Archives for June 2014

June 2014 - Page 20 of 22 - Money Morning - Only the News You Can Profit From

Read This to Dodge Investing in Bitcoin the Wrong Way

Investors hoping to get a piece of the Bitcoin price surge are getting anxious waiting for the Winklevoss Bitcoin ETF to hit the market. And an inevitable consequence of the growth of the Bitcoin economy is a proliferation of other Bitcoin investments.

Some of these will be outright fraud; efforts to trick the unsuspecting by offering an investment in Bitcoin that doesn't exist, or some similar chicanery.

But in the rush to raise money for exciting new projects, even well-intentioned folks have gotten themselves – and their investors – into some sticky situations.

While any sort of investing in Bitcoin carries significant risk, these Bitcoin investments occupy a dangerous gray area that's best avoided.

The Search for Yield, Emerging Markets, and a Wacky Divergence

Let's talk a little more about divergence – as in wacky divergences.

Last time, we looked at divergence through the lens of interest rates and how rates – principally measured by the yield on the U.S. Treasury 10-year note – were going lower when they were expected to move higher as the Federal Reserve tapers its monthly bond purchases.

But there's another divergence at work, and it strikes me as dangerous.

We're talking about the rising prices of emerging markets stocks and bonds...

Low Rates Won't Hide This Looming Threat Forever

Financial markets are experiencing a significant divergence in 2014 between the direction of stocks and bonds.

While the S&P 500 and Dow Jones Industrial Average have traded to new record highs, the yields on benchmark Treasury bonds have dropped sharply.

Normally, one would not expect stock prices to rise and bond yields to drop simultaneously because these movements suggest contradictory readings of the economy.

Higher stock prices indicate bullishness about economic growth, while lower bond yields suggest just the opposite.

However, the inconsistent signals being sent by markets are not as surprising as they seem, given the context of the post-crisis environment in which Federal Reserve policies have distorted normal market pricing mechanisms.

This situation could blindside investors who don't see it coming…