Somethings do not add up

Doug Noland writes in his weekly credit bubble bulletin as follows:

Let’s return to election late-night. I doubt traders and the more sophisticated market operators will easily forget what almost transpired. It’s worth noting that while S&P500 futures and the Mexican peso were collapsing, the Japanese yen was in melt-up. In just over two hours, the dollar/yen moved from 105.47 to 101.22 – an almost 4% move. Meanwhile, EM and higher-yielding currencies were under intense selling pressure – the Brazilian real, South African rand, Turkish lira, Colombian peso, Australian dollar and New Zealand dollar (to name a few). At the same time, gold surged from $1,270 to $1,338. Crude sank 4%. Global markets were on the brink of a serious speculative de-leveraging episode. [Link]

Gold has sunk to USD1229 in the spot market by close of Friday. Japanese yen is back at 106.685. Stocks made new highs and held on to them on Friday. But, at the same time, EM stocks, currencies and bonds are hurting. Risk aversion is partial. U.S. stocks and dollar are exempt. So, there is a portfolio reallocation from EM assets, US bonds and gold to US stocks. I am not convinced it makes sense.

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