On a recent Bloomberg Radio with Tom Keene broadcast, Harvey Pitt and Arthur Levitt, two former SEC Chairman were guests. Levitt made the suggestion that hedge funds had once been given the choice of “regulation-light” or “regulation-heavy.” Now, in the wake of the Madoff scandal, “regulation-heavy” is all but assured. But, isn’t this just?

The yield on all U.S. Treasurys securities are at historic lows. The 3-year T-bill and the 1-year T-bill have both actually sported negative yields — meaning investors are paying the U.S. Governemnt to borrow money from them. This is the first time this has ever happened and suggests that the zero bound may not be a problem. What gives?

The conventional wisdom in the marketplace is two-fold. First, many believe that investors are fleeing to the safe haven of U.S. treasury bonds and away from risky assets as the financial crisis has created extreme volatility in riskier asset classes. It is also believed that treasury prices are being supported by future deflation expectations. With the price of oil and commodities collapsing and consumer demand weak, inflation has dropped precipitouly in most countries around the world, including the United States.

I have a different view. Treasurys are in a bubble.

The U.S. Dollar has been holding up quite nicely during this credit crisis. In fact, it rallied significantly from deeply oversold levels against the Euro and British Pound (remember Dollar-Euro at 1.60 and Dollar-Pound at 2.10?). However, America has a number of structural problems which will inhibit further appreciation. Moreover, former buyers of U.S. Treasuries in the Middle East and Asia are going to have domestic economic worries of their own very shortly and will not be supporting U.S. assets. This means that the Dollar will be a weak currency in the not too distant future.

James Montier, a market guru usually known as a permabear has turned bullish of late. In keeping with my bullish sentiments, I have posted his thoughts below according to Bloomberg News.

That said, I should always qualify my ‘bullishness.’ I still believe we are in a bear market and that equities will go lower on an inflation-adjusted basis. Investing only in index funds is a bull market strategy to be avoided like the plague. However, there are many stocks trading for 3 and 4 times earnings like Valero Energy or Chevron that deserve a look – Montier obviously agrees. This is shaping up to be a value investor’s dream.

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Yesterday morning, I heard Louise Yamada on Tom Keene’s show on Bloomberg Radio giving her assessment that stocks may break below 2002 lows. I mentioned this in yesterday’s news round-up. But, now I have the audio for you as well.
Yamada is a much followed technical analyst so her opinion has weight. Since at least [...]

Just a few moments ago I caught a very interesting post on Alice Cook’s site UK Bubble. The gist of the post was that things are falling apart in Ireland very quickly. Given what we saw with Iceland, I have to ask: is Ireland next?

I wouldn’t suppose that things are this fragile but we cannot dismiss out of hand talk of Ireland going the way of Iceland. Here is what Alice posted:

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Barack Obama promises to make some dramatic changes in U.S. foreign policy after eight years of a neo-conservative agenda. The question really is what would those changes be. Below, David Ignatius outlines a reasonable argument that Obama will follow a cautious and step-wise approach (hat tip Chris).
We won’t see an immediate end to [...]

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While yesterday was a very positive day in U.S. markets, with the Dow up over 300 points, the real action has been in Asia. The Nikkei bottomed at a 26-year low below 7200 on October 27th. Today, it stands at 9114.60. That is a gain of almost 27% in 5 days.
Gains have [...]

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I have felt for sometime that dollar strength is a counter-trend that has a sell-by date written all over it. You see, the Federal Reserve is ballooning its balance sheet like nobody’s business as it tries to be the global lender of last resort. This is very inflationary. Apparently, the Fed wants to [...]

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Yesterday, I made the case for us to be less concerned about the U.S. and even Western Europe, but to be very concerned about a slowdown in Asia. The reasons for this are simple: most analysts now understand the extent of problems in the U.S. and Western Europe.
This, is part of the reason [...]