Barging Into the New Year:Model Portfolio Update

• Gregor Macdonald
• January 6th, 2010

Gold, Silver, and the commodity currencies have now barged into the New Year. I am surprised these moved so early and fast, but I am also pleased as they form 60% of the model portfolio. As for gold, one wonders that remarks made over the weekend from Ben Bernanke were influential. Gold is up by nearly 3.00% since the chairman gave his most recent explanation for the credit and housing bubble: it was not the fault of the FED. Once more, the FED was not connected to the bubble in any way. Instead, according to Bernanke, it was a pure case of regulatory failure.

If we recall, it was just last Summer that Bernanke had a different explanation for the financial crisis. On public television and in a speech, Bernanke said the crash of 2008 was a classic example of a panic. Indeed, he went on to explain that this was an overreaction, a behavioral phenomenon. I wrote about this at length in my August 2009 Gregor.us Monthly newsletter, Reflation Has Arrived: Friend or Foe? (see: Gregor.us Annual). In a way, Bernanke’s Summertime explanation conforms more closely to his trailing 4 years position: there is/was no housing or credit bubble, no evidence of such, and no concern that wages could not keep up with debt levels. The shift this weekend marks the first time the chairman has even allowed there was a bubble. As I have sarcastically put it: The FED has just spent 2 years and many trillions bailing out a bubble it contends never existed in the first place.

The model portfolio is up 450 basis points in the first three days of 2010. It might have been nice to have recorded those gains on 31 December, but such is score keeping and the calendar. Also at Gregor.us today, I have yet another post up on the topic of coal. I see also that our exposure to coal…(this article continues for subscribers through the membership gateway, on the right side of this page)

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