Gilts could still be worth a look – MoneyWeek

Turningyoureyesnowtotheshortertermchartbelow,thisrallytothe30-weekmovingaveragehasclearlyfailed,whichshouldmeanthatweareonthenextlegdownofajourney,possiblyto2。

5%。

Thepotentialupsideforgiltsthereforeisjusthuge。

Thosewhoareworriedaboutexcessiveissuanceandhigherinflationshouldalsoconsiderausterity-drivenfallingdemandandover-supplyofgoods。

Weareconfrontedwithmonetaryinflationandgoldsbenefitingfromthat;however,over-supplyatatimeofcreditcrisisisverynegativeforretailpriceinflation。

If,asweexpect,thestockmarketisgoingtobreakdownagainandotherassetmarketssuchaspropertyaregoingtofurtherweaken,whereelsebutingiltswillthepensionfundsputtheirmoney,andwhereelsewilltheriskaverseputtheirmoney?

Everybodysaysthatgiltswillgodowninvaluebecauseofincreasedissuance,exceptthatnobodyseemstohavetoldthegiltmarket。

Theendofthe10-yeartradingrangeshouldhavebeenmarkedbygiltyieldsbreakingtotheupsideifinflationwasagenuinerisk;thefactthatitwastothedownsidesaysthatnomatterhowunlikely,inflationandissuancearenotissuesfortheforeseeablefuture。

Owninglong-datedgiltsisathoughtfulinvestmentposition,wewatchitlikeacatwatchesamousehole,wereconsidertheinvestmentdecisioneverydayandifpriceactionbehavesinawaywedontexpect,considerclosingtheposition。

Ourmantrais,dontlosemoneyandoutperformcashbyasmuchaspossible。

Ourdiligentworkprocessistargetedtoachievethat。



ThisarticlewaswrittenbyJohnRobsonAndrewSelsbyat

FullCircleAssetManagement



aspublishedinthe

threesixtyNewsletter



on13February2009

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