Wednesday 13 January 2010
GOLD prediction by CEO of US Gold Inc (UBX)
CEO of US Gold Mckewen predicts $2,000pto end 2010 & wait for it....$5,000pto towards 2012/2013
Review 4Q 2009 6th January 2010
“There are bulls, bears, stags, lambs and giddy goats”
– a Market Maxim c/o W. Dennis Heymanson
After the FTSE All-World index had, by mid-November, surged more than +75% from the bottom and the FTSE Emerging Latin America index prospered +123% the global equity rally started to falter in December. With questionable signs of economic recovery in the US that could mean the end of almost zero interest rates and other attempts to stimulate the economy there are clear danger signs flagged in markets worldwide. The FTSE100 ended the year +22% at 5412 and +53% from its March low of 3512; the percentage gain of 2009 numerically matched its loss for the decade -22% having fallen from the all-time dot.com high of 6930 on 30th December 1999 (although if one includes dividend income then the FTSE100 returned a total of less than 7% over the decade). The following factors drove the market in 2009;
• Quantitative easing (QE) and concerted support for banks internationally (TARP) which boosted confidence.
• Dramatically reduced interest rates and increased money supply have enabled companies to borrow very cheaply; capital raisings strengthened balance sheets in the process.
• Drastic cost-cutting has helped stabilise company profits forcing analysts to upgrade previously downbeat projections.
• A change in sentiment from fear end 2008 of a global depression towards more measured concerns merely about the speed of recovery.
It’s clear that many global shares are beginning now to look expensive. If profit improvements and economic recovery don't materialize then the market may surrender some of the 2009 gains. The limited shock from the Dubai debt crisis in 4Q 09 served as a reminder of the fragility of the recovery but more worryingly the recently announced Chinese manufacturing numbers imply an acceleration of GDP growth to circa 10-11% from 7% approx. in 2009. If China is overheating then some knock on effect will be felt in emerging markets and through commodity markets at some juncture. I have been flagging this for some months and still see little real value at this time and continue to maintain high cash reserves. Last year the driving debate was whether the shape of the economy would be a ‘V’ (investors may be misguided for backing the quick fix prescribed by Bernanke), ‘W’ (double dip), ‘U’ or ‘L’. Although the jury is still out it’s clear that international money supplies are over-extended and interest rates may well reverse the trend earlier than most analysts predict. The double dip looks the most likely scenario to me and a sharp correction in China may be the catalyst for this.
Looking forward hereon I continue to focus on oils, precious metals and companies that have relative low gearing and intact business models regardless of the impending tax hikes and slowdown. Clearly the UK domestic scene is far too exposed to a severe downturn when one factors in the scale of the UK government’s problems. Thus I believe that 1Q 2010 is (yet again) one to remain cautious. My favourite stock picks are BP, Royal Dutch Shell ‘B’ (safe dividends), Yamana Gold, Newmont Mining and ASA (US listed closed-end fund focusing on precious metals). I am still avoiding banks/financials (although HSBC & Standard Chartered can be examined on any fallback) and recommend a selective few UK equities (Sainsbury, Greene King/Marstons, Imagination Technology, Dana Petroleum/Heritage Oil/Dominion Petroleum) although generally speaking I remain very cautious and suggest selling into strength where feasible and sensible. The big investment issue really surrounds bonds and when best to offload US$, £sterling and Euro instruments. Sometime in this quarter it will be sensible to diversify into alternative currencies (I have been recommending WisdomTree Emerging Markets Currencies Fund ETF listed on NYSE epic: CEW $22.21) or to hedge one’s portfolio through Proshares Ultra SHORT China (also listed on NYSE epic: FXP $8.02). Gold is likely to re-examine $1,200pto quite soon and possibly test the next resistance level of $1,332pto by the summer; my hunch is that further testing of $1,461pto resistance could be achieved by 3 Q with oil moving up simultaneously to $90pbo+.
Warren Buffett recorded his worst performance against the stock market in a decade last year after committing $44bn to a takeover of Burlington Northern Santa Fe railroad and lowering his expectations for investment returns. Berkshire Hathaway Inc. the company Buffett has led as chairman for more than four decades, rose +2.7% on the New York Stock Exchange in 2009, less than the +23% return in the Standard & Poor’s 500 Index. This year is likely to be the toughest for many years for tax payers and small businesses and I expect unexpected volatility at times. As the Sage of Omaha, Warren Buffett has found out himself it is extremely difficult to measure short-term performance versus long-term strategy. He believes in his acquisition of Burlington in the same way I believe in gold and oil related investments for the first half of this new decade.
– a Market Maxim c/o W. Dennis Heymanson
After the FTSE All-World index had, by mid-November, surged more than +75% from the bottom and the FTSE Emerging Latin America index prospered +123% the global equity rally started to falter in December. With questionable signs of economic recovery in the US that could mean the end of almost zero interest rates and other attempts to stimulate the economy there are clear danger signs flagged in markets worldwide. The FTSE100 ended the year +22% at 5412 and +53% from its March low of 3512; the percentage gain of 2009 numerically matched its loss for the decade -22% having fallen from the all-time dot.com high of 6930 on 30th December 1999 (although if one includes dividend income then the FTSE100 returned a total of less than 7% over the decade). The following factors drove the market in 2009;
• Quantitative easing (QE) and concerted support for banks internationally (TARP) which boosted confidence.
• Dramatically reduced interest rates and increased money supply have enabled companies to borrow very cheaply; capital raisings strengthened balance sheets in the process.
• Drastic cost-cutting has helped stabilise company profits forcing analysts to upgrade previously downbeat projections.
• A change in sentiment from fear end 2008 of a global depression towards more measured concerns merely about the speed of recovery.
It’s clear that many global shares are beginning now to look expensive. If profit improvements and economic recovery don't materialize then the market may surrender some of the 2009 gains. The limited shock from the Dubai debt crisis in 4Q 09 served as a reminder of the fragility of the recovery but more worryingly the recently announced Chinese manufacturing numbers imply an acceleration of GDP growth to circa 10-11% from 7% approx. in 2009. If China is overheating then some knock on effect will be felt in emerging markets and through commodity markets at some juncture. I have been flagging this for some months and still see little real value at this time and continue to maintain high cash reserves. Last year the driving debate was whether the shape of the economy would be a ‘V’ (investors may be misguided for backing the quick fix prescribed by Bernanke), ‘W’ (double dip), ‘U’ or ‘L’. Although the jury is still out it’s clear that international money supplies are over-extended and interest rates may well reverse the trend earlier than most analysts predict. The double dip looks the most likely scenario to me and a sharp correction in China may be the catalyst for this.
Looking forward hereon I continue to focus on oils, precious metals and companies that have relative low gearing and intact business models regardless of the impending tax hikes and slowdown. Clearly the UK domestic scene is far too exposed to a severe downturn when one factors in the scale of the UK government’s problems. Thus I believe that 1Q 2010 is (yet again) one to remain cautious. My favourite stock picks are BP, Royal Dutch Shell ‘B’ (safe dividends), Yamana Gold, Newmont Mining and ASA (US listed closed-end fund focusing on precious metals). I am still avoiding banks/financials (although HSBC & Standard Chartered can be examined on any fallback) and recommend a selective few UK equities (Sainsbury, Greene King/Marstons, Imagination Technology, Dana Petroleum/Heritage Oil/Dominion Petroleum) although generally speaking I remain very cautious and suggest selling into strength where feasible and sensible. The big investment issue really surrounds bonds and when best to offload US$, £sterling and Euro instruments. Sometime in this quarter it will be sensible to diversify into alternative currencies (I have been recommending WisdomTree Emerging Markets Currencies Fund ETF listed on NYSE epic: CEW $22.21) or to hedge one’s portfolio through Proshares Ultra SHORT China (also listed on NYSE epic: FXP $8.02). Gold is likely to re-examine $1,200pto quite soon and possibly test the next resistance level of $1,332pto by the summer; my hunch is that further testing of $1,461pto resistance could be achieved by 3 Q with oil moving up simultaneously to $90pbo+.
Warren Buffett recorded his worst performance against the stock market in a decade last year after committing $44bn to a takeover of Burlington Northern Santa Fe railroad and lowering his expectations for investment returns. Berkshire Hathaway Inc. the company Buffett has led as chairman for more than four decades, rose +2.7% on the New York Stock Exchange in 2009, less than the +23% return in the Standard & Poor’s 500 Index. This year is likely to be the toughest for many years for tax payers and small businesses and I expect unexpected volatility at times. As the Sage of Omaha, Warren Buffett has found out himself it is extremely difficult to measure short-term performance versus long-term strategy. He believes in his acquisition of Burlington in the same way I believe in gold and oil related investments for the first half of this new decade.
John Paulson & GOLD 30th Dec 2009
John Paulson, a presenter at the Grant’s Fall Investment Conference and undoubtedly the richest man in the room. Portfolio magazine dubbed him “The Man Who Made Too Much” after he made $3.7 billion by betting against mortgage-backed securities (MBS). He is one of the greatest hedge-fund managers ever.Gold is his favourite today. As to why, Paulson presented a simple, but compelling case. First, the monetary base has exploded in a way we’ve never seen before. The monetary base is essentially the Federal Reserve Bank’s currency and reserves. The Fed, by buying up securities in this crisis, has pumped a lot of money into the economy.As Paulson explained, that’s because this base money has not yet been lent out and multiplied throughout the economy. Yet the monetary base and money supply are highly correlated, “almost 1-to-1 between the two,” Paulson said.That means that as the monetary base expands, the money supply surely follows, though there is a lag. (Money supply is a broader measure of money than just the monetary base, as it includes personal deposits and more. The monetary base is like a kind of monetary yeast. It makes money supply rise.)If money supply grows faster than the economy, that will create inflation, says Paulson. As it is impossible for the economy to grow anywhere near that vertical spike in the monetary base, Paulson contends inflation is coming The U.S. is not alone in its money-printing exercise. The supply of most currencies is expanding rapidly – even the normally tame Swiss franc. In the race of paper currencies, they are all dogs. Hence Paulson’s interest in gold, which no government can make on a whim. Therefore, in the context of the exploding monetary base, gold seems relatively cheap. In other words, as the money supply rises, so does the price of gold, eventually. As a result, says Paulson, “gold has been a perfect hedge against inflation.” There is some slippage over time. The gold price can change faster or slower than the money supply. But when the market gets worried about inflation, the gold price usually changes much faster – as happened in the 1970s. In 1973 – to pick a typical year – inflation was 9% and gold rose 67%. That was a pattern common in the 1970s. The potential for inflation this time around is greater than it was in the 1970s, given that the growth in the monetary base is so much greater than it was in the 1970s. Gold could do much better this time around, reaching “$3,000 or $4,000, or $5,000 per ounce” as Paulson said. ***my thoughts exactly***
Subscribe to:
Posts (Atom)