Signs of Financial Turmoil Are Brewing
Markets everywhere are becoming more unpredictable and uncertain. Some of the most astute investors are beginning to exercise caution and even warn that some kind of black swan event could be coming to the financial markets.
Some of the stern warnings are coming from bond fund investors:
- A sub-title in The Telegraph reads: It may be time to put money under the mattress. High profile fund managers explain how to prepare for a 'systemic event’. The same article went on to say that the trigger for the “inevitable correction” could come from a completely unanticipated event. (Source: telegraph.co.uk 2105 June 20th)
- A headline in ZeroHedge reads: $140 Billion Bond Fund Goes To Cash As It "Braces For Bond-Market Collapse”. The article goes on to say that a Los Angeles based money manger which oversees almost $140 billion of US debt has been accumulating more and more cash in its credit funds. (Source: ZeroHedge 2015 June 22nd)
- In an article in Business Insider, according to Bank of America Merrill Lynch, net sales of US stocks amounted to $4.1 billion last week, the largest total since January 2008. The article went on to say that after three weeks of net-buying, institutional clients’ net sales last week were the largest in our data history. (Source: Business Insider 2015 June 23rd)
Time to Diversify?
Today’s investment environment is becoming more uncertain than ever, which is what scares professional money mangers the most. Many are now stressing the importance of diversification and having money spread across many different asset classes.
This seems like a good idea, however we may be entering a period of history where high levels of risk are present in all paper assets. It is challenging to find value in most stocks, bonds and currencies because of the asset inflation caused by record amounts of global money printing.
Former US rep. Ron Paul said recently that despite record highs in the market, the Fed’s easy money policies have left stocks and bonds are on the verge of a massive collapse. ( Source: ZeroHedge 2015 June 20)
What he is referring to is that a collapse in the bond market is going to lead to big problems for the stock market, and probably the currency markets. This is why investors should consider hard assets, like the precious metals as part of a diversification plan.
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