When will the haircut and pain occur – Aus, UK, US and the PIGS government 10 year bond yields – June 2011 update

It’s been many months since I looked at the 10 year bond yields of Australia, the UK, the US and the PIGS.  These can be seen in today’s charts.  When I last posted in August of 2010 Greek 10 year debt was yielding 10.31%, as of the end of May 2011 that is now 16.29%.  Mish’s post yesterday raised some great points and gave plenty of food for thought prompting this post.

Is Gold in a Bubble? - Gold Priced in US Dollars (USD) – May 2011 Update

I currently hold 5% of my Retirement Investing Today portfolio in gold.  This is in the form of physical ETC’s “which are intended to provide investors with a return equivalent to movements in the gold spot price less fees” available from the likes of ETF Securities.  This is the commodities portion of my portfolio.  I hold no other commodity types as the vast majority seem to be futures based and previous experience has taught me that issues like contango can really affect the available returns for the Average Joe.

Irrational Exuberance and LinkedIn – History of Severe Real S&P 500 Stock Bear Markets – May 2011 Update

I couldn’t believe my eyes yesterday when LinkedIn (LNKD) had its flotation on the stock market.  All that I could think of during the day was irrational exuberance, the market can remain irrational longer than you can remain solvent and how quickly people forget.  For those that missed it LinkedIn floated at $45 per share which valued the company at $4.25B.  With earnings last year of $15.4M I calculate that as a Price Earnings (PE) ratio of 276.  That was shocking enough when you think that the long run cyclically adjusted PE (CAPE or PE10) for the S&P500 is 16.4.  However what I couldn’t believe was that during the days trading somebody or something (High Frequency Trading?) paid $122.70 a share for a PE ratio of 752 which is 46X the S&P500 PE10 long run average.  To me as an Average Joe this sounds like the dotcom days all over again.  The amazing thing is that it looks like plenty of others have already forgotten about the dotcom boom and its after affects in around 11 years and what’s even more amazing is that as I show today in Real (inflation adjusted terms) the market is still some 31.4% below the S&P500 real high of August 2000.  So we haven’t even recovered from the last lot of irrational exuberance.

“...it is likely that had they not occurred, inflation would have been substantially lower...” – UK Inflation - May 2011 Update

So we now have the UK CPI at 4.5% and the RPI at 5.2%.  I haven’t blogged about the UK Inflation situation since my post back in August of 2010.  Why?  Well as I wrote back then I had accepted that the Bank of England was going to steal from me and all the other savers out there by inflating away the value of my savings.  Also, while ever Mervyn and his mates (I think I’ll just call them the M&M’s from here in) keep interest rates at record lows of 0.5% this is going to continue so I really have nothing more I can add.  All I could do was protect myself as best as possible by ensuring I had my target allocation of 5% in gold and also that I held onto my NS&I Index Linked Savings Certificates (reinvesting as they came up for renewal) while I waited out the current theft that is occurring.

The S&P 500 cyclically adjusted PE (S&P500 PE10 or S&P500 CAPE) – May 2011 Update

Today I update the last May 2011 period cyclically adjusted PE ratio that I track – the S&P500 CAPE.   As I say every time I post on this index I am using this ratio to try and squeeze some extra performance out of my portfolio.  This method is used by Professor Robert Shiller however I modify it slightly by incorporating forecast earnings up to the month of interest. For new readers some background information on the CAPE is available here and if you’d like some information on why I use the CAPE then that is available here.