Shun The bond & invest in the Gold

The indiscriminate use of monetary policy by the governments to curb the recession, lead unprecedented budget deficits. They have not much option left but to print the money to fill the gaps. The aftermath of this will bring up dormant monster inflation in coming time.

The long term value of paper currency if we talk in economic language is zero. The store of value hence lies in Gold. The other reason that makes Gold as a candidate of investments is in coming inflationary era, the people who are risk averse would not find bond as a safe instrument to invest. So though investment in Gold does not bring us any cash flows, but in gloomy situation when value of paper currency starts depreciating and monster inflation eats out any gain from investments in bond, and sovereign debt crisis is hovering over a region, nothing is more secured investments as Gold.

My take would be shun the bond and invest in Gold even though if it is at historically high level. J

 

Rranjan27@gmail.com

 

Beijing in a sweat as China's economy overheats - Telegraph

Beijing in a sweat as China's economy overheats - Telegraph

China Property Bubble Bursts in Bond Market as Kaisa Drops: Credit Markets - Bloomberg

China Property Bubble Bursts in Bond Market as Kaisa Drops: Credit Markets - Bloomberg

Euro is proving surprisingly popular as a funding currency-------------- Interesting story published in bloomberg

Euro is proving surprisingly popular as a funding currency

May 25, 2010

THE fastest convergence in short-term interest rates in almost a year is making the euro a surprise addition to currencies used to finance investments in higher-yielding assets.

 

"The hot guys are moving into using the euro as a funding currency," said John Taylor, who helps oversee $US7.5 billion ($9 billion) as chairman of the New York-based FX Concepts LLC, manager of the world's largest foreign-exchange hedge fund. "It's not quite as cheap as the yen but it's a lot safer in a crisis, because the worse the world looks the worse the euro looks."

 

Borrowing in euros to finance an investment in the Australian dollar, New Zealand dollar, Brazilian real and Norwegian krone returned 10 per cent in the past six months.

 

The same trade using the US dollar resulted in a 7.5 per cent loss, and a 7.4 per cent decline with the yen.

 

Deteriorating economic prospects in the euro zone have helped push down the cost of short-term borrowing in Europe relative to the US.

 

The London interbank offered rate, or Libor, for three-month loans in euros fell to within about 14 basis points of the dollar rate on May 21, according to the British Bankers Association. Libor for loans in dollars for three months was 0.497 per cent at the end of last week, compared with 0.636 per cent for euros, it said.

 

The European Central Bank's main refinancing rate is 1 per cent.

 

Bloomberg

German Business Confidence Probably Increased to Two-Year High - BusinessWeek

German Business Confidence Probably Increased to Two-Year High - BusinessWeek

NIFTY LONG TERM BEARISH…………

Yes, rightly said by NTT in his book we human tend overestimate our skill, especially in the matter of judgment. Crisis of Greece has been started to affecting our equity market badly. Now in my view Nifty or any Asian market is going to underperform in the long term. The solid reason is, though our underline economy is strong, but at the end of the day demand of our asset class determines their price. And demand not only comes through domestic side, but in the globalized world money chases cheaper assets. The debacle in euro has created many opportunities to smart money, whether in short term speculation or long term investments in the Eurozone. The calculation is simple in euro zone all are weak but not Germany and France. Smart money has spotted the opportunity to invest in their asset class, because now they are cheaper due to huge depreciation of euro. Hot money is working there in two ways in speculation & investments both. Hence we are watching the pull out of FII's money from Indian market. Simply because now they are more risk averse, looking for better opportunity (Read Euro zone) and debacle in china's economy is about to happen. The asset bubble that Chinese has created is in matter of time of will bust whether suddenly or slowly. Long term bear market is set, definitely for about a year. rranjan27@gmail.com

 

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