Market Outlook Journal
by James Finch - Please email your feedback to jfinch@stockinterview.com
Editor’s Note: Please visit StockInterview’s disclaimer page for full disclosure, forward looking statements, important links and cautions.

Go to page: 1 2 3 4 5 6 7 8 9 10 11 12 13

August 18, 2006

The Bullish versus Bearish Case on Short-Term Gold Investing The Bearish Case Guest Commentary By Rudi Filapek-Vandyck Editor, FN Arena www.fnarena.com FN Arena supplies financial and economic news stories, analysis and commentary in the Australian and global financial markets. FN Arena - Passionate about Financial News FN Arena is building the future of financial news reporting at www.fnarena.com. Our daily news reports can be trialed at no cost and no obligation. Simply sign up and get a feel for what we are trying to achieve. Rudi Filapek-Vandyck Editor, FN Arena   Central Bank Gold Sales Looming? US based market analyst Dennis Gartman is positive on gold longer term, he has been for a while now. Yesterday he cut his market position in half. A decision, he wrote in his daily newsletter to subscribers, that was not made easily, nor happily. So what caused Gartman to substantially reduce his exposure to a commodity he believes should only go up in value over the longer term? It's that same old nemesis again: the central banks. Under the Washington Agreement, Gartman reminds us, the legacy central banks of Europe have the right to sell up to 500 tonnes of gold each year. Under the agreement each year ends on September 30th. As of the end of July, official gold sales under the agreement amounted to 331 tonnes. This still leaves a sizeable portion unsold. This cannot be rolled into the following year. This means there are only a few weeks left for the central banks to dispose a large amount of gold. (We probably don't have to elaborate any more about why he made the decision to cut his exposure). So what's holding back the central banks? Why haven't they been selling more over the past eleven months? Gartman believes the cause lies in the dispute between the German central bank and the country's ministry of finance. Both have been unable to agree on how and for what the proceeds of further gold sales should be used. As a result of this, the German central bank has refrained from selling any of its gold. Gartman believes it is but logical to assume other central banks will jump in Germany's space. The Bullish Case Guest Commentary By Greg Peel Senior Writer, FN Arena www.fnarena.com Greg Peel Senior Writer, FN Arena Funds Buying Returns To Gold As Technicals Strengthen Let's take out the blip for the moment that was the Israel-Lebanon inspired move from around US$600/oz to US$650/oz and back again. This occurred in a period of oil price volatility and while most gold traders were sunning themselves on beaches. Consider, more importantly, the move up from the hard correction lows of around US$550/oz. The World Gold Council reports that gold investment in the second quarter rose 19% to 130 tonnes and 75% on value compared to the second quarter last year. The increase was marked by the attraction of exchange-traded funds (ETF) which saw a US$789m inflow in the quarter. The most popular ETF, streetTRACKS gold shares, held 371.9 tonnes of gold worth US$7.3bn as at June 30. Also notable was a 64% increase in demand for gold coins over the same period last year, with Turkey leading the charge and the US chiming in. Bucking the trend was gold demand for jewellery, which was up 12% for the quarter but down 24% on last year in tonnage terms, to 562 tonnes. It is easy to forget in an investment mindset that most of the world's gold still becomes jewellery, and that demand is very price sensitive. Gold investors are hoping that the traditional jewellery demand increases will occur as usual in the latter quarters, coinciding with Asian wedding seasons. If this is the case, then Kitco analyst Jon Nadler suggests any siphoning off of significant tonnage in a time of fragile supply will mean reliance on the ebb and flow of geopolitical concerns will take a backseat to pure bullishness. Overall gold supply was constrained in the second quarter, due to substantial mining company dehedging and a lack of selling from central banks. FN Arena noted yesterday that under the Washington Agreement, European central banks can sell 500 tonnes up to September. To date, only 331 tonnes have been sold. This has been enough to spook raging gold bull Dennis Gartman into halving his long position in the short term. The question is, however, have the central banks simply been tardy, or have they decided not to sell? The Washington Agreement only limits sales, it doesn't enforce them. There has been a growing trend amongst governments around the world to ease their US dollar investments and switch their foreign reserves into other assets, such as euro and gold. China, for example, holds next to no gold in its vaults. Anecdotal evidence aside, Value View Gold Report editor Ned Schmidt notes gold is currently providing short term technical buy signals in US dollars, Canadian dollars, euros and pounds. Peter Grandich of the Grandich Letter believes the technicals suggest a large rally is on the cards, although he would prefer to see a further "washout" to below US$600/oz to cement the call. (Some late central bank selling perhaps?). He is maintaining his view that gold will break US$735/oz in 2007, and it's a matter of when, not if. Technical chartists at Barclays Capital, however, believe the odds are in favour of short term weakness. Citing several signals including intra-day momentum oscillators having become overbought, the chartists believe gold bullion is likely to move south first before resuming its upward path. Downside targets are seen towards the July 2006 low and confluence of support in the US$600/605 area, the chartists say. They add bulls need to "retake" the US$635/40 area to alleviate immediate downside potential. Using weekly patterns analysis/Elliott wave counts Barclays believes there are still higher highs to come for gold, but these will probably now be late this year, or even into next year. In the meantime, expect erratic choppy ranges, the chartists say. StockInterview.com was granted permission to post this story written by Rudi Filapek-Vandyck and Greg Peel.

August 16, 2006

Uranium Wars – The Battle For Queensland Guest Commentary By Greg Peel Senior Writer, FN Arena www.fnarena.com FN Arena supplies financial and economic news stories, analysis and commentary in the Australian and global financial markets. FN Arena - Passionate about Financial News FN Arena is building the future of financial news reporting at www.fnarena.com. Our daily news reports can be trialed at no cost and no obligation. Simply sign up and get a feel for what we are trying to achieve. Greg Peel Senior Writer, FN Arena   Mt Isa is a town of about 25,000 located 1,820km north-west of Brisbane in the state of Queensland, and in the middle of what most Australians would agree could readily be described as "the outback". (The outback, by definition, is always further out than where you are now). Mt Isa is most famous as the birthplace of US Open tennis champion Pat Rafter, and for being the rodeo capital of Australia. It is also a big hole – or at least if you fly over Mt Isa you can stare in wonder at a very big hole. Mt Isa is arguably Australia's premier mining town. The big hole is the location of an enormous copper-silver-lead-zinc mine which has been in operation for over eighty years, originally owned by iconic Aussie company Mt Isa Mines, or MIM. When the resource industry was in a lull, and MIM was in trouble, it sold out to Swiss-based mining giant Xstrata – a decision the board members will rue to the end of their days. As well as Xstrata, Mt Isa's vast mineral deposits are currently exploited by the likes of BHP Billiton (BHP), Rio Tinto (RIO) and Placer Dome (yes, there is gold too). But while the city may have been undergoing a new boom of late due to skyrocketing commodity prices, the latest focus is on another resource – uranium – and Mt Isa boasts one of the world's potentially largest deposits. In 1954, a small syndicate of miners first discovered uranium near Mt Isa. The next day, MIM sent out every available man and vehicle to peg out adjoining leases. (Source: Courier Mail). That's about where the excitement ended. Before a uranium industry could get started in Queensland in any meaningful fashion, opposition to uranium and nuclear energy in Australia resulted in the country's industry being restricted to three mines, in South Australia and the Northern Territory. In The 1980s, the then federal Labor government introduced laws to prevent any further mines from opening. The present Liberal-National coalition government has since rescinded those laws, but Australia is a federation of states and the states have their own powers to restrict uranium mining. Queensland is currently governed by the state Labor party, and as such the same bans on uranium mining have been in place for the past thirty years. It is presently illegal to mine uranium in Queensland. It is a quirk of the current Australian political landscape that while the Coalition is in power federally, every single state is governed by the Labor party. Australia boasts something like 40% of the world's uranium, or 28% of recoverable reserves, depending whose statistics you read. 72% of those reserves are in South Australia, home of two of the three operating mines – BHP's Olympic Dam and (US) General Atomics' Beverley mine. 18% is in the federal government-controlled Northern Territory, home of the third operating mine – Energy Resources Australia's (ERA) Ranger, and another vast reserve – Jabiluka. ERA is majority-owned by Rio Tinto. The remaining 7% and 3% of reserves are found in Western Australia and Queensland respectively. Of the three Labor party controlled states, only South Australia has given approval for the expansion of uranium mining, with Beverley ramping up and Olympic Dam set to quadruple in size. Western Australia and Queensland are both opposed. If you think that would quell any mining company and investor interest in those two states as far as uranium is concerned then you would be very wrong. Since the price of uranium took off in the last couple of years, so too have the prices of mining companies laying claim to uranium deposits in those states. Blind ignorance? Well, perhaps in some cases, but the upshot is that most investors are hoping that one day political views will change and the bans will be lifted. One man who is betting a lot on this outcome is Alan Eggars. Eggars is a mining geologist of over thirty years experience who almost solely drives New Zealand and Australian-listed mining company Summit Resources (SMM). In 1990, Eggars pegged out a plot 40km from Mt Isa. Today, Summit Resources is sitting on a 50% stake in the Valhalla and Skal uranium deposits – together, one of the biggest untapped deposits in the country, with a total resource of over 30,000 tonnes of contained uranium oxide. The other 50% in the joint venture is owned by Valhalla Uranium (VUL) which is an 83% subsidiary of Resolute Mining (RSG). In 1997, Summit announced "spectacular grades" of uranium at its Mt Isa sites, and before a 1997-98 drilling program had been completed, Summit and Resolute were talking of an orebody that had the potential to be Australia's "next major uranium mine". (Source: SEA-US) Summit's Eggars has been lobbying the Queensland government ever since to lift the uranium ban. He even tried to appeal to the Australian Stock Exchange on the basis of "unfair politics". So far, his cries have fallen on deaf ears. The reason why Queensland's incumbent premier Peter Beattie is opposed to uranium mine is somewhat spurious. It is not simply because of federal Labor party policy, because otherwise South Australia would have to ban expanded mining and that is not the case. Is it because he personally, and the majority of Queenslanders he represents, are ideologically opposed to uranium mining? That's unclear, as the reason Beattie puts forward for his uranium ban is that it will harm the Queensland coal industry – a sillier argument you've never heard. Obviously Beattie does not harbour environmental concerns about uranium mining, as coal mining and coal-fired power generation are the most environmentally destructive of all. It's probably more to do with the $1.1 billion of coal industry royalties. Just how Beattie considers a uranium industry will detract from the coal industry is unclear. It is certainly unclear to Coalition federal resources minister Ian Macfarlane, who has said: "A potential $3 billion and hundreds in new Queensland jobs is not an opportunity I thought Mr Beattie could afford to turn his back on. He should drop the political pretence and make the effort to learn something about this industry before dismissing it because of some ideological objection. "To say greater uranium exports would encroach on Australian coal export markets is the usual cocktail of Beattie spin and ill-informed comment. He's dismissing job and export opportunities on the basis of a completely false view that uranium exports will hurt our coal exports. It's absurd." (Source: The Australian) Of course, Macfarlane is from the opposing political camp, and such an outburst is to be expected, but then Beattie has also drawn criticism from federal Labor resources spokesman Martin Ferguson. "In the minds of the resources industry, they cannot see why uranium mining is acceptable in South Australia but not in Queensland." Ferguson also said it was "hard to accept that in a resources state" coal stocks could be exploited to take advantage of the resources boom, but uranium deposits had to be left undeveloped. (Source: The Australian) It may not be that Beattie himself fully believes his own argument. He may be the premier, but as a Labor politician he is beholden to his power-base – the trade unions. It is the nature of trade unions in this country that executives are often more concerned with their subscription incomes than with protecting workers' rights. In Queensland the Australian Workers Union is dominant but it competes with the Construction, Forestry, Mining and Energy Union for coverage at mineral and coal mines. It is also the nature of trade unions that they often join in support of environmental causes, but these do only afford second place to workers' jobs. No doubt a burgeoning uranium industry would be seen by unionists as a threat to the coal industry, ergo lost jobs. The fact that even if uranium bans were lifted today it would be years before any meaningful production was up and running in the state seems lost on unionists and politicians. The fact that the coal industry is only likely to get bigger – uranium or no uranium – as the developing world cries out for more power and oil stocks dwindle, also seems lost. The fact that any displaced coal worker – were that bizarrely to happen – could probably get a job in the uranium industry the next day is also beyond these people's narrow agenda. Opposition spokesman Ferguson is on to it, having recently courted the Australian Workers Union to support overturning the Labor party restriction on uranium mining in exchange for a hint of dominant coverage of the uranium industry and its workers. If ever Premier Beattie is to change his mind, it might come about next April at the annual Labor Party National Conference. This particular conference will draw the attention of not only the country but also the world, as Labor leader Kim Beazley has proposed a relaxation of the long-standing party policy of restricting uranium mining. This little piece of news rocked the Australian uranium investment world back in July, and sent prices of hopeful mining stocks running hard once more. If both sides of federal politics end up pro-uranium, surely the states will soon have to fall into line? Beattie has so far only commented that he would "look forward to the debate at the national conference which will determine the party's position". As to whether Beazley will actually be able to sway the majority of his party members to a pro-uranium stance is not clear either. There are many within the party vehemently opposed. Opposition is based on environmental factors (and although nuclear energy might be clean by comparison to fossil fuels the whole process of uranium mining and power plant construction is little cleaner than the coal equivalent), on geopolitical factors (how do we know our uranium won't end up in weapons?), and the controversial question of waste. The federal government has already signed uranium export agreements with China. With these agreements come a strict caveat of only using Australian uranium for peaceful purposes, but Australian people have taken that with a cynical grain of salt. The next stop is probably India, although under strict policy India, as a non-signatory to the Nuclear Non-Proliferation Treaty, and one of few nuclear weapons-capable nations, is not permitted to receive Australian uranium. Again, the Australian people do not expect a prime minister who is long on "resource provider to the world" rhetoric, and short on keeping promises, to actually stick to policy on this one. But all in all it is probably the waste question which causes the most concern. Australians as a whole wouldn't know a lot about nuclear physics, but they do know that nuclear waste takes thousands of years to break down and in the meantime can cause cancer, and two-headed fish. One of the government's proposals, and indeed one the federal opposition is seriously considering, is a "cradle-to-the-grave" uranium export policy. In order to ensure Australian uranium is not used to make weapons, exporters would be required to return their once-used uranium for safe disposal back in Australia. The idea of becoming the world's nuclear waste depot is something politicians will find difficult to sell to the Australian people. It is certainly one area influencing the premier of Western Australia, Alan Carpenter, in his unequivocal stance on the uranium mining issue. "We do not support uranium mining because we believe it will inevitably lead to Western Australia becoming a dumping ground for the world's nuclear waste. We believe the majority of Western Australians support this position." (Source: Sydney Morning Herald) Unlike Queensland's position, Western Australia's position is straightforward and, according to Carpenter, "crystal clear". It is on that basis investors are hitching their wagons to the Queensland story, believing Beattie can be swayed and a national Labor party endorsement would be just the ticket. While slightly more promising, Beazley would still need to win over the caucus, or otherwise someone would have to alert Beattie to the fact the coal industry is pretty safe from any uranium industry. Either way, Summit Resources would have been thinking there might finally be some light at the end of the tunnel. Summit's exploration manager has explained that it made sense to keep plugging away despite a "no uranium mines" policy because "Beattie hasn't always been in power" and that Beazley had been hinting about a policy change for a while (Source: Courier Mail). And Eggars believes there will simply be too much pressure brought to bear. "With increasing pressure from green groups, and with global warming and the looming energy crises, everybody is now looking at uranium and nuclear power as a logical energy alternative. Australia will soon have a tremendous amount of pressure put on it - particularly from China and the US - to open up its uranium resources. Australia has now commenced negotiating a free trade agreement with China and Australian sales of uranium to China will be part of those negotiations". (Source: Minews) But just when Eggars was enjoying the possibilities, along came Paladin Resources (PDN) to spoil the party somewhat. Paladin has just announced a $167m takeover bid for Valhalla Uranium, and Resolute Mining is ready to sell. Paladin has been a star of Australia's minor miners, rising from a share price of next to nothing in early 2004 to trade over $5.00 in early 2006, all on the back of the rise in the uranium price. Paladin's primary local uranium assets, Manyingee and Oobagooma, are located in Western Australia, so Paladin, too, is playing the waiting game. The company hasn't been twiddling its thumbs, however, as it has looked further a-field to Africa to exploit uranium mining opportunities. The result is that Paladin's Langer Heinrich mine in Namibia is 70% complete with commissioning targeted for September. It is also advancing the Kayelekera project in Malawi, the most recent resource statement from which indicated uranium reserves of 15,670 tonnes. So having satisfied itself with promising African projects, Paladin's focus has once again turned back to Australia. And given Western Australia's premier is proving a rock, Queensland looks like the best place to be. It surprised no one in the industry that Resolute Mining would be prepared to sell Valhalla, given Resolute has flagged its intention to develop its US$120m Syama gold project in Mali.  It needs to raise the funds from somewhere. What has made Summit rather upset is that under the joint venture agreement between Summit and Valhalla, Summit has a pre-emptive right to Valhalla's stake were it to be put on the market. Summit claims that Valhalla is in breach of the agreement, not only by considering selling the stake directly to Paladin, but by even providing Paladin with commercially confidential information that would have been required for Paladin's due diligence. None of this bothers Paladin, Resolute or Valhalla. Valhalla claims it is not in breach of its joint venture agreement for the simple reason that it is not specifically Valhalla's stake that is on the market, it is the company that is on the market – a subtle difference. Suffice to say, the whole thing has now gone to the Western Australian Supreme Court (Summit is actually based in Perth). We will have to now await the outcome, and no one is prepared to talk. According to an ASX announcement released by Summit, if Valhalla is found in breach then Summit has the right to buy out Valhalla's stake for an agreed price or, failing agreement, 85% of the market value as determined by an independent expert. If Paladin wins the day, and Queensland's uranium ban is lifted, it will become the world's third biggest uranium producer. Summit may well be rolling its sleeves up for a battle, and with reason, but the reality is that it, too, will by now have become a takeover target. Some in the industry can't understand why it hasn't been taken over already. The industry is going through a period of consolidation, and there are mining companies clammering to buy each other out all over the world. And China is lurking. Whatever the outcome, the reality is that investment in Australian uranium is at least a five to ten year proposition at this stage. Deals with China may have excited the investment community, but even China is going to have to wait. Olympic and Ranger have long term sales contracts with the likes of the US, Japan and Korea. Olympic's expansion will take several years. Beverley is just ramping up now. Ranger is on the wane, and mining at Jabiluka is still uncertain (and unlikely to commence before 2014 either way). Australian uranium investors have pinned their hopes on a change in heart from two state governments. Of the two, Queensland's is tipped as the likely capitulator. But even if those investors get what they're hoping for, it's still going to be a long road to production. Paladin's managing director John Borshoff has warned that few uranium mines would be opened in the immediate future. (Source: Sydney Morning Herald) "There's a hell of a lot of work to do," he said. "It's not going to be an immediate process by a long shot". StockInterview.com was granted permission to post this story written by Greg Peel.

August 10, 2006

Guest Commentary By Rudi Filapek-Vandyck Editor, FN Arena www.fnarena.com FN Arena supplies financial and economic news stories, analysis and commentary in the Australian and global financial markets. FN Arena - Passionate about Financial News FN Arena is building the future of financial news reporting at www.fnarena.com. Our daily news reports can be trialed at no cost and no obligation. Simply sign up and get a feel for what we are trying to achieve. Rudi Filapek-Vandyck Editor, FN Arena   Rudi on Wednesday A little less than nine months ago, highly valued member of the FN Arena team Greg concluded one of his feature stories with a memorable sentence, one that provoked quite some responses from our readers, both positive and negative. At the bottom of a story that opened with Dante's famous entrance to Satan's inferno "Abandon all hope, ye who enter here", Greg wrote: But have no doubt – charting is pure b*llocks. You may send your letters now. And letters we saw. We promised the readers a chance to respond. We invited emails, personal insights and experiences. We called it The Revenge of the Chartists. Unfortunately, due to some unforeseen developments (all this was in the pre-FN Arena News era) those plans never materialized. I think the Revenge of the Chartists is what we are witnessing now. Many an investor would have hoped that the Federal Reserve Bank announcing a pause in its 17 month streak of interest rate increases would have at least freed up the market's spirit for a short relief rally. Instead, we're seeing share prices tumbling, day after day. As acclaimed market commentator Dennis Gartman says: it is when something positive occurs and the market doesn't rally one should become concerned for if anything that is a bearish sign. Of course, there's room for debate whether the recent Federal Reserve Bank announcement was a positive, with ongoing strong reference to potential inflation troubles in the months ahead. It also doesn't help that oil experts at Barclays Capital have reconfirmed their view that market expectations regarding oil prices are still too low, and their point is vindicated month after month, week after week. Gartman has held the view since May this year that US equities have entered a bear period. He uses technical analysis (plus his own gut instinct) to draw this conclusion. I have written at least on one previous occasion that I hoped he was wrong. Reading his recent newsletters, however, it doesn't seem like Gartman is going to change his mind though. Quite a few other technical chartists have expressed their worries and concerns over the Australian share market over the past few weeks. Some of them argued that it wasn't looking as bad for Australian equities as for the US markets, but since the US tends to dictate the overall trend for the rest of the world, the immediate outlook seemed worrisome, at least. I visited the Tech Wizard yesterday (soon to be a regular contributor to FN Arena News) he said "Rudi, I am only a little bit worried at the moment, let's call it mildly cautious, but the longer this situation continues, the more bearish the overall picture becomes." Similarly, John Bedson, who manages his own Hedge fund and who has been a subscriber to FN Arena for years now, believes his charts are signaling the market is currently in shaky territory. Greg would say we don't need charts to tell us the immediate outlook for shares is clouded, we have a daily spot oil price for that. At FN Arena we concur with Barclays. That's why we are worried about inflation in the months ahead. This is also why the market finds it hard to believe that this Fed pause will lead to a peak and reversal soon in the US interest rate cycle. It certainly ain't over in Australia yet. One release of economic data after the other appears to raise the odds for another 25 basis points hike later this year. We've all seen how tough it is for the Chinese authorities to apply the brakes on their white hot economy, a process that still hasn't generated much tangible results it would seem. It doesn't look like Australia's economy is going down without a decent fight either. The US, however, might be fighting a whole different set of demons. This week saw Nouriel Roubini, Professor of Economics and International Business at New York University Stern School of Business and of online blog fame, declare that it may already be too late to save the US economy from falling into another recession next year. Now, we all know that in this age of ever present, global encapsulating media, one has to revert to bold statements to stand out and receive the attention one is looking for (that's why we saw these US$2000/oz predictions regarding gold a few months ago), but I would find it hard to believe Roubini would seek his 15 minutes of fame by making a claim he doesn't think bears any merits. A while ago he believed the odds of a US recession by year end were about 50%. While that reads like a very scary prediction, we already know from other economists that unless theoretical odds get past the 60%, it usually isn't worth hiding in an underground bunker just yet. This week saw Roubini declare the odds have now increased to 70% and that's when the world starts paying attention, as it should. The world must prepare for America's recession, Roubini wrote on Wednesday in the Financial Times. It is already too late, he believes: "The Fed might have been hoping for a soft landing for the economy but instead it faces recession. The implications will be felt globally." The US recession will be triggered by three unstoppable forces, he predicts: the housing slowdown; high oil prices (yes, he too is in the same camp); and higher interest rates (the reason why the US share market cannot seem to find the way up). Ultimately, the US consumer, already burdened with high debt and falling wages (in real terms), will be hit hard by these three shocks coming together. More interesting than his Op-Ed piece for the FT, I found, was the preceding blog posting. It was called Four Investors' Fairy Tales…and Five Ugly Realities About The Coming Severe US Recession. Let's have a look, shall we? Nouriel Roubini believes the experts holding on to the belief the US economy will experience a soft landing are on drugs. Or they drink too much. Or both. Whatever the cause, they are not being realistic. I'll come back to this a bit later. That's myth (fairy tale) number one. Number two: in case things turn out worse, the Fed will come to the rescue by lowering interest rates. Slower economic growth will also lower interest rates. Sorry, but Bernanke and Co are simply behind the curve, Roubini believes, it won't do. Not anymore. Roubini is, of course, on the side of the experts who believe the next Fed move will be cutting interest rates again. But it's not good news. In 2000, Roubini argues, the Fed found itself in a similar position. It stopped tightening in June 2000 following a series of hikes since June 1999 taking rates higher by 175 basis points. But soon after it paused the economy slumped from 5% to 0% growth. Aggressive cutting followed but the economy nevertheless spun in recession by the first quarter of 2001. The Fed cannot stop the housing slump either, he argues, and there are several omens to signal the slump in housing will be severe and hit the economy hard. It is easy to see why he doesn't believe a hard landing is avoidable. Myth number three: the rest of the world will be able to de-couple from the US and continue growing at a perky rate. Number four is that the long awaited rebalancing of global current account imbalances is underway and the process will be achieved in an orderly fashion. Roubini's doom predicting is centred around the US housing sector. The coming slump will hit US consumers by decreasing their wealth. It is that simple. 30% of the growth in payrolls over the last few years was either directly or indirectly related to housing, he adds. A weakening US dollar will push up currencies such as the euro and the yen. This will impact on the profits of foreign firms. His conclusion: the last four global recessions have been characterised by an oil shock and an inflation scare that triggered monetary tightening and stagflation. It won't be different this time: global business cycles are highly correlated. Roubini thinks the rest of world can maybe manage to de-couple for a quarter of two, as Europe and Asia are experiencing a cyclical recovery, but a US recession will have a severe impact nevertheless. And all this doesn't even mention what else could happen given the large US current account deficits, the rising danger of increased protectionism and so on. Cash is king, he says, warning investors not to get sucked in by the next share market rally. Somewhere on my hard drive, I have stored a document by Robert Prechter, once of widespread guru status. If my memory is correct, the prediction, made in early 2005, was for a new bear market cycle to start in March 2006. Oh yes, that was wrong, wasn't it? Let's hope it was wrong full stop. Not just by two months. Till next week! Your admittedly a little worried myself editor, Rudi Filapek-Vandyck (supported by the Magnificent Four: Greg, Terry, Chris and Rob) StockInterview.com was granted permission to post this story written by Rudi Filapek-Vandyck.

Go to page: 1 2 3 4 5 6 7 8 9 10 11 12 13