As illuminated in my last blog’s forecast - Update 5 – Global Economies heading for turbulence, watch out the falling US Dollar dated 16 September 2010, the US dollar weakens further. Against 6 major currencies, the US Dollar Future Index (DXY) spot price traded lower at $78.18 tonight. That was nearly 4 % lower as compared to $81.40 on 16 September 2010, or 5.5 % lower compared to $82.74 at end August. In one month elapsed, this is substantial decline of the US Dollar. The U.S. dollar had the worst quarterly loss in more than eight years falling to 6-month low against the Euro.
Against the Bloomberg-JP Morgan Asia Dollar Index,( ADXY) which tracks the region’s 10 most used currencies excluding the Yen, the US Dollar the gauge rose relentlessly from 112.09 to 115.02 since 1 September 2010 . For the year 2010 till end September, the greenback has lost 7.7% against the Baht, 10% against Ringgit and 5.6% against the Singapore Dollar and roughly 6.5% against the Aussie Dollar.
Gold and equities continue to uptrend. December delivery contract for spot gold breached the US$1,317 level for the week ended 1 October 2010 whilst equities had its dream run up north, consolidated further by better-than-expected August durable goods order announcement by the US Commerce Department on 24 September 2010.
Excluding transportation equipment, a 2% gain in improved reading of capital goods order re-ignited the fireworks of US stock market rebound - after a slow downward drift since that week beginning, amid sluggish volumes. Mr. Henry McVey, Morgan Stanley Investment Management’s head of global macro and asset allocation, was looking to cut exposure to equities.
Until the Commerce Department’s announcement, the US stock market had been dogged all week by the Fed’s FOMC warning that it will act if the “modest” economic recovery stalled, sparking fears of renewed deflationary threats.
The Fed openly warned of recovery pace having “slowed in recent months” and would remain “modest near term”, even hinting of deflationary trend of “inflation rates below target levels.” Exacerbated by lending contraction, albeit at a reduced rate in recent months, FOMC noted that “business spending on equipment and software is rising, though less rapidly than earlier in the year”
It was the Fed’s last meeting before the November’s mid-term Congressional election, the FOMC shied from taking a stance of vigorous stimulus spending initiative. That practically left the economy to drift along the path of continuing modest growth.
Threats from the Fed of impending “quantitative easing” weaken the dollar as forex market views that as printing of greenback. It is indicative that the US economy needs the support of both the Fed and the weaker dollar lifting exports
A pair of high-level departures from the government’s economic team, Wall Street bailout figures Herbert Allison and Lawrence Summers, weighs only briefly on US stock market sentiment. Other heavyweight economic advisors who have left include Budget Director, Peter Orszaq and Christina Romer. Tonight saw the resignation of Rahm Emanuel, White House chief of staff, forcing the Obama Administration to make some strategic choices in the likely wake of ascendant Republican Party post the Congressional mid-term election.
Instead of market glum, it was the Commerce Department’s announcement of higher durable August capital goods order which cheered economists and stock investors.
Excluding transportation equipment, durable goods order gain of 2% mainly in steel, heavy machinery and computers suggests that manufacturing is regaining traction. It was viewed as a healthy rebound after a worrying massive decline of 3.8% in July following a tepid 0.2% gain in June.
After two months of consecutive increases of 0.2 percent in June and 2.5 percent in July, August shipments of manufactured durable goods, however, slipped 1.5 percent – this suggests a lagged measure of July’s weak durable goods order. SEPTEMBER’S DURABLE GOODS SHIPMENT WOULD BE A GOOD CONFIRMATION OR OTHERWISE OF AUGUST MANUFACTURING REBOUND.
Non-defence capital goods order, excluding aircraft, gained 4.1% ALSO PERFORMED VERY WELL comparing most favorably against July’s 5.3% decline. Core capital goods shipment was up 1.6% in August – a key indicator of business spending - was a big jump from July’s 0.1% gain. This is a FIRST strong hint that business spending has taken hold, AFTER RECENT MONTHS OF WEAKNESS, elevating prospects of the US economy gaining some sparkle. US stock market rallied to close the week ending 24 September 2010 on a strong note.
Durable goods inventory rose 0.4% in August (8 consecutive months of increase) following a positive 1.3% and 0.6% gain in June and July respectively – INDICATING INVENTORY BUILD-UP IS SLOWING. This could be the bottleneck which is what Lawrence Summers warned of the end of inventory cycle limiting growth forward.
Stocks will not fly off the shelves unless consumer confidence picks up and this is NOT happening.
Near Tuesday September month end, the US Conference Board reported consumer confidence in the U.S. economy remains “quite grim,” with its gauge fell to 48.5, the lowest reading since February. It is a shocker considering the strongest September stock market sentiments prevailing but there were many reasons as well. September’s pullback in confidence cited “less favorable business and labor market conditions, coupled with a more pessimistic short-term outlook”.
For the month of September, US stock market performed brilliantly, apparently disregarding the much-unchanged gloomy economic outlook persisting. The Dow Jones Industrial Average is now up 8.44 percent, Nasdaq up 10.5 percent and the S&P 500, up 9.5 percent, ahead of the corporate results season. Corporate takeovers, threat of quantitative easing, gain on durable capital goods order and no doubt the falling US Dollar were the main drivers of the market.
What the market is now keenly awaiting is the earnings reports and the revisions – either upwards or downwards accompanying it. This author is betting of more upwards than downward revisions – thanks to the two-track US economy, supported more from off-shore stronger performance of US corporations, obviously benefiting from the declining US dollar. As forewarned in my last write-up of 16 September of 2010 of a “TECTONIC USD/EURO,USD/YEN AND USD/YUAN SHIFT MAY ALREADY BEEN UNDERWAY”, the Brazilian finance Minister , Guido Mantega 10 days later spoke of an “international currency war” has broken out as governments around the globe compete to lower their exchange rates to boost competitiveness.
Indeed, the central banks in Japan, South Korea, Taiwan, Brazil, Colombia and Peru intervened in the forex market, buying dollar to make their own currencies cheaper. History has shown that the effect of this kind of intervention doesn't last for very long." Despite strong US Congressional pressure, China has continued to suppress the value of the Yuan, while monetary officials from around the world including Singapore and Colombia issued warnings over their currencies’ strength.
The author believes that the trend of falling US dollar will continue into the last quarter of 2010, perhaps, even faster than currently seen.
BNP Paribas is also forecasting further decline before calendar year end in the US dollar from present level against all major currencies including the Australian dollar.
Part of the reasons is that emergent economies are attracting capital flow from developed economies and that drives up demand for local currencies. And as long as “quantitative easing” continues in the US at zero to near zero interest rates, the capital outflow from developed economies to emerging economies will continue. The negative downside of this currency appreciation is the erosion of trade competitiveness of export dependent economies like Japan, Brazil, South Korea and Taiwan.
US Economy – conflicting signals fading weaker and crawling along the bottom
Overall there is not much noticeable improvement in the state of the US economy apart from a brighter blip in autos manufacturing. The Conference Board says its August leading economic index was up 0.3%, after a 0.1% increase in July.
Most recent data, however, suggests an improving manufacturing upturn in autos. The Chicago PMI staged an unexpectedly spectacularly strong climb in September to 60.4%, a big jump from 56.7% in August.
US car makers reported relatively strong month – no surprises there, given the upswing in the US stock market. Chrysler reported car sales surged 61%, Ford jumped 46% and GM posted 10.5% hike over a depressed 2009 year-on-year comparisons.
Imports also joined the industry’s barrage of improved numbers – Toyota was up 16.8% and Hyundai up 47.7%. Overall, the seasonally adjusted annual rate of sales came in at 11.76 million cars and trucks, according to Autodata, below the annual replacement rate of 14 million vehicles going to the scrap yards. Total US auto sales for the year-to-date were up 10.3 percent at 7.8 million vehicles.
Whilst autos did relatively well in September, the optimistic manufacturing outlook does NOT spread evenly across the rest of US. Although manufacturing activity was still expanding in September, it is tapering off and signs are pointing to a slower final quarter of 2010. The Institute for Supply Management index of factory activity fell to 54.4% in September from 56.3% in August. It is a long way from 60.4% in April 2010 when US companies restocked inventories or made purchases delayed during the recession.
Other sub-sector ISM indices point to growing but slower pace of economic activity.
New orders in September were barely expanding, down to 51.1 compared to 53.1 in August. Inventories grew faster to 55.6 in September on the heels of 51.4 in August and backlog of orders contracting in September to 46.5 from a positive 51.5 in August. Overall, the US manufacturing sector is growing but decelerating closer to contraction.
Sales of existing single-family homes and condos rebounded 7.6% in August, showing a steadily gradual improvement trend - from July’s 5.2% gain, June’s 2.8% gain after a massive 29.9% steep decline in May.
But home prices have not picked up beyond a token since May. Case-Shiller home-price index showed prices of single-family homes in 20 large cities rose by 0.6% in July compared to June. Demand for homes has plunged since a federal tax break for buyers ended, and foreclosures continue.
Economists are already forecasting falling year-on-year comparison of September and October home prices.
By and large, the US economic recovery remains uncertain with far more confidence displayed by corporate sector in M & A activities than consumer spending on goods and services. In fact, US consumer spending rose by a tepid 0.2% in August over July.
Amongst major M & A moves hogging the headlines were Hewlett Packard’s hotly-contested successful US$3.25 acquisition of 3 Par, Wal-Mart’s proposed $4.25 billion takeover of South Africa ‘s Massmart Holdings, Unilever’s US$3.7 billion acquisition of American Alberto Culver Co and Cisco acquisition of ExtendMedia and AOL’s bid for TechCrunch
The leaders of America’s largest companies are, however less optimistic on economy for the next 6 months at least. The response of 125 out of the 160 members Business Roundtable said its latest quarterly report cut its forecast for annual growth to 1.9% in 2010 from its earlier target of 2.7%. This consensus forecast, if eventuated, averages around 1.1% for the September and December quarters – well below the annualized trend average of 2.7% to June 2010.
AXA Investment Managers in Paris is also bearish on the US economy. Franz Wenzel, its Deputy Director of Investment Strategy, while discounting the possibility of U.S. economy tipping back into recession, cautioned that macroeconomic data would remain lackluster over the next six months on sub-trend growth rate, with a chance that the recovery will stall.
EUROPEAN ECONOMY – still fragile but limited signs of improvement
Economies in Europe were a mixed bag of performance in September. Germany fared best with unemployment fell faster-than-expected by 40,000 additional jobs in September.
Germany's retail sales dropped 0.2% in August compared after the 0.4% fall in July and 0.3% in June – that is three consecutive months of decline despite other resurgent economic numbers.
But German retail sales – the dog in the Germany’s recovery story – are highly volatile. It is poised to turnaround, given stronger labor market conditions now prevailing. Anecdotal evidences available and continued trend of a stronger labor market bodes well for private consumption increase forward.
Business and consumer confidence in Euro zone also picked up in September, though uneven – strongest in Germany, gains achieved in Spain, Netherland and Poland, remaining stable in France but weaker in Italy
Other official data showed that new industrial orders in the currency area posted their sharpest monthly drop in 19 months in July.
Industrial orders in the 16-nation euro zone fell 2.4% in July compared to a revised similar percentage increase in June order.
It must be remembered that industrial production in 16-member EU rose 0.5% in May for the first time since August 2009 after a 1.4% decline in month preceding.
The uptrend of industrial production recovery within EU nations since May 2010, therefore, has not yet been firmly established.
Final Markit PMI index showed manufacturing activity in the 16-nation euro zone advanced at its slowest pace in eight months in September. The PMI fell to 53.7, down from 55.1 in August.
The unemployment rate in the 16-nation euro zone stood at 10.1% in August, unchanged from an upwardly revised July figure.
Falling PMI reading, fluctuating levels of new industrial orders, slow retail sales and static employment data point to slower growth ahead in the currency area.
British Economy – struggling to hold and reversal back to stimulus spending leanings
Outside the 16-member Euro zone, the British economy seems to be struggling to hold. Latest Markit/CIPS manufacturing PMI shows Britain's manufacturing activity grew at its slowest pace in 10 months in September. The index fell to 53.4, down from a revised 53.7 in August.
Despite the austerity-driven VAT increased to 20% from 17.5% by the new Government, thriftier UK consumers are gradually increasing their spending as labor market shows some improvement of late.
August retail sales declined 0.5% over July, according to the UK Office of National Statistics, against a forecast rise of 0.3% disappointed economists.
But retail sales rebounded in September, according to preliminary survey of British Confederation of Industry, bringing some relief.
Incidentally, the Bank of England last week signaled a subtle shift moving closer to stimulus as growth has been slower than anticipated. The Monetary Policy Committee, led by Governor Mervyn King, voted 8-1 to keep the benchmark interest rate at 0.5 percent record low since March 2009 and the bond-purchase plan at 200 billion pounds ($313 billion).
This stimulus move brought the BOE closer in alignment with the US Federal Reserve of quantitative easing and it highlights the difficult tightrope balance in many central bank monetary policies attempting to revive flagging recovery and fiscal responsibility needed for austerity in debt-ridden developed economies.
Likewise, the US Federal Reserve mulls flexible bond strategy amid uncertain recovery
http://www.theaustralian.com.au/business/news/federal-reserve-mulls-flexible-bond-strategy-amid-uncertain-recovery/story-e6frg90x-1225930759420While the economic statistics coming out of EU and Britain appear to have stabilized to a certain degree, and not dipping now into another recession, the same stability cannot be said of its banking and financial sector. European debt crisis flared-up again last week to cause instability to global stock markets. Despite the “successful” European banking stress test completed, Deutsche Bank needed to raise another 10 billion Euros in its balance sheet recapitalization. Of this amount, it expects to apply 7.7 billion Euros to buy and recapitalize its 30% owned Deutsche PostBank, Germany’s largest retail bank, which in a multi-staged rescue deal, will ultimately delivers it majority control.
Spain’s public debt rating was downgraded by Moody’s Investor Services and Ireland found itself needing to rescue its nationalized beleaguered Allied Irish Bank – the final costs could come to a staggering US$46.6 billion.
Sovereign debt and banking worries is expected to continue to haunt the European economic recovery trail.
Asian economies
China – stronger stabilized growth
Manufacturing activity in China staged a surprise rebound in September, despite the shutdowns in steel and other construction-related and energy-intensive sectors. According to HSBC’s survey, China’s PMI rose to 52.9 in September from 51.9 in August after a brief contraction 49.4 in July.
China's official purchasing managers' index jumped to 53.8 in September from 51.7 recorded in the previous month, recapturing acceleration in the nation's manufacturing activity. It is a pleasing rebound after two consecutive monthly declines in June and July. Analysts, however, noted a seasonal play in Christmas demand order underlying the September improved PMI data.
Retail sales in China also picked up strongly in September.
That improved manufacturing performance to a 5-month high coupled with sharp gains in domestic retail sales help to allay fears that China is heading for a rapid slowdown. A Merrill Lynch survey of 215 of its fund managers saw sentiment swung from underweight rating in August to overweight of China’s economy outlook in September.
On the negative side, inflationary trends continue of both import and output prices. China remains worried over the risk of property price bubble. Ahead an extended closure for week of holidays, Beijing announced fresh measures to cool the property market. China ordered banks nationwide to halt mortgage lending to individuals who already have loans on two properties, and raise down payment requirements for first-time buyers to 30% from 20% previously. Down payments on second-home purchases will rise to 50% from 40%. It also plans to introduce a trial property tax in some cities, with Shanghai, Shenzhen, Beijing and Chongqing before a nationwide rollout. China Daily also reported on last Monday the enactment of new administrative supply adding measures such as anti-land hoarding rules and new zoning rules aimed at curbing rising house prices.
The slew of new measures showed the credit tightening measures introduced in April 2010 has not had its desired impact as yet. That means also that China has not yet successfully “soft-landed” its slowing of a runaway economy partly fueled by residential property asset inflation bubble.
Strong US Congressional pressure on significant Yuan appreciation is likely to add inflationary import but not many realize that a higher Yuan may positively advantage competitiveness of other Asian exporting nations rather than benefiting the US trade imbalance, economy and employment as Chinese manufacture do NOT compete directly with US manufactured exports or imports into US market. The end negative impact of any sharp rise in Yuan could destabilize the prospects of soft Chinese landing and resolution of its property bubble.
Japan – weaker outlook forward
Although the Bank of Japan Qtrly “tankan” business sentiment index showed improvement but waning forward, that optimism did NOT reflect itself in industrial production statistics.
Japan’s Ministry of Economy, Trade and Industry data showed the country’s industrial production in August fell 0.3% from July, slightly accelerating from July’s 0.2% decrease and it is the third consecutive decline.
In downgrading its assessment of industrial output from up trending, it says that the trend is now flattening and outlook is weakening forward. Expiration of Japanese government incentives for consumers to purchase fuel-efficient vehicles is forecast to drive down auto production in September and even greater extent in October.
Disappointing industrial production data for August, waning outlook forecast in September quarter’s tankan survey and increasingly challenging export sector hamstrung by the fast appreciating yen paint a gloomy picture of Japan’s September quarter’s GDP outlook.
Japan’s August trade surplus fell 37.5% lower from year-earlier levels.
Rising Yen is increasing a cause for concern. Governor Masaaki Shirakawa said that the Bank of Japan needs to monitor risks to Japan’s economy, exports, and corporate profitability. As US expressed its willingness to extend its monetary stimulus, BOJ board member Ryuzo Miyao, warned “We’re entering a situation where we need to pay more attention to downside risks,”
Growth in exports which decelerated to 23.5 percent in July, the slowest this year, has deteriorated further. Japan's annual export growth slowed for a sixth straight month in August, is yet another sign that a strong yen and moderating overseas demand could hurt the economy's export-led recovery
The overall economy grew at a 1.5 percent annual rate in the second quarter, less than half the pace of the previous period.
"We still face the risk of a double-dip recession," said Takahide Kiuchi, chief economist at Nomura Securities in Tokyo.
The BOJ is under pressure to pursue “strong monetary easing” but this action is unlikely to stimulate demand nor is it likely to have significant banking impact of arresting declining banking loans in the dearth of consumer confidence and corporate borrowings. Some direct intervention in the forex market by the BOJ to sell down the Yen might be necessary from time to time to slow the upsurge in Yen.
The softness of the Japanese economy can be seen in the marginal fall in the August jobless rate to 5.1% and extended consumer prices drop by 1% from a year earlier.
Miyao warned of the risks that the US economy may fall into a protected period of slow growth.
South Korea – steep rise in Korean Won may slow export and economy forward
South Korea’s economy continued to chart a strong growth path. Its June qtr 1.4% GDP growth ( roughly in parity with March qtr 1.5% growth) fueled by demand for the nation’s exports of semi-conductor and electronic goods. Industrial production expanded for the 14th straight month in July, exports advanced, albeit slower, for the 11th consecutive month.
The trade surplus will reach $32 billion in 2010, a long climb from earlier estimate of $20 billion.
Exports are equivalent to about half the economy. September’s 4.4% accelerated appreciation in Korean Won is a “critical factor” edging adversely its forward trade outlook as global demand weakens in semi-conductors and electronic sector. S. Korea August exports growth slows to key markets of China, US and EU.
http://www.reuters.com/article/idUSBJL00206620100915
Interest rate is slowly rising as signs of inflation are emerging on the horizon. Latest IMF forecast in early September says its GDP is still expected to grow by 6.1% in 2010.
Taiwan – strong economic outlook fast fading forward
Taiwan is another bright spot among East Asian economies but its outlook is also fading fast. The island’s economy expanded by 13.1 percent in the first half with exports accounting for more than half its economy. Taiwan’s statistics bureau forecasts economic growth will slow to a paltry 1.37 percent in the fourth quarter compared with a year earlier
Forward forecast – confused stock markets & watch out for gold
The biggest unknowns are, of course, the outcome of the upcoming US Congressional election on 2 November and its impact on future policy choices within the realm of political realities of constraints. Recent high level departures within the Obama’s administration will, most likely, exacerbate the risks to robust cohesion and integration in all policy advice, formulation and implementation including economic issues. The hard-fought health care reform’s passage through Congress showed how difficult it was in making its way though the US legislative process. Beyond the political arena, there are big deeply embedded economic issues of banking reform and economic revitalization remaining yet unresolved.
While the September stock prices rally in the US seems wildly optimistic, they lacked conviction in volumes traded. Stocks prices ran up strongly alongside gold price, and belatedly oil as well, but not nearly so pronounced of base metals. US 10-year bond yield rose initially then fell back and gold-mining shares in Australia have eased back even as spot gold prices surged repeatedly to new records. Either the debt market or equities are lying – a question which I raised in my last write up.
Gary Schlossberg, Wells Capital Management offered these explanations for the triumvirate rise together of stocks, bonds and equities together.
Mr. Schlossberg is right of assertions that the Fed’s promise easing of monetary policy has no impact on the economy except lowering the dollar which must favored commodities including gold. Stocks are the odd man out being attracted to bottom fishing from investors. Money inflow, nevertheless, adds to investors’ optimism. Those investors dissatisfied with low bond yields looking for higher yields in more risky investments will invest part of their funds in equities.
This author now believes that EU and US stock market investors are confused of economic fundamentals with some periodic sparkles of positive news within conflicting signals, against a backdrop of unyielding conditions of damaged economies. Plenty of anecdotal evidences exist to support this view.
- European sovereign debt and banking crisis have NOT been resolved. Irish Allied banking woes, the downgrade of Spain’s public debt ratings and the recapitalization of Deutsche Bank are prime examples of unyielding conditions prevailing despite the recent much-acclaimed “success” of European banking “stress” tests. INTERESTING ENOUGH, THE CONFLUENCE OF THESE ERUPTIONS LAST WEEK HAS ONLY SMALL IMPACT ON STOCK PRICES IN EUROPE
- US and EU stock markets reacted STRONGLY POSITIVE to a mere 2% increase in August durable goods order, excluding transportation equipment, many wildly bullish investors seems to have FORGOTTEN about the 3.8% decline in relevant July comparison and a tepid 0.2% increase in June. Likewise, positive reactions to stronger official Chinese PMI manufacturing read for September has a seasonal relevance seems to have also gone unnoticed.
- the rapidly falling US dollar is stalling export market reach of countries like Japan, South Korea and Taiwan into the US market – meaning that cheaper dollar is sucking out the growth in otherwise strongly performing heavily export-dependent Asian economies also has risks of its negative impact, potentially squeezing out US exports opportunities in these slowing economies.
- financial markets are NOT convinced as yet that the double-dip risks of deflation are behind us. Manufacturing is weaker not only in US but also in Europe, Japan, Taiwan, South Korea and Singapore - all pointers that the fragile global recovery is slipping. Britain is moving closer to monetary stimulus and consumers worldwide are still retrenching, even in brightly-lit German economy, except China. Western economies are confronted with the grim realities that the closing end of stimulus spending trail saw no pick-up by consumers of the economic baton in support of sustaining growth, forcing Governments’ back on the tightrope of re-balancing stimulus withdrawal and extending stimulus support instead including that of China. FALLING US DOLLAR ABETTING FINANCIAL MARKETS’ PERCEPTION THAT DEFLATION RISK IS JUST PROLONGED and delayed, not punctured of eventuality in its likely avoidance.
- all the financial engineering at the corporate level of takeovers does NOT add to income generation, economic growth or employment. It is asset shuffling, headline hogging, definitely, and some confidence building among equities investors which may or may not inspire consumer confidence forward and it won’t do so unless it is (unlikely to be so) sustained for significant stretch of time to buoy investors beyond the US Congressional 2 November election.
- the “perverse” of massive debt “capitalization” of balance sheets among US corporations seems to have investors’ irrational liking and bullish sentiment approval. Debt financing even by cash-rich corporations, very cheaply in current very low interest rate environment, evaporates part of the “cost of capital” by substitution effects as interest payments on bond financing, unlike dividend payout, are tax deductible. The funds thus raised is used in share buybacks, pay dividend or simply return a portion of capital back to equity holders but it adds nothing to sales headline nor corporate bottom-line. This should give hint to shareholders that corporations are unable to find attractive investment opportunity to deploy ‘cheap” and/or “excess” capital and bodes nothing forward of future prospects. General Electric Inc. for example, changed its mind on dividend payout after conference calls to analysts in its previous quarterly earnings briefing. Why should investors cheer dividend paid out of “debt” bond issues merely because it is cheaper?
- quantitative easing is unlikely to positively impact on the level of economic activity. Corporations, unlike consumers, are cash rich and banking system is flushed with cash but either slow to lend or borrowers find little or no viable justification for increased loan demand in the fragile weak recovery. For recovery to find its grip and spread through the economy, corporations must increase capital spending a lot more intensively than current and that is NOT happening in US, EU or Japan.
- so global economy is still stuck in the gridlock of sagging recovery and gold prices rising despite equities also oddly rising – each is waiting for the other to fall when realities hit home.
My view is that gold will continue to rise. Quantitative easing – the only option seemingly available of economic lever left to Obama , in a political gridlock on Capitol Hill post-November Congressional election, will weaken US dollar further, and if the economy slips from a low base into recession, stock prices will head the direction of Antarctic. Barring major Central Bank or IMF selling, gold will head for Arctic as US dollar heads in the opposite direction.
Anyone disagreeing?
Zhen He
1 October 2010
