Recently flock investors all over the world have crowded into whichever assets are perceived as being the safe-haven. This includes all high-dividend paying stocks and any type of fixed-income issue. The media basically has done a fine job selling the flavor of the day to these folks.
One of these days there will be a huge surge in the market in favor of a very small number of bold, savvy investors who took advantage of recent stock market bargains. At that point everyone will try to pile into the same trades at the same time. This has long been the pattern in the past and the future will be no different.
Eventually the massive disparity between defensive assets and risk assets must resolve. And yes, history does repeat itself and this time is no different. Many investors who are blindly crowded into US treasuries will be dealt a tough lesson. The limited potential of safe-haven assets will soon be recognised. The question is how long will it take for this disparity to resolve itself.
For now, we would like to draw your attention to two interesting but contrasting recent articles from MarketWatch writers.
Here is an article that most investors read and subsequently piled up into US dollar, TLT and other known safe-havens. It was published just before last week’s rally:
Euro crisis brings world to brink of depression. Parallels to 1930s’ missteps unmistakable, by Darrell Delamaide’s Politics of Capital.
Now here is a completely different article that appeared on Monday July, 30th, that we enjoyed reading:
Inverse ‘Summer Crash’ takes shape, by Michael Gayed.