Retail Investors Celebrate 32 Consecutive Weeks Of Equity Outflows By Pulling Money Out Of Taxable Bond Funds As Well

That ICI has just confirmed the 32nd consecutive outflow from domestic equity mutual funds is not surprising.

The five big questions facing investors in 2011

It's the time of year when everyone comes out with their forecasts for 2011 – and we've got plenty of them for you in the current issue of MoneyWeek magazine. For now, let's look at five of the big issues that investors will have to cope with next year.

Should you buy a property to protect against inflation?

People are starting to get worried about inflation. Consumer price index (CPI) inflation – the official measure – is sitting at 3.3%. But the most recent survey from the Bank of England showed that people believe inflation is more like 3.9%. And they reckon it will stay at that level for the next 12 months. That's the highest expectations have been since 2008. In February, consumers thought inflation would be just 2.5% over the next 12 months. The big danger with expectations is that they may become reality, as people demand higher wages to match, and companies push up prices as a result. So are we going to see interest rates rising soon? The Confederation of British Industry (CBI) reckons so. In fact, the CBI reckons that the Bank will start hiking rates within the next six months. But are they right? And if inflation is set to head higher, how best can you protect yourself?

The best ways to play emerging markets

So we can’t be blamed for thinking about more exotic climes. And it seems that’s where the money is heading as well. Nearly 50% of institutional investors plan to increase their exposure to emerging markets in the next 12 months, according to a recent Deutsche Bank survey reported in the FT. That’s the highest figure for any asset class. We all know what happens when an asset class gets too popular. The bubble tends to burst. But when? That’s the catch…

Take a long-term view on emerging markets

Investment is sometimes a case of getting one or two big decisions right.

Many black swans, but Vince Cable is the turkey

In a year of big surprises, how long before the Business Secretary is stuffed, asks Jeff Randall.

Record spike in EMU default risk on Portugal downgrade and Greek restructuring scare

The cost of default insurance on eurozone bonds has surged to an all-time high on reports that Greece is preparing the way for a sovereign debt restructuring after 2013, with tacit support from the EU authorities.

Citigroup fears fresh wave of sovereign defaults and bank failures in eurozone

Citigroup has warned of a fresh wave of bank failures and a string of sovereign defaults in Europe unless EU leaders come up with a credible response to the crisis.

What Spain's woes mean for the euro

I'm starting to think there's a bit of a conspiracy going on in the global markets just now. Europe and the US are the key players. Every time investors get too worried about the problems occurring on one side of the Atlantic, the authorities on the other side stick their heads up and shout: "Hey, forget them! We're in much worse shape!" As economics professor Michael Spence puts it on Project-Syndicate.org, "capital markets have become schizophrenic, with investment rushing back and forth across the Atlantic in response to contagion risk in Europe and quantitative easing in the United States." This week, the big story has been the spike in US Treasury bond yields. There have also been rumblings of fear over how US cities are going to fund themselves in the near future. But now it looks as though the worry pendulum might be about to swing back to Europe once more...

Six reasons to steer clear of UK commercial property

“Buy like hell”. That was the advice from one investment veteran last week. He wasn’t talking about shares, bonds or commodities. He wasn’t even talking about some wacky new product thought up by the City’s black box brigade. No, he was telling punters to pile into good old boring British commercial property. And you can see why he might be tempted. Despite a rally in commercial property prices over recent months, values are still a long way below the peaks of three years ago. So is his advice right? Or should you wait a while longer?

China and India's latest love-in raises serious issues for the West

The dragon and the elephant should tango!" So said Wen Jiabao last week during a rare visit to India. The Chinese premier employed some uncharacteristically colourful language to convey an unusual idea – that of Sino-Indian co-operation.

Staying together in the eurozone could turn out worse

The European Council meets this week. On the agenda is the establishment of a permanent crisis resolution mechanism for the eurozone to replace the European Financial Stability Facility (or EFSF), which expires in 2013.

European Central Bank arms itself for Spanish crisis

The European Central Bank (ECB) is to double its capital base to cope with "credit risk" stemming from the eurozone debt crisis, paving the way for direct action to shore up the Spanish debt markets if necessary.

Gold jewellery loses glister as prices surge

Please respect FT.com's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email ftsales.support@ft.com to buy additional rights or use this link to reference the article - http://www.ft.com/cms/s/0/b52d834c-03bd-11e0-8c3f-00144feabdc0.html#ixzz17r0MIuHM The UK’s Royal Mint is as busy as it has ever been in its 1,000-year history. Sales of the popular gold sovereign coin have surged 400 per cent from last year, and November was “the biggest single month we’ve ever had in our entire history”, says Dave Knight, head of commemorative coins.

U.S. Home Values to Drop by $1.7 Trillion This Year, Zillow Says

U.S. home values are poised to drop by more than $1.7 trillion this year amid rising foreclosures and the expiration of homebuyer tax credits, said Zillow Inc., a closely held provider of home price data. This year’s estimated decline, more than the $1.05 trillion drop in 2009, brings the loss since the June 2006 home-price peak to $9 trillion, the Seattle-based company said today in a statement.

Ron Paul, Author of ‘End the Fed,’ to Lead Fed Panel

Representative Ron Paul, Texas Republican and author of “End the Fed,” will take control of the House subcommittee that oversees the Federal Reserve. House Financial Services chairman-elect Spencer Bachus, an Alabama Republican, selected Paul, 75, to lead the panel’s domestic monetary policy subcommittee when their party takes the House majority next month, the committee chairman said today.

Why US equities could be hard to beat in 2011

Hosting a debate between a panel of fund managers and asset allocators recently, I was struck by the unanimity of their views on what would be the best-performing geographic area next year.

Quantitative Easing: The Real Reason the Fed May Go For QE3

Ben Bernanke has a secret. And it's a secret that very likely terrifies him and his policymaking brethren at the U.S. Federal Reserve. That secret has to do with his latest round of "quantitative easing," a liquidity-push known as "QE2." What Bernanke & Co. don't want Americans to know is that painfully slow growth - or even a double-dip recession - isn't their greatest fear. Bernanke's greatest fear is that without this liquidity, one or more of the massive, already-bailed-out U.S. banks could stumble and once again undermine the global financial system. And this time around, the outcome would be much, much uglier.

Is this the end of the great bond bull market?

What's going on in the world's government bond markets? All of a sudden, yields are rising fast again. In other words, sovereign bond prices are plunging. And we're not just talking about the likes of Ireland, where the yield surge has been driven by the recent bailout. (Yesterday, by the way, Fitch Ratings slashed the Irish credit rating for the second time in two months). No, we're talking about the planet's big boys – or should I say big borrowers. You can now get between 0.5% and 0.75% a year more by buying a ten-year US, UK or German government bond than you could two months ago. Even yields on Japanese sovereign debt, traditionally the lowest of the lot, have climbed sharply. So are we now finally seeing the end of the great long-term government bond bull market? If so, why – and what's next?

The scramble for physical metal intensifies

The scramble for physical gold and silver is intensifying. People increasingly want to own the real thing, and not some paper substitute, all of which come with counterparty risk. This conclusion is apparent from the following two charts of gold and silver forwards, which are based on data made available by the London Bullion Market Association through November 24th (the most recent data available).

Goldman: These Are The 5 Reasons The Economy Now Looks Way Better

Goldman Sachs revised their growth forecast higher for 2011 this week, from 2.0% GDP growth for the year to 2.7% growth (via Zero Hedge). This new bullishness is built on a series of factors, centered on an improving jobs market and a better situation in manufacturing. And while yesterday's weak jobs report might have dimmed immediate hopes, Goldman, and top economist Jan Hatzius, remain confident things are looking better for 2011.

Is U.S. Making Emerging Nations Stronger?

Why is the rate of inflation so low in the United States when the government has pumped huge amounts of debt into the country and the Federal Reserve has loaded the financial system with large amounts of liquidity? The same question was asked in the 1990s. Where was the United States inflation? The answer for the 1990s… and for the present time period… is that the United States has exported inflation to the rest of the world, more specifically, Asia. As the accompanying chart shows, inflation seems to be heading up in Asia… as it is also heading up in many other emerging nations. As reported in the LEX column of The Financial Times yesterday, global inflation has seemingly bifurcated. In the developed countries the current inflation rate is below 2 percent (Australia and the UK are exceptions). Morgan Stanley expects a 1.5 percent rate of growth for the wealthier countries in 2010. By contrast, the emerging market inflation rate is about three times higher—expected at 5.4 percent in 2010…

German 2 Year Auction Fails By 20% Of Notional As Rush From Government Paper Intensifies

There is only so long that the Bundesbank can keep ignoring the fact that it has recently started piling on failed auction after failed auction. Today, Germany tried to sell €5 billion in 2 Year 1% Schatz notes. And while the official tally on the auction was a 1.1 Bid To Cover at a 0.92% average yield, just above our own 3 Year auction yesterday, (and a drop from the 1.4 previously) this was yet another failed auction, as the bank managed to get only €4.33 billion in competitive and non-competitive bids. The kicker: the Bundesbank retained €995 million of the issue, a whopping 20% of the proposed issue size - this is the amount it could not find any buyers for, and the deficit to what have been a non-failed auction. In other words, after the entire world was rushing to buy German paper, suddenly there is nobody willing to get in.

Meet The 35 Foreign Banks That Got Bailed Out By The Fed (And This Is Just The CPFF Banks)

One may be forgiven to believe that via its FX liquidity swap lines the Fed only bailed out foreign Central Banks, which in turn took the money and funded their own banks. It turns out that is only half the story: we now know the Fed also acted in a secondary bail out capacity, providing over $350 billion in short term funding exclusively to 35 foreign banks, of which the biggest beneficiaries were UBS, Dexia and BNP. Since the funding provided was in the form of ultra-short maturity commercial paper it was essentially equivalent to cash funding. In other words, between October 27, 2008 and August 6, 2009, the Fed spent $350 billion in taxpayer funds to save 35 foreign banks.

The smart money is betting against China

here's no country in the world that splits investment opinion more than China. Optimists see it as the world's saviour. After the credit crunch and Great Recession, China's rapid expansion was one of the main factors that dragged the planet back from the brink. While the bulls may expect growth to slow a bit, they still reckon it'll continue at a sustainable pace. And while China's stock market hasn't set the world alight of late, they believe it's just a matter of time before it takes off again. But comforting though it may be, we find it hard to take this argument at face value. There are several reasons why China could soon face a raft of problems, some of which could turn very nasty. And that could be a real threat to the global economy...

Asia Forecast: High Growth Rates Will Create Top Profit Opportunities For 2011

While some individual Latin American markets have outpaced their Asian counterparts, the fact is that the 10.9% return of the overall MSCI Asia Index outdistanced the 10.3% return of the "Americas" region. Investors can expect more of the same in the New Year. The fact is that the Asian region - including Australia and New Zealand - was a profit powerhouse in 2010. And Asia's prospects for 2011 are even brighter: * It's where a great majority of the world's growth is taking place. * And it's where investors can reap their biggest profits - if they pick the right investments in the best Asian markets.

Investing in the Americas: Natural Resource Prices Will Be Key to 2011 Profits

Whether you win or lose on your Americas-related investments in 2011 will come down to a single factor - natural-resource prices. If the prices of oil, gold, copper and other natural resources are high, the hideous flaws in the economies of a number of the countries north and south of the U.S. border will remain hidden behind, as if by magic. But if resource prices plummet, then even some of the best-run countries in North and South America will probably stumble a bit - and several will be revealed as true economic basket cases. When we refer to "the Americas," we're talking about all the countries in North, Central and South America - with the United States excluded. There's a great divergence in potential. So let's begin our journey with Latin America.

A back-door bail-out for Europe?

Earlier this week, the president of the European Central Bank, Jean-Claude Trichet, said that we shouldn't underestimate the determination of the eurozone's leaders to hold everything together. On the face of it, he's happy to test that determination to its limits. Investors had assumed that Monsieur Trichet's comments meant that he'd be ready with a great big bail-out. Instead, he basically said that although the ECB won't be withdrawing 'temporary' support for troubled banks or countries any time soon, it's still up to countries to sort out their finances in the longer run. There is a "clear need" for governments to "strengthen confidence in public finances."

Global bond rout deepens on US fiscal worries

Agreement in Washington on a fresh fiscal package has set off dramatic rise in yields of US Treasuries and bonds across the world, threatening to short-circuit any benefits of stimulus. The bond rout raises concerns that the US authorities may be losing control over events.

We approach a defining moment for Europe

Germany will not abandon the no bail-out clause – a big decision looms for the EU, says Jeremy Warner.