GM’s Back — And So Are These Key Suppliers

November 19th, 2010

GM's Back -- And So Are These Key Suppliers

As GM (NYSE: GM) celebrates an impressive re-entry into the public markets, investors are chewing over a clear theme. Both GM and Ford (NYSE: F) are far healthier companies, with much leaner cost structures and the ability to generate sharply improved profit margins as industry volumes rebound. In their shadow, key auto parts suppliers are also now in fighting shape after being bruised and battered in the economic freefall of 2008. The new adage for the industry: “what doesn't kill you makes you stronger.”

How bad did it get for these auto parts suppliers? Domestic auto makers produced 15-16 million cars and trucks every year from 2001 to 2007. That figure fell to 12.5 million in 2008 and just 8.5 million in 2009. Years of steady profits were offset by massive losses in 2008 and 2009, and a number of these firms flirted with bankruptcy. For a short while, many of their stocks traded below $1. In a testament to just how much they have changed, all of the key players are likely to be nicely profitable again this year, even though the industry will produce just 11.5 million units.

Looking ahead into 2011 and 2012, industry unit volumes are expected to rebound to 12.5 million and 13.5 million, respectively, according to Citigroup. And that could prove to be conservative. That's because domestic auto makers are starting to take back market share, which means a rising swell of business for the firms that make seats, transmissions, suspensions and the like.

Shares of auto suppliers have rallied sharply in the past year, but remain very reasonably priced in relation to earnings

GM exposure
With GM's successful IPO in the news, customers may start to flock back to the auto maker in droves, now that they see it as healthier. That hasn't been the case recently. Ford announced that October sales rose +19% from a year ago, while many other auto makers also posted double-digit gains. GM saw a more modest +3.5% sales boost in October.

As a self-professed car nut, I had been a big fan of Ford Motor, noting that its new models were compelling and should yield market share gains. [Read my analysis here]

These days, I'm starting to pay closer attention to GM as it starts to build out its impressive new product portfolio. The Buick division is a big hit in China, Cadillac is unveiling a strong set of new cars that can go head-to-head with anything made in Germany, and the Chevy and GMC truck divisions should eventually see a major profit rebound when the U.S. construction industry picks back up.

But rather than buying shares of GM, you might want to focus on the auto parts suppliers with the greatest exposure to this erstwhile titan. Shares of many of these names remain cheap, and a resurgent car market could lead these stocks to nice gains.

Here are a few key names…

If you're talking about GM's pickup trucks, then you're talking about Lear (NYSE: LEA), which makes seats and electrical systems for GM's GMT 900 truck platform. Lear has been on a tear lately, delivering quarterly profits that were more than twice as high as analysts had expected in each of the past two quarters. A -$2.00 a share loss in 2009 is likely to morph into an $8.00 a share profit this year. A little back-of-the-envelope math that assumes industry volume hits 14 million by 2013 could yield earnings per share (EPS) north of $12 for Lear. Shares trade for just seven times that view.

American Axle (NYSE: AXL) has even greater exposure to GM, with more than two- thirds of its business from the company. (It was once an in-house division at GM.) The company makes axles and drivetrains, primarily for large vehicles. The company has also handily exceeded forecasts in each of the past two quarters and also notes that backlog is rising fast. That led JP Morgan to recently upgrade shares to overweight, with a $14 price target — +25% above current levels. Yet the analysts note that shares could surge closer to the $20 mark within a few years as GM's sales volume rebounds. They add that American Axle is on track to boost EBITDA +30% next year to around $370 million, and it could hit $500 million within a few years.

Action to Take –> Tenneco (NYSE: TEN) and Johnson Controls (NYSE: JCI) also have a high degree of exposure to GM. As noted earlier, all of the shares in this sector have rallied throughout 2010, and would be vulnerable to a pullback if auto and truck sales don't continue to rebound in 2011 as many expect.

Stocks in this group appear quite inexpensive, especially in terms of potential EBITDA generation. How auto industry sales fare in the next few years will determine how much more upside these stocks have.


– David Sterman

David Sterman started his career in equity research at Smith Barney, culminating in a position as Senior Analyst covering European banks. David has also served as Director of Research at Individual Investor and a Managing Editor at TheStreet.com. Read More…

Disclosure: Neither David Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.

This article originally appeared on StreetAuthority
Author: David Sterman
GM's Back — And So Are These Key Suppliers

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GM’s Back — And So Are These Key Suppliers

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Before Hyperinflation Dollar to Become World’s “Weakest Currency”

November 19th, 2010

Yesterday, JPMorgan & Chase Co. reported its anticipated impact of $600 billion in additional quantitative easing on the dollar, which will be devastating. JPMorgan finds it likely loose monetary policy could cause the dollar to collapse below 75 yen and become the weakest of planet’s most-traded currencies.

According to Bloomberg:

“The U.S. central bank, along with those in Japan and Europe, will keep interest rates at record lows in 2011 as they seek to boost economic growth, said Tohru Sasaki, head of Japanese rates and foreign-exchange research at the second-largest U.S. bank by assets. U.S. policy makers may take additional easing steps following the $600 billion bond-purchase program announced this month depending on inflation and the labor market, he said.

“’The U.S. has the world’s largest current-account deficit but keeps interest rates at virtually zero,’ Sasaki said at a forum in Tokyo yesterday. ‘The dollar can’t avoid the status as the weakest currency.’

“…The U.S. currency has declined against 12 of its 16 most-traded counterparts this year, according to data compiled by Bloomberg.”

Sasaki fingers a widely-shared concern, that the $600 billion QE2 program is quite possibly just the second in a long line of “additional easing steps.” Already QE1 failed to achieve its objectives and yet the Fed’s at it again, implementing a program that cements Bernanke’s ignominious legacy, as DR founder Bill Bonner recently described:

“…the US Federal Reserve said it was creating another $600 billion to buy US Treasury debt. That will mean a total of $2.3 trillion added to America’s monetary footings since the Fed began its QE program almost two years ago. This will also mean that Ben Bernanke has added three times as many dollars to America’s core money supply as ALL THE TREASURY SECRETARIES AND FED CHAIRMEN WHO CAME BEFORE HIM PUT TOGETHER.”

Will the dollar weaken? It seems only possible that it must. You can read more details in Bloomberg’s coverage of how JPMorgan predicts the dollar is set to become the world’s “weakest currency.”

Best,

Rocky Vega,
The Daily Reckoning

Before Hyperinflation Dollar to Become World’s “Weakest Currency” originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Before Hyperinflation Dollar to Become World’s “Weakest Currency”




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Four ETFs To Watch As China Fights Inflation

November 19th, 2010

As inflationary concerns continue to loom in China, the nation’s government is making moves to curb to fight this rise in prices, which could potentially influence the iShares FTSE/Xinhua China 25 Index Fund (FXI), the Global X China Financials ETF (CHIX), the SPDR S&P China ETF (GXC) and the Claymore/AlphaShares China All-Cap ETF (YAO).

In the month of October, the consumer price index in the world’s second largest economy rose to 4.4 percent year over year driven primarily by a 10.1 percent rise in food prices.  This increase in prices has resulted from an influx of money supply in the Chinese economy due to the nation’s expansionary monetary policies which enabled its banks to increase lending. 

A devastating effect of this increase in prices could be a sharp uptick in the basic cost of living which potentially could result in social unrest and mayhem.    To prevent this from emerging, China’s government is raising interest rates, implementing tighter control on bank lending, forcing banks to hold more capital reserves and allowing the Yuan to appreciate faster.   

As China continues to take steps at curbing inflation, potential consequences could be limiting domestic output by producers leading to a shortage in consumer goods and a decline in exports which could put the brakes on China’s overall economic growth, which could influence the aforementioned ETFs.

  • iShares FTSE/Xinhua China 25 Index Fund (FXI), which allocates nearly 47.8% of its assets to the Chinese financial sector
  • Global X China Financials ETF (CHIX), which is a sector specific play on the Chinese financial sector
  • SPDR S&P China ETF (GXC), which allocates 32.36% of its assets to financials and 7.44% to consumer discretionary
  • Guggenheim China All-Cap ETF (YAO), which allocates 33.7% of its assets to financials and nearly 5.5% to consumer discretionary.

Disclosure: No Positions

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Four ETFs To Watch As China Fights Inflation




HERE IS YOUR FOOTER

ETF, Uncategorized

Four ETFs To Watch As China Fights Inflation

November 19th, 2010

As inflationary concerns continue to loom in China, the nation’s government is making moves to curb to fight this rise in prices, which could potentially influence the iShares FTSE/Xinhua China 25 Index Fund (FXI), the Global X China Financials ETF (CHIX), the SPDR S&P China ETF (GXC) and the Claymore/AlphaShares China All-Cap ETF (YAO).

In the month of October, the consumer price index in the world’s second largest economy rose to 4.4 percent year over year driven primarily by a 10.1 percent rise in food prices.  This increase in prices has resulted from an influx of money supply in the Chinese economy due to the nation’s expansionary monetary policies which enabled its banks to increase lending. 

A devastating effect of this increase in prices could be a sharp uptick in the basic cost of living which potentially could result in social unrest and mayhem.    To prevent this from emerging, China’s government is raising interest rates, implementing tighter control on bank lending, forcing banks to hold more capital reserves and allowing the Yuan to appreciate faster.   

As China continues to take steps at curbing inflation, potential consequences could be limiting domestic output by producers leading to a shortage in consumer goods and a decline in exports which could put the brakes on China’s overall economic growth, which could influence the aforementioned ETFs.

  • iShares FTSE/Xinhua China 25 Index Fund (FXI), which allocates nearly 47.8% of its assets to the Chinese financial sector
  • Global X China Financials ETF (CHIX), which is a sector specific play on the Chinese financial sector
  • SPDR S&P China ETF (GXC), which allocates 32.36% of its assets to financials and 7.44% to consumer discretionary
  • Guggenheim China All-Cap ETF (YAO), which allocates 33.7% of its assets to financials and nearly 5.5% to consumer discretionary.

Disclosure: No Positions

Read more here:
Four ETFs To Watch As China Fights Inflation




HERE IS YOUR FOOTER

ETF, Uncategorized

Catastrophically Cutting the Deficit

November 19th, 2010

As you know, the White House put together a bi-partisan commission to figure out how to get the deficit down. The group made what sounded like sensible proposals. Cut this…trim that. But even if the proposals were accepted in their entirety – which they won’t be – only about a third of the deficit would be eliminated.

In a nutshell – which is where these things belong – the feds spend about one out of every four GDP dollars in the US. They collect, however, only about one in every five or six dollars worth of GDP. That is a pretty big gap – nearly 10% of total GDP.

If you’re going to cut that kind of a deficit you’re going to need more than a bi-partisan commission. You’re going to need a catastrophe.

Heck, we could cut the budget in half an hour. We’d just get rid of everything that was not part of the original plan – that is, everything that was not necessary for the defense of the country or the maintenance of law and order. We’d have a huge surplus overnight…and lynch mob by daybreak.

Deficits are a big problem. They’re not going away. We’re not going to “grow our way out” of them. Left unchecked, the country will go broke. So you can expect a lot of pantywaist proposals and pussyfooting around on the subject in the years ahead. And then the country will go broke.

The big item is health care. It seems to grow uncontrollably. Americans don’t want to give it up.

We went to the doctor today. We paid $220, in cash. That was the end of it.

“Come back next year,” she said.

Seems controllable enough to us. If we don’t have $220 we won’t go back.

But Americans seem to like going to doctors and hospitals…especially if someone else pays for it.

Bill Bonner
for The Daily Reckoning

Catastrophically Cutting the Deficit originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Catastrophically Cutting the Deficit




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Catastrophically Cutting the Deficit

November 19th, 2010

As you know, the White House put together a bi-partisan commission to figure out how to get the deficit down. The group made what sounded like sensible proposals. Cut this…trim that. But even if the proposals were accepted in their entirety – which they won’t be – only about a third of the deficit would be eliminated.

In a nutshell – which is where these things belong – the feds spend about one out of every four GDP dollars in the US. They collect, however, only about one in every five or six dollars worth of GDP. That is a pretty big gap – nearly 10% of total GDP.

If you’re going to cut that kind of a deficit you’re going to need more than a bi-partisan commission. You’re going to need a catastrophe.

Heck, we could cut the budget in half an hour. We’d just get rid of everything that was not part of the original plan – that is, everything that was not necessary for the defense of the country or the maintenance of law and order. We’d have a huge surplus overnight…and lynch mob by daybreak.

Deficits are a big problem. They’re not going away. We’re not going to “grow our way out” of them. Left unchecked, the country will go broke. So you can expect a lot of pantywaist proposals and pussyfooting around on the subject in the years ahead. And then the country will go broke.

The big item is health care. It seems to grow uncontrollably. Americans don’t want to give it up.

We went to the doctor today. We paid $220, in cash. That was the end of it.

“Come back next year,” she said.

Seems controllable enough to us. If we don’t have $220 we won’t go back.

But Americans seem to like going to doctors and hospitals…especially if someone else pays for it.

Bill Bonner
for The Daily Reckoning

Catastrophically Cutting the Deficit originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Catastrophically Cutting the Deficit




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

In Search of Golden Enlightenment

November 18th, 2010

Kopin Tan of Barron’s has the honor of having his photo accompanying his Streetwise column, and my Keen Mogambo Eyesight (KME) notices that he appears to be an Asian-type person.

Suddenly I was alert to the possibility that he, as an Asian, could be chock-a-block full of Asian wisdom, and of the kind that I can understand, unlike the advice that the Dalai Lama gave Groundskeeper Carl Spackler in the movie Caddy Shack, which was, as I recall, “Gunga da gunga,” which makes no sense to me or anybody I ask.

I could ask Bill Murray himself, I guess, but he is like me, in that he is too busy trying to get his golf swing under control to be answering some stupid question by some stupid guy with the stupid name Mogambo Guru about some stupid ad-lib he did in a movie he made 25 years ago.

In the case of Mr. Murray, I actually remember the time, back when I first started this newsletter, when I called him to get his opinion about the wisdom of buying gold and silver in response the inflation that will be caused by Alan Greenspan, the then-chairman of the Federal Reserve, creating so much money.

I recall that the phone rang and rang, but I let it ring and ring. I knew he was home because it was about 6:00 a.m., his time out there in California, so I knew he had to be home! “Simple deduction, my dear, Dr. Watson!”

Finally, as predicted in the previous paragraph, he finally answers, all groggy and half-asleep, “Hello?”

To help wake him up, I was deliberately perky and up-tempo, and I said, “Hello, Bill! This is your old pal Mogambo, and I was just calling to confirm your opinion about how you are sure that Alan Greenspan creating so much money and credit is going to result in inflation and more bubbles in stocks, and bonds, and houses, and derivatives, and the sheer size of the government and its many dependents, which is not to mention simmering, constant inflation in the prices of everything else, and how you were discussing that Exact Freaking Point (EFP) with the Dalai Lama when you were working as his looper in Tibet, which is a tasty tidbit of celebrity gossip that I want to use in my newsletter!”

I could hear him breathing on the end of the line, so I continued, “Well, Bill, old buddy old pal, since we are talking about the Dalai Lama, when he told you ‘gunga ga dunga,’ was he saying, literally, ‘money get money’? And does that translate into colloquial English as, ‘Get gold and silver?’ Does it, Bill? Does it?”

He didn’t answer right away, so I urged him on, “Does ‘gunga ga dunga’ mean ‘gold and silver’ or not? Yes or no, ya moron? Or are you such a conceited hotshot that you think you are too big and too important to tell me just because I have a ‘problem’ and I live in a closet, and nobody knows me or reads my newsletter because the CIA and the FBI and the NSA are censoring me? Is that it? Is that what you think, Murray, you worthless piece of Hollywood crap?”

Well, for some reason, that is when he rudely hung up on me, so we never finished our terrific interview, and the Mogambo Guru newsletter piece ended up with me putting words into his mouth about how the Federal Reserve’s insane expansions of the money supply has created so much inflation in prices that the dollar has lost 97% of its purchasing power since the Fed took over in 1913, and how he now plays a lot of golf and urges everyone to rise up in angry rebellion and march on Washington, DC to tear down the Federal Reserve building.

But that was then, and this is now, and so naturally I was hoping that Mr. Tan would reveal something as pithy as “gunga ga dunga” that would suddenly, in a moment of blinding, transcendent enlightenment, miraculously put my whole miserable life aright, where suddenly I would not care that everyone was plotting against me and talking about me behind my back, and I would be complacent as the Federal Reserve is creating so much excessively outrageous amounts of money that ruinous inflation in prices is guaranteed and how we’re freaking doomed as a result.

And mostly I would be the height of serenity about whether I already had enough gold, silver and oil instead of obsessively hoarding more and more of them, always more and more as the only defense against the foul Federal Reserve’s creating inflation.

You can see that I was primed to something transformational, and so it is with enhanced pleasure that I read his opening sentence with a bias towards an Asian-type of fortune-cookie Zen, so that his “Extraordinary measures rarely produce merely ordinary consequences” became subtly profound.

And then scary! And then running like hell to the Mogambo Big Bubba Bunker (MBBB) in a panic and taking up a defensive position, which I did just ahead of the arrival of his going on that “all that money we’re printing has to go somewhere, and faster-growing emerging markets – and the commodities they gobble up – offer some of the more obvious and compelling stories.”

I bring this up not because the possible satori in Mr. Tan’s “Extraordinary measures rarely produce merely ordinary consequences” remark, nor how it is all bound up in a whirling hurricane of uncanny philosophical links to many other fascinating economic theories (none of which I actually understand), but how Mr. Tan quotes John Roque of WJB Capital saying, “$1,000 bought you nearly 50 ounces of gold in 1930 and less than an ounce today, but gold has no more surged than the dollar has slipped nearly 99% over that stretch.”

He’s so right that it makes me angry in a Mogambo Howl Of Outrage (MHOO) kind of way because every percentage loss of buying power during those last 80 years is written in the tears and suffering of the unemployed, the unemployable and those living on fixed incomes, all of whom must pay higher prices even though they don’t have more money, or any money at all.

To deliberately increase the suffering of the poor by making prices go up as a result of the Federal Reserve creating so much money is actually shameful, and it is the shame of all the yahoo huckster “economists” like the execrable Ben Bernanke of the Federal Reserve and the odious Paul Krugman of Princeton and who spreads his insane economic opinions through the fellow-traveler leftist New York Times, a newspaper whose obvious hypocrisy is a foul stench in my Sensitive Mogambo Nose (SMN).

But this is not about how we Americans are morons who believe that you can live well, and probably forever, by spending more money than you have by just creating more money, nor about how we think that every other government in all of history didn’t do this amazing trick because they were so stupid and we are so smart.

Obviously, I am working my way into a Hysterical Mogambo Rant (HMR), cleverly averted by Mr. Roque bringing me back to reality by appealing to my greed when he went on to say, “Besides, at about 1.15, the ratio of gold to the Standard & Poor’s 500 is still below the long-term average near 1.5,” which a little deft calculator work reveals is either equal to a nice “spring back” potential for a 30% rise in the price of gold “just to revert to the historical norm,” or a 3,000,000,000,000 % rise, I don’t really know which because percentages, fractions and calculators are so confusing to me.

But even the lower estimate of a 30% rise has me licking my Greedy Mogambo Chops (GMC) about how much I would like a 30% rise in the price of gold, and how many fun toys I could buy with those profits, but which would inevitably meet with howls of protest from the wife and children about how they are “dressed in rags” and eat only a cheap imitation gruel that I buy from a guy who sells it out of the trunk of his car down by the 4th Street bridge, while I invest all our remaining money into gold, silver and oil, except for the part I use to selfishly indulge my every frivolous whim.

Their whine, whine, whine is part of the downside of gluttony, I tells ya, as it really takes away some of the thrill of self-indulgence!

So you can imagine how I got really excited when he went on that the ratio of gold to the Standard & Poor’s 500 went to levels “pushing 3 in the 1970s,” which implies either a 261% rise in the price of gold to equal the S&P500, or the S&P500 falling to equal a third of an ounce of gold!

Perhaps it is this fabulous fact that makes me leap suddenly to my feet and excitedly exclaim, “Buy gold, silver and oil, you morons, because it is so obvious, so cheap and so mindlessly simple that even a guy as stupid as I am can see it, instantly recognize its significance, and be thrilled that ‘Whee! This investing stuff is easy!’”

The Mogambo Guru
for The Daily Reckoning

In Search of Golden Enlightenment originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
In Search of Golden Enlightenment




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

India Supply Concerns Boost Sugar ETFs

November 18th, 2010

Heavy rainfall and inclimate weather have taken its toll on India’s second largest producing state having many investors worried that global supply for sugar will not meet demand sending prices higher and providing positive price support to the iPath DJ-UBS Sugar TR Sub-Idx ETN (SGG), the PowerShares DB Agriculture Fund (DBA) and the UBS E-TRACS CMCI Agriculture TR ETN (UAG).

Elevated demand for sugar has resulted in a diminishing supply of global sugar stock levels, pushing levels to their lowest point in 20 years and prices of raw sugar prices back up towards their 30-year high levels.  Furthermore, yields in Uttar Pradesh, which is India’s second largest sugar producing state, have been cut enhancing fears that India may not produce the expected 25 million ton crop that the global market place has been hoping for, reports Caroline Henshaw of the Wall Street Journal. 

As for the near future, global demand for sugar is expected to remain elevated and continue to increase as the global population grows and the purchasing power of emerging nations increases.   This global imbalance in supply and demand will likely provide positive price support to the previously mentioned ETFs.

  • iPath DJ-UBS Sugar TR Sub-Idx ETN (SGG), which is a pure play on sugar. SGG is an unsecured, unsubordinated debt security linked to an index designed to reflect the returns available on an unleveraged investment in futures contracts on sugar.
  • PowerShares DB Agriculture Fund (DBA), which gives exposure to agricultural-based commodities through the use of futures contracts; DBA allocates 12.5% of its assets to sugar futures.
  • UBS E-TRACS CMCI Agriculture TR ETN (UAG), seeking to track the performance of the UBS Bloomberg CMCI Agriculture Index Total Return, which measures the collateralized returns from a basket of 10 futures contracts representing the agricultural sector; UAG currently allocates 16.58% of its assets to Sugar #11 futures contracts and 4.28% to Sugar #5 futures contracts.

Although an opportunity seeks to exist in the sugar markets, it is equally important to consider the inherent risk and volatility involved with investing in the agriculturally-driven commodity.  To help mitigate the effects of these risks and volatility, the use of an exit strategy is important.  Such a strategy can be found at www.SmartStops.net.

Disclosure: No Positions

Read more here:
India Supply Concerns Boost Sugar ETFs




HERE IS YOUR FOOTER

Commodities, ETF, Uncategorized

Three Reasons to Consider the Chilean Peso

November 18th, 2010

Investments in China and Brazil are a bit overdone at the moment. Don’t get me wrong, there’s still plenty of upside for both currencies — but not quite at the rate of the last few years.

So, where can an international investor seek higher rates of return? Try the Chilean peso. Although the currency has enjoyed brief run-up in recent quarters, there is still plenty of upside room left. Let’s take a quick look at why.

For one thing, Chile’s economy is absolutely booming. It is expected to grow by 5.1% this year and rise to 6.1% next year. Central Bank of Chile Governor Jose De Gregorio is even [don’t be wishy-washy] more optimistic — setting growth estimates in the 5.5%–6.5% range.

Most of those gains will come from Chile’s extensive copper exports. Chilean mines have been the top global copper producers for many years — producing approximately 6 billion metric tons last year. The base metal is a necessity for both industrial and commercial uses. And being in South America gives Chile relatively easy access to markets in the United States, the European Union and major economies in Asia, not to mention nearby Brazil.

In fact, not surprisingly, trade with China and Brazil has been booming for three years now, thanks to their insatiable hunger for Chile’s copper. Their steady and increasing demand for the versatile metal will lead to further appreciation in the currency as importing nations exchange pesos to complete their trades.

The country’s rapid pace of growth is also being fueled by accelerations by a healthy employment rate. President Sebastian Pinera promised to create approximately 200,000 new jobs over the next four years. And while politicians all over the world have been making the same promises, Pinera has actually done that and better. So far, 290,000 new jobs have been added — and many economists are estimating a possible top out of 300,000 before the year is over.

The phenomenal increases in employment are helping increase the country’s corporate investment and spending. But more importantly, the gains in the labor force are helping to support income growth and personal spending. Chilean domestic consumption skyrocketed in the first three months of the year — vaulting higher by over 11%.

This is a far cry from comparable spending in the United States — which is rising by only 2.6% so far this year. Should Chile’s domestic growth continue — and all signs say it will — rest assured that domestic consumption will continue to rise, adding to the country’s growth prospects.

Now, as with any other booming economy, you must consider the risk of higher inflation rates. As the Chilean economy expands, higher consumer prices are inevitable — but so are higher central bank rates.

Since the 2008-09 financial crisis, the Central Bank of Chile has raised rates for five straight months. Its overnight lending rate went from a record low of 0.5% to 2.75% in an effort to combat 2% inflation. And more rate hikes are expected before the year is out and heading into 2011. These higher interest rates are going to attract more foreign investors searching for a retail return that’s higher than current rates.

With higher economic prospects for the Chile thanks to stable demand for copper, growing employment and foreseeable interest rate hikes, it’s difficult to see how the Chilean peso won’t be a great and appreciable currency in the long term.

Richard Lee
for The Daily Reckoning

Three Reasons to Consider the Chilean Peso originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Three Reasons to Consider the Chilean Peso




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Three ETFs Influenced By Black Friday

November 18th, 2010

With Thanksgiving right around the corner, the nation’s single busiest shopping day is about to unleash, and whether or not the retail sector will get a boost this holiday season is ambiguous, however, the Retail HOLDRs (RTH), the iShares Dow Jones US Consumer Services (IYC) and the SPDR S&P Select Retail (XRT) are likely to be influenced regardless of the outcome.

A poll conducted by the National Retail Federation shows that up to 138 million shoppers may visit the nation’s shopping malls over the Black Friday weekend, an increase of nearly 3 percent from last year.  Many are expected to flock to the blockbuster bargains that are being offered by retailer like Wal-Mart (WMT), Target (TGT) and Best Buy (BB).  Wal-Mart is expected to offer DVDs for as little as $1.96, Blue-Ray Disc Movies for $10 and some kitchen appliances for under $3, while Target is following a similar path and is also expected to offer a 40 inch LCD HDTV for under $300 and Best Buy is advertising netbook computers starting at under $150.   

On the positive side for retailers, it appears that consumers have already adjusted their spending habits and have started to open up their wallets.  According to the Commerce Department, retail sales trended upward for the fourth straight month in a row in October indicating that consumption growth could be gaining some traction. 

On the negative side, special promotional sales put together by retailers to entice consumers during the year may end up having an adverse affect and on Black Friday revenues in that some consumers may have already made their big purchases for the year. 

At the end of the day, there will be a lot of traffic in and out of retail stores on Black Friday with numerous deals to capitalize on.  Regardless of whether or not consumers will act on these deals and continue the recent upward trend of spending, the aforementioned ETFs will likely be influenced.

  • Retail HOLDRs (RTH), which includes 18 holdings in the retail sector and allocates 19.63% of its assets to Wal-Mart, 8.57% to Target and 3.83% to Best Buy.
  • iShares Dow Jones US Consumer Services (IYC), which is a highly diversified play on the retail sector including 194 different holdings of companies in the retail sector and allocating 7.31% of its assets to Wal-Mart and 2.34% to Target.
  • SPDR S&P Select Retail ETF (XRT), which includes 66 different holdings of companies who derive their revenues through consumer spending.

To help protect from the downside risks involved with investing in the retail sector, such as macroeconomic forces like unemployment, the use of an exit strategy is a good idea.  Such a strategy can be found at www.SmartStops.net.

Disclosure:  No Positions

Read more here:
Three ETFs Influenced By Black Friday




HERE IS YOUR FOOTER

ETF, Uncategorized

Guest Columnist for Steven Sears at Barron’s

November 18th, 2010

It may just be a coincidence, but each time I have been tapped as a guest columnist for The Striking Price on behalf of Steven Sears at Barron’s, there has been a spike in volatility just as I sit down to draft some thoughts. Perhaps Steven knows something I don’t, but if he does, he’s not telling.

Today in There’s Opportunity in Uncertainty, I build on some themes from a previous September column, Will Market Volatility Return to Crisis Levels? and discuss why I think those who have been earning a nice living by selling options steadily for the past two years or so may still be able to carry that strategy forward.

In today’s column, I also mention the sentiment cycle pioneered by Justin Mamis in The Nature of Risk. As that graphic has never appeared on the blog, I have decided to include it below for reference.

I will take up some of the ideas presented in the Barron’s column, including information risk and price risk, in this space going forward.

Related posts:

Previous Barron’s contributions:

Disclosure(s): none



Read more here:
Guest Columnist for Steven Sears at Barron’s

OPTIONS, Uncategorized

Dear Uncle Sucker…

November 18th, 2010

[Ed. Note: This article originally appeared at “The Big Picture”]

For many years, I’ve been a fan of Warren Buffett’s long term approach to value investing. Understanding the value of a company, regardless of its momentary stock price, is a great long term investing strategy.

But it pains me whenever I read commentary from Buffett that glosses over reality or is somehow self-serving. His OpEd in the NYT – Pretty Good for Government Work – paints an artificially rosy picture of the Bailout, ignores the negatives, and omits his own financial interest in government actions.

What might he have written if Sir Warren was dosed with some sodium pentothal before he sat down to pen that “Thank you” letter? It might have gone something like this:

DEAR Uncle Sam Sucker,

I was about to send you a thank you note for bailing out the economy…but then some nice men dressed in Ninja outfits came in and shot me full of truth serum. That led me to make one more set of edits to my letter thanking you for saving the economy.

It also helped me recall some things I seemed to have forgotten in my other public pronunciations about the bailouts.

I suddenly recalled who it was who allowed the banks to run wild in the first place: You. Your behavior before, during and after the crisis was the epitome of a corrupt and irresponsible government. You rewarded incompetency, created moral hazard, punished the prudent, and engaged in the single biggest transfer of wealth from the citizenry of the United States to the Wall Street insiders who created the mess in the first place.

Kudos.

Before I get to the bailouts, I have to remind you that in:

  • 1999, you passed the Financial Services Modernization Act. This repealed Glass-Steagall, the law that had successfully kept main street banking safely separated from Wall Street for seven decades. Even the 1987 market crash had no impact on Main Street credit availability, thanks to Glass-Steagall.
  • 1997-2010, you allowed the Credit Rating Agencies to change their business model, from Investor pays to Underwriter pays – a business structure known as Payola. This change effectively allowed banks to purchase their AAA ratings, and was ignored by the SEC and other regulators.
  • 2000, you passed the Commodities Futures Modernization Act. It allowed the shadow banking industry to develop without any oversight by the Commodity Futures Trading Commission, the SEC, or the state insurance regulators. This led to rampant creation of credit-default swaps, CDOs, and other financial weapons of mass destruction – and the demise of AIG.
  • 2001-04, the Fed, under Alan Greenspan, irresponsibly dropped fund rates to 1%. This set off an inflationary spiral in housing, commodities, and in most assets priced in dollars or credit.
  • 1999-07, the Federal Reserve failed to use its supervisory and regulatory authority over banks, mortgage underwriters and other lenders, who abandoned such standards as employment history, income, down payments, credit rating, assets, property loan-to-value ratio and debt-servicing ability.
  • 2004, the SEC waived its leverage rules, allowing the 5 biggest Wall Street firms to go from 12 to 1 to 20, 30 and even 40 to 1. Ironically, this rule was called the “Bear Stearns Exemption.”

These actions and rule changes were requested by the banking industry. Rather than behave as adult supervision, you indulged the reckless kiddies, looking the other way as they acted out. You were the grand enabler of the finance sector’s misbehavior. Hence, you helped create the mess by allowing the banking sector to run roughshod over decades of successful constraints. (Kudos again on that).

There were voices warning about the upcoming crisis, but you managed to turn a deaf ear to them: Warnings about subprime lending, problems with securitization, against the false claim that residential real estate never went down in value, or that the models forecasting VAR were wildly understating risk. An economy driven by growth dependent upon credit-fueled consumption was unsustainable, and yet you encouraged that reckless credit consumption. The compensation schemes for Wall Street were hilariously short term (ignored by you); the crony capitalism of Boards of Directors that undercut market discipline was similarly ignored. You encouraged the hollowing out of the US economy, allowing it to become increasingly “Financialized” at the expense of industry and manufacturing. What was once a small but important part of the economy became dominant, yet unproductive, with your blessing.

Bottom line: You were at a loss for understanding the many factors that led to the crisis in the first place.

When the crisis struck, you did not seem to understand the role you should play. Instead of stepping up to halt the financialization, to unwind it, you gave away the shop. You failed to extract concessions from firms on the verge of bankruptcy. Your negotiating skills were embarrassing. In the face of meltdown, you panicked.

You could have undone the decades of radical deregulation at that moment. You could have fired the incompetent management, wiped out the shareholders who invested in insolvent companies, given the creditors and bond holders a major haircut for their foolish lending. Instead, you rewarded them for their gross incompetence.

The solutions you ran with were ad hoc, poorly thought out, improvised. You crossed legal boundaries, putting the Fed in the position of violating its charter and exceeding its mandates. You created a Moral Hazard, the impact of which may not be felt until decades in the future.

Very few of your senior elected and appointed officials understood what was going on.

Rather than offer an intelligent response to the crisis, you delivered brute force: Trillions of dollars were thrown at the problem, papering over its symptoms but not its underlying causes.

Well, Uncle Sam, you delivered a motherload of cash. Considering the dollar sums involved, your actions were remarkably ineffective. What was left over afterwards was a wildly over-leveraged consumer whose credit limits had been reached; State and municipal budgets were heavily dependent upon that excess consumer spending, creating huge budget holes because of it. Net net: The resultant economy was in the worst recession since the Great Depression.

As a student of the Great Depression, Ben Bernanke should have had the best grasp – but his bailout of Bear Stearns revealed him to be just another banker, intent on saving the banks – banking system be damned. To give you a clue of exactly how lost Hank Paulson was, he spent his time praying, and creating documents that exempted himself personally for liability. He’s from Goldman, so we know that “team first” ain’t exactly his style. Tim Geithner, who did such a stupendous job overseeing the banks in the first place, was in way over his head. And while I never voted for George W. Bush, I give him great credit for hiding under the bed and pretty much staying out of everyone else’s way. I would call him clueless, but that wouldn’t be fair to the legions of clueless around the world.

Sheila Bair grasped the gravity of the situation earliest, and put numerous failed banks through the insolvency process. If we were smart, we would have allowed her to work her way through the entire finance sector, effecting a GM-like prepackaged bankruptcy for Citigroup, Bank of America, Merrill Lynch, Morgan Stanley, AIG, etc. It would have been painful as hell, but we would be much better off had we allowed her to tear the Band-Aid off quickly. Instead, we are suffering through a death of a 1000 cuts, Japanese style.

I would be remiss if I failed to mention my personal positions in this: I made a killing in Goldman Sachs and GE. My investments in Wells Fargo would have been a disaster if not for you. Don’t even get me started with me being the largest shareholder in Moody’s – that was some joyride. And considering all of the counter-parties that Berkshire Hathaway has, we risked being just another insolvent investment firm along with everyone else had nothing been done.

So I must say thanks to you, Uncle Sam, and your aides. In this extraordinary emergency, you came through for me – and my world looks far different than if you had not.

Your grateful but wide-eyed nephew,

Warren

Regards,

Barry Ritholtz
for The Daily Reckoning

Dear Uncle Sucker… originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Dear Uncle Sucker…




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Real Estate, Uncategorized

Dear Uncle Sucker…

November 18th, 2010

[Ed. Note: This article originally appeared at “The Big Picture”]

For many years, I’ve been a fan of Warren Buffett’s long term approach to value investing. Understanding the value of a company, regardless of its momentary stock price, is a great long term investing strategy.

But it pains me whenever I read commentary from Buffett that glosses over reality or is somehow self-serving. His OpEd in the NYT – Pretty Good for Government Work – paints an artificially rosy picture of the Bailout, ignores the negatives, and omits his own financial interest in government actions.

What might he have written if Sir Warren was dosed with some sodium pentothal before he sat down to pen that “Thank you” letter? It might have gone something like this:

DEAR Uncle Sam Sucker,

I was about to send you a thank you note for bailing out the economy…but then some nice men dressed in Ninja outfits came in and shot me full of truth serum. That led me to make one more set of edits to my letter thanking you for saving the economy.

It also helped me recall some things I seemed to have forgotten in my other public pronunciations about the bailouts.

I suddenly recalled who it was who allowed the banks to run wild in the first place: You. Your behavior before, during and after the crisis was the epitome of a corrupt and irresponsible government. You rewarded incompetency, created moral hazard, punished the prudent, and engaged in the single biggest transfer of wealth from the citizenry of the United States to the Wall Street insiders who created the mess in the first place.

Kudos.

Before I get to the bailouts, I have to remind you that in:

  • 1999, you passed the Financial Services Modernization Act. This repealed Glass-Steagall, the law that had successfully kept main street banking safely separated from Wall Street for seven decades. Even the 1987 market crash had no impact on Main Street credit availability, thanks to Glass-Steagall.
  • 1997-2010, you allowed the Credit Rating Agencies to change their business model, from Investor pays to Underwriter pays – a business structure known as Payola. This change effectively allowed banks to purchase their AAA ratings, and was ignored by the SEC and other regulators.
  • 2000, you passed the Commodities Futures Modernization Act. It allowed the shadow banking industry to develop without any oversight by the Commodity Futures Trading Commission, the SEC, or the state insurance regulators. This led to rampant creation of credit-default swaps, CDOs, and other financial weapons of mass destruction – and the demise of AIG.
  • 2001-04, the Fed, under Alan Greenspan, irresponsibly dropped fund rates to 1%. This set off an inflationary spiral in housing, commodities, and in most assets priced in dollars or credit.
  • 1999-07, the Federal Reserve failed to use its supervisory and regulatory authority over banks, mortgage underwriters and other lenders, who abandoned such standards as employment history, income, down payments, credit rating, assets, property loan-to-value ratio and debt-servicing ability.
  • 2004, the SEC waived its leverage rules, allowing the 5 biggest Wall Street firms to go from 12 to 1 to 20, 30 and even 40 to 1. Ironically, this rule was called the “Bear Stearns Exemption.”

These actions and rule changes were requested by the banking industry. Rather than behave as adult supervision, you indulged the reckless kiddies, looking the other way as they acted out. You were the grand enabler of the finance sector’s misbehavior. Hence, you helped create the mess by allowing the banking sector to run roughshod over decades of successful constraints. (Kudos again on that).

There were voices warning about the upcoming crisis, but you managed to turn a deaf ear to them: Warnings about subprime lending, problems with securitization, against the false claim that residential real estate never went down in value, or that the models forecasting VAR were wildly understating risk. An economy driven by growth dependent upon credit-fueled consumption was unsustainable, and yet you encouraged that reckless credit consumption. The compensation schemes for Wall Street were hilariously short term (ignored by you); the crony capitalism of Boards of Directors that undercut market discipline was similarly ignored. You encouraged the hollowing out of the US economy, allowing it to become increasingly “Financialized” at the expense of industry and manufacturing. What was once a small but important part of the economy became dominant, yet unproductive, with your blessing.

Bottom line: You were at a loss for understanding the many factors that led to the crisis in the first place.

When the crisis struck, you did not seem to understand the role you should play. Instead of stepping up to halt the financialization, to unwind it, you gave away the shop. You failed to extract concessions from firms on the verge of bankruptcy. Your negotiating skills were embarrassing. In the face of meltdown, you panicked.

You could have undone the decades of radical deregulation at that moment. You could have fired the incompetent management, wiped out the shareholders who invested in insolvent companies, given the creditors and bond holders a major haircut for their foolish lending. Instead, you rewarded them for their gross incompetence.

The solutions you ran with were ad hoc, poorly thought out, improvised. You crossed legal boundaries, putting the Fed in the position of violating its charter and exceeding its mandates. You created a Moral Hazard, the impact of which may not be felt until decades in the future.

Very few of your senior elected and appointed officials understood what was going on.

Rather than offer an intelligent response to the crisis, you delivered brute force: Trillions of dollars were thrown at the problem, papering over its symptoms but not its underlying causes.

Well, Uncle Sam, you delivered a motherload of cash. Considering the dollar sums involved, your actions were remarkably ineffective. What was left over afterwards was a wildly over-leveraged consumer whose credit limits had been reached; State and municipal budgets were heavily dependent upon that excess consumer spending, creating huge budget holes because of it. Net net: The resultant economy was in the worst recession since the Great Depression.

As a student of the Great Depression, Ben Bernanke should have had the best grasp – but his bailout of Bear Stearns revealed him to be just another banker, intent on saving the banks – banking system be damned. To give you a clue of exactly how lost Hank Paulson was, he spent his time praying, and creating documents that exempted himself personally for liability. He’s from Goldman, so we know that “team first” ain’t exactly his style. Tim Geithner, who did such a stupendous job overseeing the banks in the first place, was in way over his head. And while I never voted for George W. Bush, I give him great credit for hiding under the bed and pretty much staying out of everyone else’s way. I would call him clueless, but that wouldn’t be fair to the legions of clueless around the world.

Sheila Bair grasped the gravity of the situation earliest, and put numerous failed banks through the insolvency process. If we were smart, we would have allowed her to work her way through the entire finance sector, effecting a GM-like prepackaged bankruptcy for Citigroup, Bank of America, Merrill Lynch, Morgan Stanley, AIG, etc. It would have been painful as hell, but we would be much better off had we allowed her to tear the Band-Aid off quickly. Instead, we are suffering through a death of a 1000 cuts, Japanese style.

I would be remiss if I failed to mention my personal positions in this: I made a killing in Goldman Sachs and GE. My investments in Wells Fargo would have been a disaster if not for you. Don’t even get me started with me being the largest shareholder in Moody’s – that was some joyride. And considering all of the counter-parties that Berkshire Hathaway has, we risked being just another insolvent investment firm along with everyone else had nothing been done.

So I must say thanks to you, Uncle Sam, and your aides. In this extraordinary emergency, you came through for me – and my world looks far different than if you had not.

Your grateful but wide-eyed nephew,

Warren

Regards,

Barry Ritholtz
for The Daily Reckoning

Dear Uncle Sucker… originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
Dear Uncle Sucker…




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Real Estate, Uncategorized

India and China Continue to Drive Gold Demand

November 18th, 2010

The World Gold Council’s (WGC) latest quarterly recap shows global gold demand is getting stronger despite rising gold prices. Gold rose 28 percent to record the highest average price for a quarter ever at $1,226.75 an ounce while gold demand jumped 12 percent on a year-over-year basis to 921.8 tons during the quarter.

Jewelry demand, which increased 8 percent on a year-over-year basis, accounted for 57 percent of overall demand, while investment demand rose 19 percent to account for 31 percent of total demand.

It appears consumers and investors, especially in India, China, Russia and Turkey, are growing accustomed to higher gold prices. At the end of the third quarter, gold demand in India had already exceeded that of 2009 and demand levels in China are ahead of last year’s pace.

The WGC says “these results demonstrate that consumers in these countries are becoming accustomed to high price ranges…and consumers are preferring to make gold jewelry purchases at current prices in order to avoid purchasing at higher prices in [the] future.”

Investment demand rose despite a 7 percent decline in investment in ETFs, which has been the biggest driver in investment demand of late.

Chinese investors seeking protection from rising interest rates directed a considerable portion of their savings into gold products, causing demand for gold bars to jump 44 percent. Net retail investment in China reached 45 tons, breaking the previous record of 40 tons set in the first quarter of 2010.

We’ve said this many times, as the economy recovers and per capita incomes in countries such as China and India rise, consumers and investors within those countries will likely see gold as a key investment vehicle because of the cultural connection carried over thousands of years.

Additionally, the official sector—central banks—were net buyers of gold with Russia, Sri Lanka, Thailand and Philippines increasing their holdings. This offset the International Monetary Fund’s continued selling of gold under the current Central Bank Gold Agreement.

Regards,

Frank Holmes,
for The Daily Reckoning

P.S. For more updates on global investing from me and the U.S. Global Investors team, visit my investment blog, Frank Talk.

India and China Continue to Drive Gold Demand originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
India and China Continue to Drive Gold Demand




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, ETF, Uncategorized

India and China Continue to Drive Gold Demand

November 18th, 2010

The World Gold Council’s (WGC) latest quarterly recap shows global gold demand is getting stronger despite rising gold prices. Gold rose 28 percent to record the highest average price for a quarter ever at $1,226.75 an ounce while gold demand jumped 12 percent on a year-over-year basis to 921.8 tons during the quarter.

Jewelry demand, which increased 8 percent on a year-over-year basis, accounted for 57 percent of overall demand, while investment demand rose 19 percent to account for 31 percent of total demand.

It appears consumers and investors, especially in India, China, Russia and Turkey, are growing accustomed to higher gold prices. At the end of the third quarter, gold demand in India had already exceeded that of 2009 and demand levels in China are ahead of last year’s pace.

The WGC says “these results demonstrate that consumers in these countries are becoming accustomed to high price ranges…and consumers are preferring to make gold jewelry purchases at current prices in order to avoid purchasing at higher prices in [the] future.”

Investment demand rose despite a 7 percent decline in investment in ETFs, which has been the biggest driver in investment demand of late.

Chinese investors seeking protection from rising interest rates directed a considerable portion of their savings into gold products, causing demand for gold bars to jump 44 percent. Net retail investment in China reached 45 tons, breaking the previous record of 40 tons set in the first quarter of 2010.

We’ve said this many times, as the economy recovers and per capita incomes in countries such as China and India rise, consumers and investors within those countries will likely see gold as a key investment vehicle because of the cultural connection carried over thousands of years.

Additionally, the official sector—central banks—were net buyers of gold with Russia, Sri Lanka, Thailand and Philippines increasing their holdings. This offset the International Monetary Fund’s continued selling of gold under the current Central Bank Gold Agreement.

Regards,

Frank Holmes,
for The Daily Reckoning

P.S. For more updates on global investing from me and the U.S. Global Investors team, visit my investment blog, Frank Talk.

India and China Continue to Drive Gold Demand originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”

Read more here:
India and China Continue to Drive Gold Demand




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, ETF, Uncategorized

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