There are a few yellow leaves on the trees. The mornings are cool.
‘My son started school last week,’ we told a neighbour yesterday.
‘What? Seems awful early for public school.’
‘They’ve been moving it forward. Back in the old days the kids helped on the farm with the harvest. School didn’t start around here until about the seventh or eighth of September. And we got to go back two weeks later because we lived on a farm.
‘Now nobody does that anymore. I don’t know what young people do. Nothing, I guess. That’s why they start school earlier.’
Our youngest son, Edward, headed back to college on Sunday. He goes to school in New England and takes the train — the Vermonter — from Baltimore’s Union Station. It seemed early to be sending him off too.
But Earth turns. The days grow shorter and cooler. And investors begin to feel the chill wind.
So far, only metaphorically. Later, they will feel the icy winds blowing around the corner of Wall Street in New York…or over their own hills and dales. And they will wonder…
…What’s a share in a company really worth? What’s a bond worth? Heck, what’s the dollar itself worth?
All of these questions will draw the same reply: It depends.
Among the things it depends on is the level of trust in society…in its leaders…in its capital structure…and in its future.
When the sun is shining it’s easy to have trust in a society. It’s when the chilly winds blow that the question marks begin to fly. You see them picked up like plastic bags by gusts of wind…floating around until they are snagged on some barren tree.
That’s when it gets interesting…when the hopes and hallucinations that undergirded the boom give way.
Markets are cyclical. Sooner or later, whether we like it or not, they change. And our guess is that investors are about to go back to school and learn that three major markets — debt, equities and gold — have changed direction recently.
Gold is now headed back up. US stocks are completing a huge, rounded top. And bond prices have already begun to fall (and yields rise).
The Federal Reserve spoke like a climatologist last week. Maybe Earth will begin cooling off, it said. Then again, maybe it won’t.
It said it was still considering tapering off. But it also reminded us that it would only do so if and when it felt like it was kinda a good idea…which probably wouldn’t be any time soon.
US stock markets rose on Friday…barely. Gold got some exercise — up $25 an ounce to bring it within a few dollars of $1,400.
How about that gold? Just when you thought it was finished…it comes back strong.
What will it do when winter comes and the warm light of trust fades away?
To be continued…
for Markets and Money
From the Archives…
Richard Fisher’s ‘Super Easy’ Fed
23-08-2013 – Nick Hubble
US Stocks and the Timeless Wisdom of Izzy Stone
22-08-2013 – Chris Mayer
Bankers Profit at the Expense of the Broader Community
21-08-2013 – Vern Gowdie
A Bond Market Tantrum
20-08-2013 – Nick Hubble
Australia’s Economy: Complex, Fragile or Centralised?
19-08-2013 – Nick Hubble