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George Dorgan

 
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  • The Best Contrarian Macro Investment: Russia? [View article]
    I cannot believe the claim that Russian firms have a lot of USD debt. If they had it, they got rid of it already already when the ruble started its descent.
    The reasons for the weak ruble are FX speculation, capital flight of oligarchs and default fears after the 1998 experience.
    As I explain above, default fears are irrational and oligarch money will come back.

    Russians and Putin are and were not risk-averse enough. As opposed to the risk-averse China, there are no capital controls.
    Dec 17, 2014. 12:47 AM | Likes Like |Link to Comment
  • The Best Contrarian Macro Investment: Russia? [View article]
    Putin and the central bank finally decided to drive Russia into a recession and I am very happy that they do it. I was desperately waiting for higher unemployment to fight against rising wage expectations.

    Many market participants are looking at Russia’s hike from 10.5% to 17.0% and saying “wow”.

    Sergej Glazyev already before:
    "With the average profitability of manufacturing in 7.5-8% loan issued at rates of 10% and above [Now we are at 17%], cannot be used by most companies either for investment or for working capital. With the exception of a number of oil and gas, and chemical and metallurgical sector, the real economy that decision cut from credit emitted by the state."

    JPM (via Zerohedge http://bit.ly/13s5Pga)

    "The rate hike occurred after today's 10% depreciation of the RUB despite attempts by the CBR to intervene earlier in the day. The decision was aimed at "limiting substantially increased ruble depreciation risks and inflation risks" according to the CBR. This emergency move suggests to us that household deposit dollarisation had increased significantly (official October data had already suggested dollarisation re-accelerated again). Tonight's large rate hike should in the short term help to slow retail dollarisation demand. However rate hikes do little to help the underlying demand for USD from corporates and banks who continue to front load their demand in order to apy their FX debt payments further down the line. With limited access to USD funding markets and oil having yet to find its bottom, the perceptions of local banks and corps on RUB continues to be negative, fuelling this hoarding behavior.

    Bottom line: expect the market to react positively to the rate hike in the short run, but further measures are needed from the CBR for us to turn more bullish on RUB in the medium run, particularly in the absence of improved geopolitical risks and higher oil prices."

    But Goldman is less negative on the move: "The decision clearly removes the uncertainty over the CBR's strategy that in our view was a major driver of the recent Ruble volatility and hence is positive. "
    Dec 17, 2014. 12:35 AM | Likes Like |Link to Comment
  • The Best Contrarian Macro Investment: Russia? [View article]
    As I anticipated the Dubai stock market is finally crashing.
    http://bit.ly/1wJ2m6z
    Dec 17, 2014. 12:12 AM | Likes Like |Link to Comment
  • The Best Contrarian Macro Investment: Russia? [View article]
    So for you it was obvious already in March that the Brent oil price would fall from 105$ to 60$?
    Dec 13, 2014. 02:35 AM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    Sorry for that, false friend for a native German like me.
    I meant "lending to Americans".
    Currently it is driven by the combination of 2.5% yield on Treasuries combined with the expectation of a stronger dollar.
    Dec 13, 2014. 02:30 AM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    I call it: "A new financial cycle has started. Germany grows thanks to local demand and the above mentioned rising wages.

    My judgement is that thanks to German internal demand, the euro will perform better than gold in the next year.
    Dec 13, 2014. 02:25 AM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    Thanks for the challenging feedback.
    1) I incorporated a reference to Luzi Stamm's petition in my rather neutral article on Swiss gold sales:
    http://bit.ly/12Eu3Dj

    2) On Italian or German stocks:
    Please read the article on "Irrational exerburance" that explains that higher wages point to lower profits of German companies. The latest GDP release speaks of 3.6% higher income of wage earners.
    Be aware that I still buy Swiss stocks thanks to currency manipulation.
    http://bit.ly/1spsPlz

    Moreover, I have a 30-40% monthly savings rate with salaries paid in CHF. Purchases of Italian stocks hedges against a potential purchasing power destruction of my francs orchestrated by the SNB.

    3) Deflation isn't deterimental to gold.
    Correct, I mentioned this in a recent tweet.
    "Rising gold to oil ratio points to low Fed rates for longer."
    Gold maintains value thanks to limited supply, while for example ipads and any other technological gadget loses value.
    We live in period of positive deflation thanks to free trade, global distribution of labor and technological improvements. Therefore I do not expect a deflationary shock on wages and do not hold gold at current prices. I am ready to buy around 1000$ and will do so.

    4) As for the difference between 1200$ (gold purchasing level, suggested in the article) and my personal level: I already possess an inflation hedge, namely CHF income, I do not need to hold so much gold. The situation is completely different for Americans.
    Dec 13, 2014. 02:21 AM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    In the part on today's situation, it was already in. I clearly state that the money side of trade flows move into Europe, while financial flows (from Europe) bet on Fed rate hikes.
    Dec 6, 2014. 12:38 PM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    I am sorry, my fault not to mention it.
    In the underlying history article,
    http://bit.ly/1w0FTm9
    I clearly state that yield-seeking Europeans were borrowing to Americans, while US capital went back from Asia to the US.
    Possibly it was too evident for me that higher GDP growth in the US attracted foreign capital, so I missed the sentence here.

    I submitted a change to the article
    Dec 6, 2014. 12:23 PM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    @Tom see my comment on the CB gold sales and correlations above
    Dec 5, 2014. 12:17 AM | 1 Like Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    see my comment on the CB gold sales and correlations above
    Dec 5, 2014. 12:16 AM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    If you read my page on the gold sales of the BoE or SNB, you will understand that buying euro-denominated bonds was considered a good alternative at the time. Income + at least for the BoE: currency gains on the undervalued euro in the year 2000 .
    http://bit.ly/12Eu3Dj
    Moreover the euro is positively correlated to gold, when the dollar appreciates then gold falls in price. Sterling rather belong to the dollar category.
    The reason for the relation between euro and gold is the heavy German exposure in Emerging markets.
    Dec 5, 2014. 12:13 AM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    Good challenge,

    if central banks like the SNB sold gold at 1900$ in 2011, would have been perfect for them.
    Certainly I cannot predict how far gold prices will fall with the new "irrational exerburance" phase in the US. Splitting purchases at different levels is a psychological help. I personally do not own gold currently, but I possess undervalued stocks, like Italian ones.

    Gold could rise far higher than the 1900$ during the next inflation round when both US and Chinese wages rise quickly. This will possibly only happen when China becomes a democratic country and when ageing reduces global labor supply. We are possibly 20 or 30 years away from that.

    On the other side, global competition puts a cap on wages. Money-printing has triggered huge investments in China and other EM that brings some beautiful deflationary pressures.
    Dec 5, 2014. 12:06 AM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    you miss to understand the global macro background for exactly these high NASDAQ valuations. They are explained above.
    Also bear in mind that Americans often spend and increase debt based on the "wealth effect", namely rising stock and home price valuations.
    Dec 4, 2014. 01:34 AM | 4 Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    Very good comment. I expect stocks to be strong in the next 5 years.

    Basis: explained in the article about the upcoming repetition of the irrational exuberance.
    http://bit.ly/1I2yRCA

    Important:
    Currently what one might call "exuberance" is caused more by higher company debt and investments than by households debt. Many people still prefer to pay down debt, while companies sit on cash already for a decade. So you could even say this is no exuberance at all.

    Still household savings rates are close to zero, wages do not really rise, maybe due to global competition and slack in labor market.
    The latest BEA labor costs release showed that companies do not transfer their profits to wage earners. This is a slowing as compared to my findings in the exerburance post.
    Dec 4, 2014. 01:23 AM | 2 Likes Like |Link to Comment
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