A recent response for a fund manager.... It may be of interest to readers...
I spent some time in the City on Monday night with the movers and shakers and there is an interesting split. Youngsters at the banks think the Euro can be saved, oldies like me on the macro-economic side feel the Euro is doomed and will actually die around about March.
The bond markets are telling us the latter are right. As I predicted there is now a cash squeeze, particularly in the dollar. Hence sterling’s significant fall against it over the last few weeks. Commodities and bonds will continue to slide bringing down already relatively cheap equities. Notwithstanding low interest rates cash is King and will remain so now for some time.
Gold will and is being dragged down by this scramble for cash to cover positions. All of which, of course, we knew would happen. The market is difficult to call short term, but with gold I still anticipate buying opportunities in the mid to late $1500s.
The sterling investor will be protected by this later in 2012 as world markets increasingly realise external debt per capita in the UK is $143,242. Dollar cash is a good call, short T Bills better which is why I was trying to find a fund that could accommodate this eight weeks ago.
We are on the edge of the holocaust which will play out in the next 4 months. There is no hiding place but dollars and gold. Client expectations need to be managed, indeed warned is a better word.