I have been recommending Gold, China since long and recently I recommended to buy Oil and short Indian Rupee.
Click on below links to browse through recent research on above mentioned topics.
Sometimes, you are fortunate, whatever you recommend hits the roof. Though, I must acknowledge that It takes lots of efforts, at least 6-7 hours reading and research a day, to recommend or forecast any asset class.
Let me update you on my recommendations.
In line with expectation, Gold is scaling newer highs. Currently trading around $1326. I believe, the powerful forces driving Gold up are fiercely at work and I do not see any reduction in momentum.
Dollar has continued to fall incessantly and now as I have been saying since 2008 that this crisis will end in currency wars is at work. Japan decided to cut rates from 0.1% to 0 to 0.1%. What a rate cut? Do you think, would it make any difference from 0.1% to 0 to 0.1%?
Heck No, investors know this and Central Bank of Japan also know it well.
This action was aimed to send signal to other Central Banks and Govts, that Japan will not remain silent on their respective currency cheapening strategies and will retaliate with appropriate severity to cheapen the yen.Japan also created a corpus of 30 tn yen ( $ 300 bn) to buy Govt Bond and other assets expanding Central Banks tools and arsenals.
These currency wars will lead to diminishing confidence in paper currency and thus investors and general public will flock to Gold.
I would not be surprised if Gold continues upside and reaches to $1400 before any meaningful correction and consolidation.
In year 2008, every country came up with stimulus packages to sustain the economic growth and to reduce the recessionary effects. China introduced largest stimulus package in world staggering 14% of GDP(close to $600 bn). US, Europe all did introduce stimulus but in % terms of GDP they were less than Chinese stimulus.
Chinese leaders could understand the situation at the start of fallout in 2008 that this demands different solution and otherwise believed to be highly conservative Chinese Govt declared largest stimulus package in % GDP terms of world.
Goal was clear to spur the domestic consumption and reduced dependence on exports. Strategy worked well. Chinese consumption has increased since then. China became world’s largest auto market. Govt hiked wages by 30% across the board. Private players even doubled the salary packages and that led to huge consumption drive.
China’s retail sales surged almost 19% in August.
China’s factory output soared nearly 14% in August, year-over-year
Through August, China’s capital spending soared 24.8%.
Last month, China sold 1.322 million autos, fully 32% more autos than were sold in the U.S.
Plus, do not forget
China has world’s largest forex reserve of $2.3 tn with public debt as little as 16.9% of GDP(CIA factbook,2009 est.) Average public debt of world stands at 56% of GDP. You can imagine China’s financial strength.
Chinese people have far greater confidence in their Govt and its functions then its western counterparts and hence they are less worried about their future and continue to drive consumption at higher level.
Unlike USA, China did not allow Real Estate bubble to inflate further and took all mandatory steps to curb the flow in the sector. Read, China Ready to surge 50%: Part 2 for details.
China has very low fiscal deficit compared to 10% of USA, UK and many European nations.
China is emerging as winner post crisis. Investors have more faith in developed China, in its ability to sustain and expand growth and in its ability to execute policy & strategies.
I continue to recommend China. In fact, I am more aggressive on Chinese market than 3 months before as other markets are about to top out globally and as I have been saying China is contra world market, it optimizes rise of Chinese market.
First, Dollar is inversely related to Oil. As dollar has been falling and has now reached to critical level of 78 any further downside will act as catalyst for zooming highs of Oil prices.
Second, China, India and broadly Asia is witnessing unprecedented growth in auto sales. For India, auto sales recorded new lifetime highs and China became world’s largest car market. In time to come as more number of people are pulled out of below poverty line to middle class, sales of car and two wheelers are bound to go up.
And Hence,Oil consumption.
Third, Peak Oil theory proved that Oil reserves are depleting fast. World reached to peak oil production in early start to mid of this decade.
Fourth, since World has digged out easy explorable reserves, now companies have to explore deep sea reserves and likewise others, which drives the production cost as high as $70 per barrel
Fifth, post crisis in 2008 and 2009, many exploration companies either abandoned exploration projects or delayed the execution because of lack of capital and crisis. Reworking on those projects add higher cost of production and This will delay the new reserve addition of Oil.
All above listed catalysts will drive Oil prices higher. Do not be surprised if Oil climb pasts $125 level next year.
In line with my expectation, Indian rupee has continued to gain strength and reached to 44.22 yesterday. For short while, it may bounce back and consolidate around 45.5-46 level. But, make no mistake, Rupee is in full swing to march past 40 mark against dollar.
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