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  • Short-Term Market Strategy: Sell Gold, Equities, Crude; Buy Treasuries and Dollar [View article]
    Sure, Fed can't prevent recessions. But policymakers do believe that government intervention can. And government intervention comes in the form of artificially low interest rates and quantitative easing.

    Further, market is driven by psychology and waves of optimism and pessimism (agreed). However, if you put enough money in the system, you can have assets going up, while the economy is still struggling.

    Let's take the example of the beginning of the crisis. From October 2007 to March 2008, the Fed cut rates from 5.25 to near zero. During this period (and until July), all commodities rallied.

    Even if we consider the period of QE2, the stock markets have been relatively higher.

    But I agree that each subsequent QE will have a lesser impact on the asset markets as market participants realize that the real economy is going from bad to worse.
    Aug 17, 2011. 12:25 PM | 1 Like Like |Link to Comment
  • Are We Headed for Another Major Slump? [View article]
    In general, the perception of market paarticipants that economic activity is worsening, would lead to spreads widening. High yield bond holders would typically demand more in a scenario of greater economic uncertainty. Therefore, the consumption collapse, could be one of the aaspects. Further, since markets are a discounting mechanism, there is something worse expected for the foreseeable future
    Aug 16, 2011. 01:30 PM | Likes Like |Link to Comment
  • Global Reserve Currency: Dollar Will Remain King [View article]
    Yes, you are right in pointing out that...However, dont forget that we are living in a world of digital money...Therefore, on a relative basis, going back to something like that seems difficult.

    Having said this, in my opinion, individuals and Central Banks have unofficially started using gold as a currency. Therefore, we might not have a official gold standard, but an unofficial one already exist. Where people are looking to protect the value of their money
    Aug 9, 2011. 12:27 AM | Likes Like |Link to Comment
  • Another Bear Market for Equities? [View article]
    In my personal opinion, investing in physical gold would be a better idea...In terms of downside, I dont see any very meaningful correction in gold...Euro crisis, weakness in Dollar, geopolitical tensions, middle-east crisis, all are gold price supportive.

    Therefore, as an investor, I would keep my positions in physical gold and look to add more on corrections
    Aug 6, 2011. 05:07 AM | Likes Like |Link to Comment
  • QE3 a Certainty in Near-Term: Downside Expected in Equities and Commodities [View article]
    Well, its difficult to access the quantum of funds, which might be pumped into the system. But one can say with conviction that it is coming and one can position oneself accordingly in different asset classes. If you look at policymakers, it would be another package aimed at boosting consumption and stimulating the economy temporarily...

    Sure, QE2 was did not help. That's my perspective or yours. However, the policymakers think it was a big success. Check one of my earlier articles on mindset of policymakers, where a case is made on the success of QE2. Therefore, from their perspective, it was successful and from their perspective, QE3 will also help.

    Hence, your point on QEs doing nothing for the economy is well taken. And, it is a fact. If only you can convince the policymakers of the same.
    Aug 2, 2011. 03:06 AM | 1 Like Like |Link to Comment
  • The Deficit Reduction Plan Not Likely to Make a Difference [View article]
    Yes, the spending cuts will be planned 4-5 years from now...When the time comes, we might be no action on the spending cuts front...On the contrary, as you pointed out, further QE will increase the risk of inflation...There is a theory of countries trying to inflate their way out of the enormous debt...however, it has not worked in the past...

    My concern is also that the wekening Dollar is more of a problem to China and other countries than it is to the US...They will lose the value of their reserve holdings in matter of no time...

    For sure, default is not on the cards...but a weak Dollar and inflation is another kind of taxation as well as default...Remains to be seen how long the big crisis can be extended...
    Jul 28, 2011. 01:33 AM | Likes Like |Link to Comment
  • A Decade of Decline in Equity Markets [View article]
    As mentioned earlier, the investment environment and themes change with time. In the current investment environment, characterized by ample availability of liquidity (and committed policy makers ready to infuse more liquidity), one does need to look at assets where real returns would be positive.

    Further, Dow might not be priced in Dollar or Gold. However, when an investor seeks to liquidate his/her holdings, that is in Dollar. If, one gains nominally, and loses on the purchasing power, the investment would not be fruitful.

    I do understand the perspective of dividends and calculating returns based on that. However, I would like to point out that if one takes the inflation reported by the government, and if one takes inflation based on his/her change in price of basket of goods consumed, there is a marked difference. And I would like to calculate my returns based on inflation in my basket of goods. The way I see it, any investment that beats currency depreciation and inflation of 4-5% might be considered good
    Jul 17, 2011. 04:26 AM | Likes Like |Link to Comment
  • A Decade of Decline in Equity Markets [View article]
    That's a fantastic point you made...Clearly, all commodities and precious metals were in a bear market from 1980-2000...I must mention here that it began with interest rates touching a high of 15% in the ealry 1980's...But the investment scenario changes with time and what I wanted to stress here is that we are in a period (maybe another deacde), where the Dow Jones will underperform the commodities and precious metals...

    So the objective was not to prove that Dow Jones can never be a good investment option...The objective is to tell that in the current scenario, one is better off in many other asset classes than the Dow Jones index...
    Jul 15, 2011. 06:54 AM | 3 Likes Like |Link to Comment
  • Gold: Is the Best Part of the Rally Over, Or Yet to Come? [View article]
    This is a fantastic observation. For sure, the gold silver historical ratio would tell us that silver is undervalued on a relative basis. Therefore, there is no doubt that silver also has the potential to give substantial returns in the long-term.

    Having said this, certain properties still make gold a preference over solver. Central Banks do increase and hold their hard currency in gold.

    In general, as you concluded, precious metals (hard assets) are in for a good rally in the next decade and more
    Mar 14, 2011. 01:51 PM | 3 Likes Like |Link to Comment
  • Oil Price Drop and Oil Company Price Drop Overdone [View article]
    The biggest driver for oil prices will be robust economic activity in China and India. Moreover, US and Europe have also seen some growth (largely aided by stimulus) and oil demand is expected to remain stable (if not growing) from the Western world. Therefore, for sure, there is no reason to believe that one will see a sharp correction in oil prices in the near-term or long term.

    With the world consuming more oil on an annual basis than reserves being added, there is more reason to believe that oil prices will remain at higher levels. Coupled with all this, a weak Dollar has always been oil price supportive and there is also no reason to believe that the Dollar will be strong in the long-term
    Mar 13, 2011. 05:32 AM | Likes Like |Link to Comment
  • Potash Still Has a Bright Future as Megaminer BHP Takes an Interest [View article]
    I heard Marc Faber talk in one of his recent interviews about Potash...According to him, Wheat is one of the cheapest commodities when adjusted for inflation...and a alternative way to play wheat is to buy potash companies...
    Jan 22, 2010. 03:04 AM | Likes Like |Link to Comment
  • Are Deflationist Arguments Still on Track? [View article]
    Inflation and deflation can also be sector specific and region specific...Some sectors in a economy can have inflation while other can be in deflation...

    However, a weak Dollar is broadly a signal of inflation...The only way one can see deflation is if the Dollar is strong...the probability of that outcome is very less given the fact that the US projects $7.1 trillion in deficits in the next 10 years...

    Another way we can have deflation is when the entire financial system collapses...that also can't be ruled out in the next decade if the Government goes bankrupt...
    Jan 18, 2010. 06:08 AM | 1 Like Like |Link to Comment
  • Why Positive Returns Are Likely in 2010 - Part II [View article]
    The S&P earnings average around $82 at the peak of global economic activity...Expecting earnings of around $75 in the fiscal is an optimistic call...

    I doubt if earnings will exceed expectations...There is a higher probability of earnings going below expectations...That might be negative for the markets...

    Overall, my opinion is that we might not see a significant upside this year...One cannot rule out a closing level for S&P below the closing levels for 2009...At the same time, there is a very slim chance of any major correction as liquidity is ample...

    So 2010 might be a difficult year for the markets after the markets having one of the best years in 2009...
    Jan 18, 2010. 03:31 AM | 1 Like Like |Link to Comment
  • The Importance of Sound Money [View article]
    This is an excellent article and a must read for everyone...However, its not such a great article for Central Bankers all over the world...

    According to economics, money has three functions and one of the most important ones is that it is a store of value...However Mr. Bernanke and Co. have managed to change economics...Money is not longer a store of value...I think Mr. Greenspan and Mr. Bernanke should get a Noble prize for this achievement...

    Then people come out and say that they don't understand why gold is going up...The reason lies in this article...Its cos gold is honest money...
    Jan 18, 2010. 12:17 AM | 2 Likes Like |Link to Comment
  • Is Market About to Stall? [View article]
    At any point of time its difficult to judge the direction of the markets in the very short term...However, given the current valuations, the probability of a meaningful correction is higher then the probability of another sharp upside...

    Therefore, in my opinion, one should avoid fresh exposure to equities and partial profit booking on stocks that have run up a lot is also not a bad idea...

    Last year March, sentiments were very negative and that when a reversal occurred...I am not suggesting that we will have a crash now...but things look over optimistic and a meaningful correction can't be ruled out relatively soon...
    Jan 18, 2010. 12:10 AM | 1 Like Like |Link to Comment