“Ring Of Fire” – Bill Gross, No.10 in 25 Most Powerful People In Business And 3 Times “Fixed Income Manager Of The Year”
Bill Gross is the managing director of PIMCO—one of the world’s largest fixed-income asset management companies, with $1,001 billion in assets under management as of the end of 2009. He has being ranked No. 10 in Fortune magazine’s list of the 25 most powerful people in business. In 2007, he was named “fixed-income manager of the year” by Morningstar for the third time in 10 years.
In his February online investment outlook letter, entitled “Ring of Fire”, Gross lumps the U.S. in the “ring of fire” along with vulnerable countries such as Spain, Greece, Italy, Ireland, and the U.K. in terms of investment risk. He said all these countries have government debt approaching 90% of GDP!! And this, says Gross—citing a book by Carmen Reinhart and Kenneth Rogoff called This Time is Different—is bad news, as such high debt levels slow growth by 1% or more, slashing returns on investment and on financial assets.
Gross also cites a McKinsey Global Institute study titled “Debt and deleveraging: The global credit bubble and its economic consequences.” It looks at total debt, public and private, and concludes that countries that enter financial crises with lower initial debt levels can respond far better—explaining why India, Brazil, China, and Canada were relatively shielded from the recent financial downturn.
Gross advises investors to put growth and currency assets in developing economies, especially in Asia. He wrote: “When the price is right, go where the growth is, where the consumer sector is still in its infancy, where national debt levels are low, where reserves are high, and where trade surpluses promise to generate additional reserves for years to come. Look for a savings-oriented economy which should gradually evolve into a consumer-focused economy. China, India, Brazil and more miniature sized examples of each would be excellent examples.”
Similarly, he recommends investing fixed income assets in those same countries if possible, though, since emerging markets have less developed financial markets and lower liquidity, fixed-income investors may need to turn to developed economies. His top choice for now would be Canada, because its “conservative banks never did participate in the housing crisis and it stayed closer to fiscal balance than any other country.” His next choice is Germany. The one to avoid at all costs: the U.K.
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
Marc Faber Sees ‘No Huge Downside Risk For Gold’, More Sovereign Defaults
Marc Faber, the Swiss fund manager and Gloom Boom & Doom editor said the governments of every developed economy will eventually default on their sovereign debts, so the one thing he will never do in his life is ’sell my gold.’
Potential defaulter include the US, the UK and Western Europe.
Speaking to CNBC in a live interview via telephone, Faber said: “In the developed world we have huge debt to GDP, in terms of government debt to GDP and unfunded liabilities that will come due. These unfunded liabilities are so huge that eventually these governments will all have to print money before they default,” he added.
Speaking at Russia’s Troika Dialog Forum in Moscow last week, Faber said: “I’m convinced the US government will go bankrupt, but not tomorrow, and before they do they will print money and you’ll get a depression with very high inflation rates.”
“If you ask me about the correction in the gold market, sure, we already corrected 10% from the peak and it could last somewhat longer. But when I look at Mr.Obama, Mr.Bernanke, Mr. Tim Geithner and Mr. Larry Summers, the one thing I will never do in my life is sell my gold.”
In an interview with Bloomberg Television in Hong Kong on Thursday, Faber reiterated he doesn’t see a “huge downside risk” for gold. “I won’t rule out that gold will go down to US$950 or US$1,000, but I don’t expect more downside.” “I don’t see any scenario where gold will collapse,” he added.
The famed investor told Bloomberg the Euro may rebound to US$1.40 against the US dollar because the currency is currently “oversold” amid concerns over Greece’s deficit, the largest in the European Union. “The region, along with the European Central Bank, will probably “bail out” the country, in turn creating more deficits” he also said.
“When Greece is bailed out, it’s a further indication that paper money is losing its purchasing power because it’s diluted through larger and larger bailouts and more and more deficits,” Faber said. “Now it can rebound to around US$1.40 but more than that, you shouldn’t expect.”
Any other recommendations?
“Other commodities haven’t gone up yet, such as the grains,” he said. “It may take time until they start to go up substantially but if you have time, you should be long wheat, corn, soya beans or own a farm, which is one way to participate in future food price increases.”
The global stock markets, which have mostly fallen about 10%-20% from their peaks, have begun a correction phase that Faber expects to continue. He said he thinks the new resistance level for the S&P 500 will be 1,100, though an oversold market could cause a relief rally over the next ten days.
Faber has said in many interviews that he sees dips in gold as an opportunity to buy some more bullion. But how long can the gold bull market last? “The gold bull market will come to an end when sovereign wealth funds – sick and tired of their investments in financial stocks – will finally purchase gold,” wrote Faber back in January 2008 in his Gloom, Boom & Doom report.
Source: BI-ME (Posted: Thurs, February 11, 2010 6:38 pm)
Disclaimer: Please be informed that the above mentioned stocks/indexes/investment instruments are solely for the purpose of education; it is NOT a recommendation or an invitation to trade/invest. For trading/investment advice, please speak to your remisier, dealer representative or financial adviser. Please understand that there is risk in every trade/investment venture, know your risk first before you venture into any of them.
China May Overtake Japan As The World’s 2nd Largest Economy in 2010
Currently, U.S. is the world’s largest economy, followed by Japan and China respectively in the 2nd and 3rd placing. Because of this financial crisis, economists point out that China may have a chance to overtake Japan as the world’s 2nd largest economy in 2010, 5 years ahead of what the experts have anticipated. With China slowly conquering Japan’s export market and a reduction in productivity due to the aging population, this will cause a further decline in the Japan’s economy. The outlook for Japan for the next 10 or 20 years maybe quite bleak. Look at the Nikkei 225 chart below, the index for Japan stock market is still way way below the highest level in the 1990’s because of the famous “lost decade”.
In the 80’s, Japan’s GDP had surpassed that of U.S. once but now, Japan’s GDP is only 75% of that of U.S. and it is ranked No. 19 in the whole world. Japan’s unemployment rate is at 5.7% currently. For the 1st quarter of 2009, Japan’s economy has contracted 11.7% y-o-y, 2nd quarter GDP has only managed a 2.3% growth. Economists predicted that the Japan’s economy may decline by 3% this year and expand by only 1% next year; whereas China’s GDP is fore-casted to grow 8% this year.
At this point of time, China’s net income per capita is not even 10% that of Japan, but China’s economy has already overtaken that of Japan in terms of other economical factors. In fact, the purchasing power of the Chinese has already surpassed that of the Japanese in 1992, it is expected to overtake that of the American in 2020.
Will China overtake U.S. as the world’s largest economy by the year 2020? It is highly possible. Maybe China’s renminbi will replace U.S. dollar as the new world reserve currency by then too. Only time will tell.
Cheers 
Loading ...-
About Me
-
Categories
-
Archives
-
Recent Posts