Quote of the Week - Hathaway

John Hathaway of Tocqueville Asset Management, as you know, is one of our favourite analysts as he presents a balanced view.  The following are excerpts from a piece he wrote this week.

“In our view, the systemic risks that existed prior to the presidential election have not suddenly vanished. Most important among these is a massive bond-market bubble. Close behind, equity valuations remain at historically extreme levels. How the new administration deals with these vexing issues, assuming that it even begins to comprehend them, is a complete unknown. Any unwinding promises to be precarious, full of pitfalls and setbacks, all of which are reason enough to hedge bets on a trouble-free return to robust economic growth with exposure to gold….

And according to David Rosenberg of Gluskin Sheff, “There is no bid in the Treasury market and the price chart looks like Bank stocks in the summer and fall of 2008. Globally, we have seen (post-election) $1.2 trillion of bond value wiped out.” Bonds are weak based on expectations of rising deficit spending and inflation. Higher bond yields would seem to undermine the idea of higher stock prices, especially with valuations near all- time highs, perhaps second only to levels seen during the dot-com bubble.