Why Gold and Asia Go Hand In HandWe have discussed repeatedly why we like Asia so much -- the Asians save and invest. This is the old-fashioned way of doing business. This approach ultimately creates prosperous nations with vibrant economies and stock markets. In the West, however, we have a big problem -- we spend and borrow -- we don't save. This creates spectacular busts, which are difficult to climb out of due to the big debt burdens. Because of this "spend and borrow" attitude, the S&P 500 saw a negative return for the first decade of the 21st century, while China and India did great -- despite the volatility. In fact, China and India have such vast room for development that they will easily beat anything that the S&P 500 has to offer in the next 10 years. Due to the problems in the West, many central banks -- not just the Federal Reserve -- have embarked on ultra-easy monetary policies that have helped spur on the economic recovery we see at present. The ultra-easy monetary policies of the Western central banks are bullish for Asia as the continent offers the best investment opportunities. Since we don't see the ultra-easy monetary policies ending anytime soon, the party in Asia will last a long time. In fact, capital flows towards the places that offer the best returns -- and in 2009, the Shanghai Composite registered a 78.8% return, while the Bombay Sensex returned 79.8% on a price-only basis. Any corrections are great buying opportunities in Asia. The PBOC Has a Better Track Record than the FedIn difference with the U.S., the Chinese have a track record of addressing bubbles before they become problematic. They recently issued a warning report and have been doing a lot to curb lending that was necessary to survive in 2009. From Bloomberg: "Rapid asset price increases in major markets since 2009 have been pushed by "ultra-loose" monetary policies by governments around the world and "don't mean real economies have recovered or will recover strongly," the People's Bank of China said in a report posted on its Web site today. Such gains "unless they receive sufficient support from macroeconomic fundamentals, may lead to a new round of asset bubbles that may burst," the Beijing-based bank said." Since not every central bank is as responsible as the PBOC, we may end up having a big inflationary problem in a couple of years as these ultra-easy monetary policies are unlikely to end soon. We have to stay invested in the best investment opportunities in Asia, but also guard against this inflationary threat. Why We Are Bullish on GoldOne way to guard against this problem is gold. We have been bullish on gold bullion in China Strategy since 2006. Gold has essentially doubled since. And it's likely to at least double once more, if not rise further… Gold bullion's inflation-adjusted all-time high from 1980 is about $2,500 per ounce. With all this printing it can easily surpass that in an inflationary environment. The most conservative way to invest in gold is by buying physical bullion bars or a gold bullion ETF. The most popular such ETF is the SPDR Gold Trust (NYSE: GLD). While we are not gold bugs here at Asia Insider, we are definitely gold bulls. In the current environment, it makes a lot of sense to hold a reasonable amount of gold bullion in addition to the stocks of Asian companies with superior fundamentals. And due to the popularity of holding bullion, additional ETFs based on physical bullion have recently come to the market. ETF Securities from London has introduced products on the U.S. market that cover all the precious metals -- palladium, platinum, gold and silver. The ETFS Physical Silver (NYSE: SIVR), the ETFS Physical Palladium (NYSE: PALL), the ETFS Physical Swiss Gold (NYSE: SGOL) and the ETFS Physical Platinum (NYSE: PPLT) all trade on the NYSE and have similar expense ratios of 0.6%. We had a negative CPI in 2009 and tame inflation so far in 2010. Inflation may not be a problem for some time, but if this printing continues, it will be a big problem. There are peculiarities that you need to be aware of when investing in precious metals other than gold -- they behave more like industrial metals. In other words, most of the uses for gold bullion are for precious metals purposes: as a store of value, jewelry and some industrial demand. Most of the uses of palladium, platinum and silver are industrial. This is why in a weak economy, like the one we saw in 2008, gold was up while the rest of the precious metals declined; the more industrial the precious metal the bigger the decline. In an improving economy with an inflationary threat on the horizon -- like the one we have at present -- all precious metals are likely to do well. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints. Nothing in this article is, or should be construed as, investment advice. |
__._,_.___
*****************************************
http://in.groups.yahoo.com/group/investwise/
INVESTMENTS IN INDIA
We are low-risk, long-term investors.
Stocks, mutual funds and the entire investment gamut. Only financing/investment avenues in India will be discussed.
For any assistance, questions or improvement ideas, contact investwise-owner@yahoogroups.co.in
****************************************************************
NEW! ==== Check our LINKS and FILES sections for a world of information. REGULARLY UPDATED.
NEW! ==== Check "Tracklist" in Links and Files sections for Investment Ideas.
****************************************************************
http://in.groups.yahoo.com/group/investwise/
INVESTMENTS IN INDIA
We are low-risk, long-term investors.
Stocks, mutual funds and the entire investment gamut. Only financing/investment avenues in India will be discussed.
For any assistance, questions or improvement ideas, contact investwise-owner@yahoogroups.co.in
****************************************************************
NEW! ==== Check our LINKS and FILES sections for a world of information. REGULARLY UPDATED.
NEW! ==== Check "Tracklist" in Links and Files sections for Investment Ideas.
****************************************************************
.
__,_._,___
No comments:
Post a Comment