Excellent article by Roach, but that's the norm. Note also
the interesting article (1st of 2) by Jen, on currencies. His bottom line:
The USD is still grossly overvalued, in my view. We have reported that the size of the misalignment is around 15-20%. But valuation is a ‘stock’ concept. To complement the valuation calculations, we revive a ‘flow’ based calculation to assess the size of the USD correction needed to normalise the C/A deficit. With the assumption that the long-run sustainable C/A deficit is around 2.5% of GDP, rather than the current 5.0%, and assuming that the US and the rest of the world revert back to more reasonable growth rates rather than what we witnessed in the late-1990s, the USD, we calculate, will need to correct by a little more than 20%. This figure is in the same ballpark as the size of the misalignment we computed. The larger the fiscal stimulus, the larger the C/A deficit, and the larger the USD correction necessary to normalise this balance.
I suspect that most people won't seriously consider buying gold or gold stocks until they connect US$ weakness to the price rises in things they have to have, or are used to buying. That's a ways off, except for energy (a supply/demand story), and meanwhile the dollar may correct up. There remains time to place your bets. I'm much closer to being a gold stock seller than a buyer here, at least with my producers as opposed to junior explorers. |
