Finance in Focus Feb 2013; Sign Posts

Posted on 30th January 2013 by Trevor in Finance in Focus |Uncategorized

Investing is not easy one has to be constantly looking for sign posts and directions from the ever moving, ever changing  massive organism called the markets.  There is never one thing that is the “oh that’s it”  but even where there seems to be it is often opaque and always debatable. There is never a perfect solution and we don’t have the advantage of hindsight – ever- in investing.

So what are the latest sign posts we should be paying attention to?

Here in Japan current sign post is definitely “Abenomics” and the wish for 2% inflation. It is often said “be careful what you wish for”,  as with 2% inflation one will get increased interest rates.  If interest rates were to increase from the low levels here in Japan to say 2% this would mean japan would be spending more than 70% of the ENTIRE TAX revenue currently to just pay the interest on the continually rising debt!  So we watch and wait for the next sign post which will be the upper house elections, should Abe and the LDP win, then the “Let’s Destroy Party” may actually get its wish, the problem being they do not know what they are going to get.  Likely a much, much weaker Yen and a structurally changed economy. Why? you may ask.  China and Japan are posturing for political gains – However China used to buy 20% plus of Japan’s exports now this is clearly declining and being replaced by purchases elsewhere – this is a structural change that will very likely not change back.  Just another problem to add to Japan’s ever growing list of economic woes.

The next sign post is the US debt ceiling – however, one we think will be just simply raised with no meaningful debt reduction. We wait to see what happens but unless the Republicans do something this will just be kicked down the road. The S&P has broken 1,500 again third time now the others were in 2000 and 2007 . . . will this be a third time lucky or are we getting very toppy on declining volumes? Declining volumes are never the sign of a healthy rally and they have been declining for four years.

The European sign posts are many, however the big one is the September German elections.  Will Merkel win?  If she does not who will the new government be and will they have an Anti-EU stance?  I.E. no monetary union . . .

The Gold comment we made in July last year still holds — GOLD  — 2012~2017

Gold is not going to go up because of all the conspiracy claims nor because the real gold will conquer the paper gold. This is all about reality. Gold is a viable part of the portfolio. It will rise to the occasion when the timing is right. The very people accused of keeping it down are the very people who will turn around and send it up as well. This is just about time. Nothing more! When the time is right and people realize that the Governments have no Clothes, look out there will be a stampede at that time. For now, that still appears headed into 2015~2017.

Gold is neutral and the next turning point will be a big one. Monthly closing resistance remains at 1755 and the primary resistance for the next 6 months is still 1807. The primary support lies at 1570 and 1480. Thus, as long as gold remains within 1807 to 1480 (Sign Posts), it is effectively neutral, so slowly and patiently accumulate!

Gold is a good investment NOT because of all the fiat nonsense, but because inflation has passed it by and there will be a huge burst of price movement. That will come when the Sovereign Debt Crisis hits the USA and that does not seem likely until the autumn of 2015.

One theory as to why gold prices aren’t bounding above $2000 is simply this: the central banks have so far failed to produce any meaningful inflation. The untold trillions worth of stimulus they have shot at this goal have barely kept deflation at bay. Granted, prices for groceries, health care and some other necessities have gone up (outside Japan). But the inflationary impact of all of these things together is inconsequential in comparison to the deflationary down force of a quadrillion dollar financial edifice that remains in a state of incipient collapse.

Please feel free to get in touch and discuss any topic on savings and investing and how to get your YEN working.


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