Saturday, April 10, 2010
As Greek Bond Rates Soar, Bankruptcy Looms
As interest rates on Greek debt spiral upward again, the question facing Europe is no longer whether Athens has the political will to cut spending and raise taxes to curb its gaping budget deficit, but whether Greece will run out of money before it gets the chance to do so. With the rate on 10-year Greek bonds reaching as high as 7.5 percent on Thursday, up from 6.5 just three days ago, the cost of insuring against a Greek default hit a record high.
The message from the market could not be clearer: artfully worded communiqués from Brussels will no longer suffice. To avoid bankruptcy, analysts said, Greece needs a bailout from Europe, and fast. (more)
China on ‘Treadmill to Hell’ Amid Bubble, Chanos Says
China’s property market is a bubble that may burst by as early as this year, according to hedge fund manager James Chanos. The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011, he said in an interview on “The Charlie Rose Show” that will air on PBS and Bloomberg TV.
China is “on a treadmill to hell,” said Chanos, who said in January the nation is Dubai times a thousand. “They can’t afford to get off this heroin of property development. It is the only thing keeping the economic growth numbers growing.” (more)
Analyst Rubin: Oil to Hit Triple Digits, Set New High
Energy analyst Jeff Rubin says oil will reach triple digits before year’s end.
By the fourth quarter of this year, oil prices will be back in triple-digit range, and by next year oil prices will rise to record highs, taking out the high-water mark of $147 a barrel set before the recession began in 2008, Rubin says.
Oil fell to around $85 a barrel on Friday, retreating further from an 18-month high reached on Tuesday, after a credit agency cut Greece's debt rating and investors focused on healthy oil supplies.
"We’re barely out of the recession, and already we face prices that, just a few years ago, our government, our oil industry and our economists told us we would never see," he wrote in the Globe And Mail. (more)
By the fourth quarter of this year, oil prices will be back in triple-digit range, and by next year oil prices will rise to record highs, taking out the high-water mark of $147 a barrel set before the recession began in 2008, Rubin says.
Oil fell to around $85 a barrel on Friday, retreating further from an 18-month high reached on Tuesday, after a credit agency cut Greece's debt rating and investors focused on healthy oil supplies.
"We’re barely out of the recession, and already we face prices that, just a few years ago, our government, our oil industry and our economists told us we would never see," he wrote in the Globe And Mail. (more)
China's Gold Quest
The World Gold Council predicts gold consumption in China will double in the next decade. Jewelry demand, investment demand, even industrial demand… they all factor in. "This forecast seems reasonable," says Frank Holmes, "and it lines up with what I've long been saying about the profound evolution in China's economy -- domestic consumption is replacing exports as the growth engine as more poor Chinese move up into the middle class and from there into the ranks of the wealthy.
"China has a centuries-long cultural affinity for gold, so it makes sense that more middle class and wealthy would mean more gold sales.
"Over the same period, China's GDP roughly tripled. The Chinese are famous for their high savings rate, and the chart shows how important gold has become as a store of their growing wealth."
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