Note: I am not an investment advisor and nothing I state should be taken as investment advice. Please consult your own private professional financial advisor for help in making investment decisions
Marc Faber is back in the news. Who is Marc Faber? He's the author of the 'Gloom, Boom, Doom Report.' On March 9th, 2009, the S&P 500 hit a 12-year low. On that day, Faber predicted stocks would rally thanks to government stimulus money being pumped into the economy. Since then, the S&P 500 has rallied 55%.
Faber is back in the news today, making the following assertions:
*Stocks have likely peaked for the year and will probably face a 20% correction.
*Faber prefers emerging markets. The Asian economies will continue to grow despite the financial mess in the West.
*Fiscal and monetary stimulus measures have only delayed an inevitable crisis instead of preventing it.
*“The next stage is for total breakdown of the financial system and for an economic and financial crisis that will bankrupt governments.” -Faber
*Gold will face a correction along with equities. Faber "wouldn't be surprised" to see gold settle at $920 an ounce. However, Faber does not plan on selling his holdings in gold.
*Despite being an ultimately doomed currency, the U.S. Dollar is likely to rally amid deflation concerns.
Source: http://www.business-standard.com/india/news/marc-faber-predicts20-fall-in-markets/371403/
Showing posts with label Asia. Show all posts
Showing posts with label Asia. Show all posts
Monday, September 28, 2009
Friday, September 18, 2009
China and the future of Gold
Note: I am not an investment advisor and nothing I state should be taken as investment advice. Please consult your own private professional financial advisor for help in making investment decisions.
The whole world is talking about gold breaking $1,000 in price.
Many people are asking: is this price sustainable? Where will gold go from here?
I can't really answer these questions myself as I'm not an expert on gold or on precious metals in general. I will note that gold is not really an asset in the normal sense, it is quite simply a form of money. So the question of whether or not gold will go higher can also be framed as "Will the U.S. Dollar (or whatever the currency may be where you live) go lower/weaken?" If so, then the answer is likely yes, the price of gold will go higher vis-a-vis that currency.
We all know the U.S. Dollar (USD) is in the dumps. The Federal Reserve's "quantitative easing" policy and climbing federal deficits are working a one-two combo on the USD. This makes me think that the gold rally isn't unwarranted and that a "gold bubble" probably isn't in effect right now, contrary to what some pundits have postulated.
A lot of news about gold has been coming out of Asia as of late.
To begin with, an Internet publication related to the mining industry and precious metals (Mineweb) is reporting that China's state-run Central Television network has aired a news program extolling the benefits of investing in precious metals and seemingly advocating that the Chinese public engage in precious metals investing by promoting the Chinese mint's bullion products. [1] A recent Wall Street Journal article seems to confirm this news report. [2] Several websites are repeating rumors first published by an employee of SinoLatin Capital, a merchant bank which specializes in transactions between Chinese and Latin American firms, that China may attempt to ban the export of gold. [3] These are just rumors and the author mentions that his firm has several Chinese mining companies as clients, so make of that what you will. All of this comes on top of the admission earlier this year that the Chinese Central Bank has been purchasing gold in order to build up its reserves.
If you want to get an idea of what the "gold mania" in China is like at the layman's level, I suggest you read this article. [4] Apparently you can buy gold at most retail bank branches in China and the Chinese mint is opening shops from which to sell bullion in many cities.
Elsewhere in Asia, it was announced today that Pakistan is abolishing import duties on gold in order to encourage legal imports of gold and discourage black market imports. [5]
Now for the "but." In the past I've mentioned the possibility of a debt-fueled deflationary depression in the U.S. (see Debt Deflation and False Dawns) I thus have to bring to your attention this article which states that in a deflationary decline gold would not be a good hedge. [6] The article's authors make a convincing argument, especially if you're a fan of the gold standard and a critic of fiat currencies.
Regardless of what happens in the future, my judgment right now is as follows. We have to remember that the price of gold is notoriously volatile. The fact that gold is so strong right now and so many people are talking about investing in it reveals how little confidence there is in the current financial order and how much unease and uncertainty continues to exist out there. That's the only conclusion I can positively take away from this situation at the moment.
Sources:
1: http://www.mineweb.co.za/mineweb/view/mineweb/en/page33?oid=88452
2: http://online.wsj.com/article/SB125249222381695221.html
3: http://www.commodityonline.com/news/China-may-ban-export-of-gold-silver-21219-3-1.html
4: http://www.sovereignman.com/finance/gold-mania-in-china/#more-650
5: http://www.dailytimes.com.pk/default.asp?page=2009\09\18\story_18-9-2009_pg5_11
6: http://www.speculative-investor.com/new/article060902.html
The whole world is talking about gold breaking $1,000 in price.
Many people are asking: is this price sustainable? Where will gold go from here?
I can't really answer these questions myself as I'm not an expert on gold or on precious metals in general. I will note that gold is not really an asset in the normal sense, it is quite simply a form of money. So the question of whether or not gold will go higher can also be framed as "Will the U.S. Dollar (or whatever the currency may be where you live) go lower/weaken?" If so, then the answer is likely yes, the price of gold will go higher vis-a-vis that currency.
We all know the U.S. Dollar (USD) is in the dumps. The Federal Reserve's "quantitative easing" policy and climbing federal deficits are working a one-two combo on the USD. This makes me think that the gold rally isn't unwarranted and that a "gold bubble" probably isn't in effect right now, contrary to what some pundits have postulated.
A lot of news about gold has been coming out of Asia as of late.
To begin with, an Internet publication related to the mining industry and precious metals (Mineweb) is reporting that China's state-run Central Television network has aired a news program extolling the benefits of investing in precious metals and seemingly advocating that the Chinese public engage in precious metals investing by promoting the Chinese mint's bullion products. [1] A recent Wall Street Journal article seems to confirm this news report. [2] Several websites are repeating rumors first published by an employee of SinoLatin Capital, a merchant bank which specializes in transactions between Chinese and Latin American firms, that China may attempt to ban the export of gold. [3] These are just rumors and the author mentions that his firm has several Chinese mining companies as clients, so make of that what you will. All of this comes on top of the admission earlier this year that the Chinese Central Bank has been purchasing gold in order to build up its reserves.
If you want to get an idea of what the "gold mania" in China is like at the layman's level, I suggest you read this article. [4] Apparently you can buy gold at most retail bank branches in China and the Chinese mint is opening shops from which to sell bullion in many cities.
Elsewhere in Asia, it was announced today that Pakistan is abolishing import duties on gold in order to encourage legal imports of gold and discourage black market imports. [5]
Now for the "but." In the past I've mentioned the possibility of a debt-fueled deflationary depression in the U.S. (see Debt Deflation and False Dawns) I thus have to bring to your attention this article which states that in a deflationary decline gold would not be a good hedge. [6] The article's authors make a convincing argument, especially if you're a fan of the gold standard and a critic of fiat currencies.
Regardless of what happens in the future, my judgment right now is as follows. We have to remember that the price of gold is notoriously volatile. The fact that gold is so strong right now and so many people are talking about investing in it reveals how little confidence there is in the current financial order and how much unease and uncertainty continues to exist out there. That's the only conclusion I can positively take away from this situation at the moment.
Sources:
1: http://www.mineweb.co.za/mineweb/view/mineweb/en/page33?oid=88452
2: http://online.wsj.com/article/SB125249222381695221.html
3: http://www.commodityonline.com/news/China-may-ban-export-of-gold-silver-21219-3-1.html
4: http://www.sovereignman.com/finance/gold-mania-in-china/#more-650
5: http://www.dailytimes.com.pk/default.asp?page=2009\09\18\story_18-9-2009_pg5_11
6: http://www.speculative-investor.com/new/article060902.html
Wednesday, August 19, 2009
Quick Update: Swine Flu in Japan
A few days ago I made a post about the effects of the swine flu on the Indian economy.
Today, the Japanese Health Minister has declared that the swine flu has reached pandemic levels in Japan after a third death in the nation from the virus.
At the moment, it doesn't appear as if the virus is having the same major effects on the economy that it had in Mumbai and other parts of India. That doesn't mean that it won't in the near future, however. The Health Ministry might be accurate and the virus could spread at pandemic levels. Or, the Health Ministry might be blowing smoke and being extra cautious. Even then, the media attention has the capability of transforming this into something larger and keeping people away from public places (and thereby from consumption).
In one of my previous posts, I commented on how stock markets are often driven more by psychology than by economic fundamentals. If history serves as a guide, then I would not be surprised in the least if this news affects Japanese investors and drives prices down, if only temporarily. Recently, negative economic news out of China and Japan hurt stock prices in the United States and Europe. That presents a pretty negative prospect, but that's reality in this global economy.
Keep in mind, I'm not predicting a decline in stock prices. Like I said in a previous post, I don't focus on the stock market, I prefer to try and gauge how the so-called "real economy" is doing. I'm merely pointing out that this swine flu is something to keep an eye on, since it definitely has the prospect of affecting economies.
Today, the Japanese Health Minister has declared that the swine flu has reached pandemic levels in Japan after a third death in the nation from the virus.
At the moment, it doesn't appear as if the virus is having the same major effects on the economy that it had in Mumbai and other parts of India. That doesn't mean that it won't in the near future, however. The Health Ministry might be accurate and the virus could spread at pandemic levels. Or, the Health Ministry might be blowing smoke and being extra cautious. Even then, the media attention has the capability of transforming this into something larger and keeping people away from public places (and thereby from consumption).
In one of my previous posts, I commented on how stock markets are often driven more by psychology than by economic fundamentals. If history serves as a guide, then I would not be surprised in the least if this news affects Japanese investors and drives prices down, if only temporarily. Recently, negative economic news out of China and Japan hurt stock prices in the United States and Europe. That presents a pretty negative prospect, but that's reality in this global economy.
Keep in mind, I'm not predicting a decline in stock prices. Like I said in a previous post, I don't focus on the stock market, I prefer to try and gauge how the so-called "real economy" is doing. I'm merely pointing out that this swine flu is something to keep an eye on, since it definitely has the prospect of affecting economies.
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