@ Hishah. There are five asset classes that are perpetually competing for investor attention:

* Debt
* Stocks
* Technology
* Commodities
* Real Estate

Currencies are the transmission mechanism that investors can gauge their losses or gains.

During the Sovereign Debt Crisis of 1931, the Dollar rallied as a safe haven to South American and European nations who defaulted on their debt obligations. Therefore, a present day strong Dollar is a replay of the safe haven status that the Greenback enjoys in tumultuous times.
Interestingly, stocks boomed between 1932 and 1937 because, remember, the world was gripped by a debt crisis causing a flight from debt. Technology had already enjoyed in day in the sun, fueling the 1921 - 1929 bull run concentrated in automotive and airline stocks. Commodities had peaked earlier in 1921 whilst real-estate was a no-go zone; property prices hit 30 cents an acre in Virginia during the Great Depression.

Fast forward to present day and the sovereign debt structures of the Western world are being called into question. Investors have two options left in the wake of the 2000 Dot Com (technology) bust, 2007 real estate bust and 2010 Sovereign Debt Crisis - commodities and stocks.

One more point to note, performance of the stock market is not always an indicator of economic performance. Take for instance the Shanghai Composite Index which was in decline between 2001 and 2006 whilst the Chinese economy was steaming ahead. Therefore, global stock markets may boom as an alternative to the debt markets whilst economies stagnate or even decline.

Just when you thought it was safe. The Golden State constitutes 13% of the economic output of the United States and would rank as the 9th largest economy were it a nation and yet has an unemployment rate of 12% largely due to the 2008 real-estate bust. Lower property taxes have placed the state's treasury in dire straits.

California is a harbinger of things to come in the United States. In the words of gold bug, Jim Sinclair, economic trends begin in the west and head east across the American heartland.

Remember Greece, the tail that wagged the European dog? Well, its 2% contribution to European economic output pales in comparison with California's 13%.

California will be forced to issue IOUs to public workers and other creditors in lieu of cash in the next two months if a budget deadlock cannot be broken, the state’s financial controller has warned.

America’s most populous state faces a repeat of 2009, when a slumping economy and its failure to agree a budget caused an unprecedented fiscal crunch and the issuing of $2.6bn of IOUs, which damaged California’s credit rating and forced it to scrap some social programmes.

Read more:

http://www.ft.com/cms/s/...-9f02-00144feabdc0.html