This is the weekly commentary for clients of BH Global Advisers S/B, by YH Wong.
It is easy to see that the great economies around the world especially in the West are getting worse in real terms despite the blackout in mainstream financial media. It is very simple. If you are seeking for another political term or want to avoid panic in the streets, nobody wants to admit the truth to frighten the stupid voters.
Packed shopping malls or rising stock markets can no longer be used as reliable indicators for any economies. Rising stock markets are merely responding to money printing. What the bonds are signaling to us is a tougher condition in the coming months, something that even self-serving central banks have very little cure for. The shills who have anticipating a clear recovery will be disappointed. The silly gloom and doomers who have been predicting a total collapse will also get it wrong.
We have been taught by the gloom and doomers that as the West declines, the developing world becomes stronger. They are predicting that Asia will “Gangnam (style)” the world one day and the US will be flushed down the toilet. No doubt such a persistent promotion by the snake oil salesmen on Wall Street and political elites with a certain agenda will create business and investment opportunities but in real economic sense, this is not going to happen. In interconnected world, medium to long-term investors should never abandon the West and put all their bets on developing markets. To engage in a heated debate with those who like to make fun of others with their extreme views is a collossal waste of time.
The world is not going to see renewed economic vitality any time soon. Some governments will continue to fudge numbers to maintain confidence. Statistically, we sense stabilization on the horizon in some economies in Asia with growth approaching the bottom range. The prospects for these economies will be more or less stuck for the rest of the year although inflation will pick up. Well, this should enable you to sleep a little “better”.
The key issue to watch for is politics. Traders are sitting on the sidelines ahead of the presidential election, worrying that there could be a surprise Romney win. A victory for Romney would end QE. The wild card is Bernanke will probably quit even if Obama is re-elected. This author hates Obama.
Markets are consolidating looking to retest support levels and volatility is not going up. Investors and traders have
also been taking profit to secure their jobs before the year ends, ignoring the QE3 trade. In meetings, more people are
asking how the US is going to deal with the “fiscal cliff”. We prefer to take a longer-term view at this juncture. This is not the time to jump with both feet for both long and short trades. The yellow metal’s recent weakness did not surprise us. We will continue to accumulate gold on weakness in a trading range we have identified. We are still hanging on to our other plays while others especially the greedy housewives starting to lose their heads.