Saturday, December 5, 2009

World Financial Report, Dec. 4, 2009

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China wary of gold 'bubble’ danger after quietly doubling its reserves

Hu Xiaolian, the vice-governor of the central bank, said Beijing would not buy gold indiscriminately.

“We must keep in mind the long-term effects when considering what to use as our reserves,” she said. “We must watch out for bubbles forming on certain assets and be careful in those areas.”

China announced this year that it had quietly doubled its gold reserves to 1,054 tonnes, the world’s fifth largest holding. India has also joined the rush, gobbling up half the IMF’s gold sale.

News that the rising powers of Asia are shifting a chunk of their fast-growing reserves into gold in a flight from Western paper currencies has emboldened investors to take out large gold bets on the futures markets or through exchange traded funds (EFT), leading to the parabolic rise in price over recent weeks. (more)

Hussman: 80% Chance of Big Market Crash

The likelihood of a large market crash is 80%, said investor John Hussman, Bloomberg reported.

Additional amounts of debt not being repaid will cause the stock market to reverse itself, said fund manager Hussman.

Although the S&P 500 Index catapulted by 64 percent from March, the Federal Deposit Insurance Corp. reported 4.94 percent of loans and leases being overdue by the end of the third quarter, reaching an all-time high.

“There is still close to an 80 percent probability that a second market plunge and economic downturn will unfold during the coming year,” Hussman wrote on his Web site. (more)

Kiplinger's Personal Finance - January 2010 (US)

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Business Week - December, 14 2009

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The Four Scenarios For 2010

New report out of DB strategist Jim Reid highlights the 4 main scenarios for 2010 from the German bank's point of view. These are as follows:

  • Scenario 1 – This scenario is the most optimistic and is one where the authorities have as good a year as they did in 2009. They likely keep stimulus extremely high in the system without there being any noticeable consequences of their actions (e.g. rates at the short and long-end stay low). Under this scenario we would expect equities to be significantly higher, credit spreads be much tighter but with bond yields only edging slightly higher as the authorities are seen to have firm control of inflation expectations and may even be continuing to buy bonds.
  • Scenario 2 – This scenario is the most likely and suggests that we start to see gradual easing off the gas from the authorities but only as it’s proved that there is some momentum in the underlying economy. Under this scenario risk assets have a good year but returns are checked to some degree by rising bond yields and less stimulus being injected into markets. A satisfactory year for risk, especially equities, but a mildly negative one for fixed income. Credit investors will likely have to rely on spreads (and higher beta credit) to get positive total returns. (more)

The Economist (November 28th - December 4th 2009)

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Money as Debt II Promises Unleashed

This video production explains in simple and straight forward language (with supporting animated visuals) the true nature of money and the dysfunctional and undemocratic nature of the global banking system, describing the process of money creation and the catastrophic impact compound interest has on society and national and global economy.

Part 1 of 8 part series