Macquarie‘s Economic Research (Australia) put out the cutely-titled Macqro Forecast today. It predicts for 2011 risks balanced between inflation and growth. Here are some extracts mostly about the Pacific Rim:
The Asian recovery of the past 18 months has been largely independent of developed world demand and there is a danger that an excessive focus on growth results in policy settings that are too loose.
Exports to China hit a sluggish patch, after being an important contributor to regional recovery in 2009. Some of this just seems to reflect an inventory cycle. Policy is also having an impact, both the clampdown on energy intensive industries and the administrative squeeze on real estate, although the latter started to ease. Overall it looks as though the soft patch for Chinese imports should prove temporary and growth seems likely to pick up in coming months, which should offset slower demand for Asian exports from G3.
Concerns about the global cycle might lead to a slight pause in the interest rate tightening cycle, although the rhetoric from central bankers suggests the situation will need to deteriorate significantly to prevent further rate hikes. A soft period for global growth leaves central banks behind the curve, considering that current policy settings are very loose and economic activity has normalised.
However, risks for 2011 seem fairly well balanced between inflation and growth, and we are less worried than consensus about inflation, consistent with our relatively conservative growth forecasts.
Macquarie is an investment bank Down Under.
Yesterday the stock rally faltered and gold went up sharply. Gold for December delivery, the most actively traded contract, gained $24.60, or 2%, to close at $1,271.70/oz on the Comex (NY Mercantile Exchange). Richard Suttmeier, chief market strategist for ValuEngine,, commented:
Gold broke out above this month’s risky level at $1263.8 to a new all time high at $1276.5. Lower yields and strong gold are signs of risk aversion.
While mine is a perverse reading of the election results, I think the Tea Party primary gains may actually help the Democrats. The new ideological players are unlikely to paddle for the center as we move toward Election Day. Scott Brown in MA went mainstream after he got a Senate seat; but I think some of the newbies are too nutty to do this.
Their doctrinaire commitment could allow the Democrats to paint themselves as the more sensible, more reliable alternative during the faceoff, picking up centrist votes and those of people who fear the unknown.
I think grizzly-bear moms and gold fit together and if my feeble political prognosticans prove valid, this is NOT a good time to stock up on precious metals. Because of the rising price, AngloGold-Ashanti, the leading African mining co, will raise $1.37 bn to unwind forward sales of gold which are hurting its earnings. AU entered into these contracts to finance new mine development, doing exactly the same thing that Ashanti Gold, then a Ghanaian company, did a decade ago before the last surge in gold prices. AU of Johannesburg, South Africa picked up the Ghanaian firm on the cheap as these hedges went very wrong. We had owned Ashanti and now look at hedge books before we buy gold mining stocks.
AU is using proceeds from this huge sale of equity and a convertible bond to remove the gold hedged which sold gold forward at under $450/oz. OF course this waters its stocks.
If you insist on buying gold, we have a suggestion below for paid subscribers.
Correction: in my blog yesterday I attributed the last paragraph about the idiocy of buying T-bonds to Warren Buffett. In fact the comment was by my source, Shawn Allen. I would love an angry phone call from the Oracle of Omaha, but in it interests of accuracy I am correcting the error now.
More about gold, emerging market bonds, potash, drug discovery, security, generics, and IT below. Instead of telling you the countries I am telling you the sectors at the suggestion of Jason from marketing. Mostly I am talking about closed-end funds. While most of my super performance results from our trolling the small and mid-cap markets of the world for neglected stocks offering great prospects, I am not going to ignore the biggest pricing anomaly out there, the discount on closed-end funds. Under economic theory, it should not exist, but happily for us, it persists and provides profit opportunities.
If you do not own the two stocks covered below, consider this a trading alert.
