bull 'n Bear on Commodities Bubbles and Fast Money



May 09, 2011 – Comments (1) | RELATED TICKERS: SLV , BAC , GLD

There is a lot of interesting stuff in today's press:

- Edward Chancellor has a piece in today's FT in which he argues that the notion of the dollar as the world's reserve currency may be outmoded. If you don't know Chancellor, he is the author of Devil Take the Hindmost: A History of Financial Speculation, a book that is required reading for every investor, particularly in a period in which speculative bubbles are popping up right and left. At the end of April, I e-mailed Chancellor some of my results concerning the silver bubble and he replied that he was aware of the problem. A few days earlier, his GMO colleague Jeremy Grantham had highlighted the bubble in commodities in his latest monthly commentary. Last week's action suggests they are probably right.

- UBS, which had some $50 billion in writedowns in the aftermath of the credit bubble, is having difficulty coming to terms with the fact that higher capital requirements (and the Swiss authorities are imposing tougher norms than Basel III) will, of necessity, lower profitability.

- The WSJ's Heard on the Street has an interesting piece on the decline in the velocity of money and suggests that this is but one indication (along with the drop in the yield on the 10-year Treasury) that a slowdown may be in the works. This is an interesting article because it highlights the crucial difference between the monetary base and the money supply (one which gold bugs appear incapable of making).

- Finally, the FT has a profile of  Swiss hedge fund manager who believes that he and his colleagues should be compensated on the basis of real (i.e. after-inflation), not nominal returns. Furthermore, at 0.80% of asset and 15% of real profit, his fees are markedly lower than those of his competitors (typically 2/20). What an iconoclast to believe that hedge fund managers should serve their investors!

Enjoy your day!

Alex Dumortier


1 Comments – Post Your Own

#1) On May 09, 2011 at 3:51 PM, MegaEurope (< 20) wrote:

Grantham's letter is even more thought-provoking than usual.

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