Are we heading towards a series of sovereign crises around the world?

It appears to me as though governments around the world have just about maxed out their credit cards as they continue running massive fiscal deficits. I’m starting to wonder if we might not see one or two sovereign debt crises in the near future. This is just some of the highlights from the news that I have seen today (not even this week but today).

Buying Gold

Gold priced in US Dollars (USD) and gold priced in British Pounds (GBP) remains above its historical real (after inflation) trend line price and above its historical real historical average price. It is however still below its historic real highs priced in either of these currencies. I’ll try and get monthly updates up for gold in both currencies in the next few days however today I’d like to report a buy/sell decision that I have made. I try and report every one of these (but I’m sure I’ll forget to do this occasionally) so that you can track what I’m up to.

Australian (ASX 200) stock market including the cyclically adjusted price earnings ratio (PE10 or CAPE) – April 2010 Update

To try and squeeze some more performance out of a retirement investing strategy that is heavily focused on asset allocation I am using a cyclically adjusted PE ratio (known as the PE10 or CAPE) for the ASX 200 to attempt to value the Australian Stock Market. The method used is based on that developed by Yale Professor Robert Shiller for the S&P 500. I will call it the ASX 200 PE10 and it is the ratio of Real (ie after inflation) Monthly Prices and the 10 Year Real (ie after inflation) Average Earnings. For my Australian Equities I will use a nominal ASX 200 PE10 value of 16 to equate to when I hold 21% Australian Equities. On a linear scale I will target 30% less stocks when the ASX 200 PE10 = 26 and will own 30% more stocks when the ASX 200 PE10 = 6.

UK Inflation – April 2010 Update

The Office for National Statistics has reported the March 2010 UK Consumer Price Index (CPI) as 3.4% up from 3.0% and the UK Retail Price Index (RPI) as 4.4% (in fact it was 4.449% so almost 4.5%) which is up from 3.7% last month.

A History of Severe Real S&P 500 Stock Bear Markets – April 2010 Update

Looking at the first chart which shows the real (inflation adjusted) S&P 500 (or its predecessor) stock market I have identified three historic severe stock bear markets. These I am defining as stock markets where from the stock market reaching a new high, they then proceeded to lose in excess of 60% of their real (inflation adjusted) value. These are best demonstrated by the second chart which shows each of these stock bear markets and the fall in percentage terms from the peak. So briefly what were these bear markets (full details here).