U.S. Dollar
As we predicted, drumbeat of PR for the dollar began to seriously, and that is to be expected.
No governmental financial authority anywhere wants dollar to fall in a straight line, no meetings and no slowdown. Now the effort has begun to give a dollar rally, and it was successful so far. Being slow the falling dollar will include:
intervention of central banks to protect their dollar holdings
jawboning from central bankers and finance ministers in each country to try to give the dollar continues to rally
Long-term, we remain bearish on the U.S. dollar. We should nonetheless note that even the dollar can rally, and it sometimes seems. It rallied for eleven months starting in December 2004. He had a spectacular fall from late 2005 until very recently.
the credit crisis - the jump was in progress,
In the last two weeks there were a few injections of capital into weak banks and brokers.
Abu Dhabi is injecting money into Citicorp. Ping, the Chinese insurer, has injected cash into Fortis Bank, Citadel to E-Trade, Bear Stearns traded investment positions with CITIC, the British Government and the German government injected funds in the UK and German banks. Chinese Sovereign Wealth Fund announced that some of your money will go to the capital infusions in Chinese banks. Today, UBS is getting a capital injection from Singapore and an unnamed middle eastern sources.
Many investors, including sovereign wealth funds and large hedge funds are looking at the possibility of buying up assets on the cheap from banks, brokers and funds who are stuck with illiquid securities. For some, buy subprime debt at 20 cents on the dollar may qualify as cheap.
ECONOMICS
Of course, the U.S. economy was just beginning his profits recession. U.S. corporate profits will be down for at least two quarters, and even longer in the housing and finance sectors.
Companies will also have to deal with the CPA to be much more cautious about their clients write off bad debts and submerged accounting for unpriced or model designation for investment. Therefore, it is simply a call to say that the recession in the U.S. get the U.S. GDP growth is only the beginning. We expect that the news media in the coming months will be full of negative news about corporate profits.
the easiest solution to solve the current problems in the news is that ... create more inflation
Most problems are associated with bad debt clogging the U.S. financial system and contributes to a situation where credit is not available for some users. This can have long-term economic consequences and should be treated as quickly as possible. recent government intervention will not be a major part of the clean up.
For this reason, we are happy to see state funds and hedge funds are a step ahead and buy heavily discounted properties to what they think are reasonable prices. Will be followed by other opportunistic investors?
the market trying to establish the following:
What is the price for cleaning bad work clogging up the financial system?
Have we reached a clearing price?
are buyers at this price?
If a clearing price for the hundreds of billions unpriceable property is located and when the liquid market has developed, then lock in the world financial system will unblock the global economy will need money to start repairing itself. recent purchases seem to be the first step in this process, and we should have no doubt that the first step is the hardest and requires the most courage.
a great event in our future MORE INFLATION
For the major economies of Europe and the U.S. with credit problems, short-term question remains, "a clearing price is found?" If it is, then the market after several months of volatility will move higher. If price is not found, we'll probably see a drop in the stock market until the clearing price is also a system can be unblocked.
Larger farms with more problems have a long process until the problem has been resolved and that can attract investors in large quantities. It is obvious that the current rally in U.S. and European markets is a short covering rally. It can become a long rally when market participants become convinced that the clearing price for the property problem is and transactions begin to take place.
and outside Europe and the United States, in countries without large losses in their banking system, the repair can begin sooner rather than later.
question for a fast growing, not weakened economy is how much the growth will slow, and how long will it be before growth accelerates? These markets are probably a good buy at 30 to 40% decreases, they often get, and some of them are already near the point of purchase.
We are still not willing to buy aggressively, but we believe that the best and first opportunity will be developed in Hong Kong, India, Brazil and Russia.
we change our view of Russia
We have been negative for Russia, while President Putin is consolidating power.
Now he has power. The country is awash in cash, and consumer spending. The market is cheap, and we are now including Russia. One big reason is that inflation will return to the world and back in an ugly way. Russia has gold, oil and base metals in large quantities.
solutions to credit crisis are sowing the seeds for the FUTURE COMMODITY prices
The last letter I outlined four approaches are likely to be used until the end of the credit crisis. These activities will eventually create inflation and humiliate the U.S. dollar further, creating a very friendly environment for gold, oil and base metals. If you are a long term investor, it is a thing of the remaining patients, while a normal correction takes place.
There will be more in the next reminder of the inflationary consequences of the actions taken to stop the credit crisis. Long-term, all this is very bullish for base metals, gold and energy prices, Brazil, Canada, Russia and other countries that produce precious metals, base metals and oil. Also, this is bullish for those countries that are growing faster than inflation, such as China and India after the correction, these two countries are currently overvalued
Thanks for listening, and hope you have a wonderful holiday season
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