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The US and foreign stocks and precious metals all were down in January to start the year
out. We may be heading into another period of deflation. I called one of the investment companies I work with for one of my clients, to make some allocation changes, and I asked the representative what the Vanguard money market was currently paying (2/1) and she replied, “unfortunately sir it is paying a negative rate right now.” That means if you put money into this particular money market you would actually lose a tiny bit of your principal. Less than a decade ago money markets were paying 5% interest per year. 0% and negative interest rates for money markets is very deflationary.
Additionally, as many of you already know we took a substantial position in the US dollar back on 12/22/2009 in many of your accounts. The US dollar index was up 1.6% during the month of January 2010. As much as anything, strength in the US dollar is an indication of deflationary forces at work.
Finally, and because foreign stocks have been going down so much, we lowered our exposure to foreign stocks in most strategies. Foreign stocks were down 4.4% in January and look like they may be heading lower or nowhere in the coming months.
Another development to start this year out, that has also been deflationary, is that the 20 year government long bond was up over 2.6% through 1/31. This means that interest rates continued to go down as we are starting 2010. For those of you that have been reading my tweets you are receiving quick blurbs on this information as it is coming. To read my tweets simply go to the home page of Eleven Two Fund Management’s new website, which is http://www.eleventwofm.com. You can also go to my Twitter page which is http://twitter.com/
Photo:
http://www.prlog.org/
