Baltic Dry Index still near life lows

Check out this chart from StockCharts.com for the baltic dry index, which is close to its life lows and down over 95% from the highs set in 2008. Obviously the massive influx of liquidity form QE's in the US, Europe and Japan hasn't really helped the global economy.

Behind the tantrums of QE withdrawal lies a very grave deflationary threat

Last week most risk assets sold of on the prospects of QE withdrawal following strong job numbers out of the U.S. Here's how things shaped up:
The S & P 500 was down well over 1%
Gold  was down close to 1%
Oil was down close to 10%
Copper was up about 2.5%
Emerging markets were down close to 3%
The clear winner was the dollar which surged nearly 2%

If markets were really bothered about inflation, gold and oil would be going through the roof instead they have absolutely collapsed over the past year:



In addition the flight to quality trade that surfaced during the recession of 2008 into the dollar seems to have emerged with a vengeance:

While one may want to brush aside the emergence of deflation which has already started to surface in recent PPI and CPI numbers, let's not forget what it did to Japan since the early 90's. Despite the all out war to contain deflation in Japan interest rates are still negative and the stock market which has rallied off late is still down over 50% from the highs it set in 1989.

My Asset Allocation Strategy (Indian Market)

Cash - 40%
Bonds - 20%
Fixed deposit - 20%
Gold - 5%
Stocks - 10% ( Majority of this in dividend funds)
Other Asset Classes - 5%


My belief is that stocks are relatively #overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese #yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.

Asset Allocation Strategy - Indian Market http://t.co/BIh2Q4yhuw pic.twitter.com/mJO6DInazm

— samuelR (@RajveerRawlin) September 6, 2015