Report on Asian Markets and Asian Currency
Summary Report For Full Version: investor1.com and click on EGS Newsletter
ASIAN MARKETS
For the moment anyway, the situation in Asia appears to have stabilized with the rolling over of short term debts to
South Korean banks and corporations led by U.S. banks. However the situation is as least as serious as we guessed it
was in our last issue.
We are witnessing currency and equity devaluations unheard of since the last Great Depression in the 1930's. It's a
classic crisis of confidence not only in the currencies but in political leadership of these countries. Initial reaction from
these autocrats was especially worrisome, ranging from complete denial (blaming George Soros for their own overvalued
currencies, corruption and cronyism) to audacity ("don't worry about reforms IMF, just send us the money").
Coincidentally, elections held or about to be held in most of these countries will hold the key to the success or failure of
reforms, and an end to the crisis. In any case we should expect to see double digit inflation and a sharp slowdown in
growth or recessions in most of these countries this year, and social upheaval places like Indonesia, South Korea,
China and others. Considering the region was responsible for 55% of world economic growth this past decade, this
should have a strong impact on world trade and the threat of global deflation will continue this year.
As for the Dow, a large top appears to have formed around 8,200. Even if the index were to crack this level and make
new highs, we can't imagine a fourth consecutive year of 20% gains for the Dow considering the impact the Asian
slowdown will have on corporate earnings.
GOLD BULL MARKET ALREADY UNDERWAY IN ASIAN CURRENCIES
Gold enters the new year with several reasons to start getting us optimistic. For one, the price has already moved up
sharply in terms of the Asian currencies. Since June, gold is up 95% in S. Korean won, and 75% in Thailand, with the
bulk of these gains occurring in just three trading days in late October/early November. This should start occurring to
investors exposed to other vulnerable currencies.
It has also occurred to me that depending on how far the crisis in Asia goes, it may only be a matter of time before the
currencies of the countries bailing them out (namely the G7 countries led by the U.S.) start to resemble the currencies
of the Asian countries. This, and or a combination of Japan starting to repatriate some of the U.S. bonds it holds could
sooner or later hit - dare I say it - the Almighty U.S. dollar. Need I say what gold would do if the world were to be
shocked by a weaker dollar?
Finally, sooner or later in the year, the countries involved with the crisis are going to start up the printing presses to print
more currency to reflate their shattered economies. The first half of the crisis will be deflationary - part two will be
inflationary, and a positive for gold longer term. |
