The State Of The Economy

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• February 11, 2013

  Viewpoint: Hey! Pay Attention!

  By Mike Getlin

  The first sign of coming instability in equity and bond markets is usually the growing comfort of most investors. Stock prices have been soaring for some time now, the bond market is awash with cash, Adele got another Grammy, and everyone seems content with the general state of affairs. Accordingly, the gold and silver markets have been relatively quiet this year as they bounce around a tight range controlled by technical traders.

  The problem is that nobody is seeing the problems. Well, not quite nobody. Actually, while the general public has been lulled to sleep, there are some big name investors positioning themselves for a significant change in market direction. Just look at what’s come out in the last couple weeks:

  1. Jim Rogers has taken a harsh stance against long term US debt, publicly stating that he is increasing his short positions in preparation for sharply lower bond values.

  2. Goldman Sachs just cut its 3 month global equities rating from overweight to neutral. They did so quietly, while most traders were driving home early last week to avoid the massive snow storm that hit the eastern seaboard.

  3. Bond giant Bill Gross has been publicly bashing long term US treasury bonds, pushing instead for higher exposure to debt issued by nations with sane monetary policies.

  4. Billionaire fund manager John Paulson has been cutting his equities positions, all but closing out his interest in major US banks.

  5. George Sorros just sold off half of his US financial sector stocks.

  6. Finally, Warren Buffet, the perennial US equities cheerleader, has quietly dumped shares in Johnson & Johnson, Kraft, Proctor and Gamble, and other US consumer product stocks. He also sold Berkshire’s entire stake in Intel.

  This week we get to see the first retail sales report under the new tax rate, including the 2% increase in payroll taxes. There’s not much consensus as to what we’re likely to see, but few are calling for strong numbers.

  Finally, give a good listen to the State of the Union address tomorrow night. I’m betting you’ll hear a lot about immigration and gun control. You’ll probably hear a bit more about “balanced” deficit reduction, but there are unlikely to be many details. What I’m betting you won’t hear about is how new policies will sustain equity markets and economic growth. I’m betting you won’t hear anything about attracting corporations back to the US to spur growth. I’m betting you won’t hear a peep about how the Fed might exit its’ position as the world’s largest investor. You won’t hear answers to these questions, because nobody is asking them. That’s probably your first sign that something is terribly wrong.

  Mike Getlin is Executive Vice President of Merit Gold & Silver, America's fastest growing physical gold IRA company.

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