The Phaserl


The Better Safe Haven: Oil, Gold or Dollars?

from The Daily Bell:

Oil is a better bet than Treasuries as the Federal Reserve contemplates raising interest rates, according to Park Sungjin, an investor in Seoul … U.S. interest rates may head higher in the coming months, said Park, the head of investment management at Meritz Securities Co., which has $7 billion in assets. – Bloomberg

Dominant Social Theme: The economy is recovering. Is a safe haven even necessary?

Free-Market Analysis: Probably so, unless one wants to take Janet Yellen’s word for it. And thus Park Sungjin may have a point. He believes that commodities could be the best safe haven at this point in the business cycle. His argument is a simple one. Sungjin points out: “The Fed is ready to raise rates, [but] the commodity market has corrected already: I’m buying. We have a long position on commodities … You have to use energy.”

Park’s opinion is shared by a Bloomberg survey of analysts. The reasoning is that “full faith and credit” of the US will not protect the bond market from a decline, especially if rates go up. Bloomberg estimates that benchmark 10-year Treasury notes might lose around three percent.

The article also quotes hard-money investor Jim Rogers who expresses uncertainty about the oil market but adds, “I’m watching this very closely,”

Interestingly, in a recent interview with the Midas Newsletter, Rogers claimed he held “a lot of cash.” Rogers could mean he was actually holding cash or perhaps short-term government debt or a foreign exchange position.

He went on to explain he was not “keen on US dollars or anything; US dollars are terribly, terribly small currency. We’re the largest debtor nation in the history of the world.”

Jim Rogers offered a position that contradicts the idea that oil is a safe haven of choice. He pointed out that when there is “turmoil” in the world, people still believe the US dollar is a safe haven and that they buy dollars because they don’t know what else to do.

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