Jim Rogers is interviewed on CNBC on the 9th of September 2011 where he discusses the possible Greek default and subsequent contagion risks to other PIIGS. He recommend to buy as much as Euro as you can after the crisis, as the Euro would be lower but be a stronger currency in the long term. Jump to 6:55 on the video below to listen to Jim Rogers.
Friday, September 9, 2011
David Morgan - The Currency Crisis Continues
David Morgan of http://www.silver-investor.com is interviewed by Stellaconcepts on the 8th of September 2011.
David Morgan explains the currency crisis continues (citing the Euro crisis) and that Gold is not in a bubble.
He also gives a possible target of 5000 USD for one ounce of Gold, but as he believes it's actually the fiat currencies that go down instead of Gold going up, he prefers to see the price of Gold in terms of ratio to the stock market or silver. He except the Gold to Silver ratio to return to its historical ratio of 16.
He is very bullish on Silver because of 3 reasons:
David Morgan explains the currency crisis continues (citing the Euro crisis) and that Gold is not in a bubble.
He also gives a possible target of 5000 USD for one ounce of Gold, but as he believes it's actually the fiat currencies that go down instead of Gold going up, he prefers to see the price of Gold in terms of ratio to the stock market or silver. He except the Gold to Silver ratio to return to its historical ratio of 16.
He is very bullish on Silver because of 3 reasons:
- There 66% less silver than during the 1980 bull market
- Back then, it was mainly a US market and now it's a global market
- Internet is there and allow people to quickly buy or sell
Wednesday, September 7, 2011
Jim Rogers: The Chinese yuan is the next safe haven currency.
Jim Rogers was interviewed on CNBC on Wednesday 7th September 2011 to discuss the recent move by the SNB (Swiss National Bank). Here are his views on the move and the Chinese yuan:
"The Swiss central bank's decision to set a limit on how much the Swiss franc can appreciate against the euro is "a huge mistake". The move will work for a while, but the market will have more money in the end than the SNB which risks losing a lot of money buying up lots of foreign currencies which they will eventually sell at a loss. Another risk is that the central bank will totally debase the Swiss franc trying to keep Switzerland 'competitive' which will then destroy the traditional Swiss financial industry. So this is a huge mistake for Switzerland since they are going to suffer more either way"
"RMB is best, the US dollar is probably good in the short term, but the absolute worst over the long term. There are various ways to get RMB exposure outside China, investors can now open bank accounts in renminbi in various cities like New York, San Francisco, Hong Kong, Singapore and others and can buy renminbi-denominated bonds in the international markets."
"The Swiss central bank's decision to set a limit on how much the Swiss franc can appreciate against the euro is "a huge mistake". The move will work for a while, but the market will have more money in the end than the SNB which risks losing a lot of money buying up lots of foreign currencies which they will eventually sell at a loss. Another risk is that the central bank will totally debase the Swiss franc trying to keep Switzerland 'competitive' which will then destroy the traditional Swiss financial industry. So this is a huge mistake for Switzerland since they are going to suffer more either way"
"RMB is best, the US dollar is probably good in the short term, but the absolute worst over the long term. There are various ways to get RMB exposure outside China, investors can now open bank accounts in renminbi in various cities like New York, San Francisco, Hong Kong, Singapore and others and can buy renminbi-denominated bonds in the international markets."
Tuesday, September 6, 2011
Consequences of a Euro break Up by UBS
UBS has written a 21-page report discussing the potential impacts of a Euro break-up.
It explains why the Euro should not exist as it is structured today and "simulate" break-up scenario (weak country leaves, strong country leaves...) and try to anticipate the possible consequences.
To conclude they answer the question "How should investors invest in case of a Euro break-up?" The answer:
You can read the report below.
xrm45126
It explains why the Euro should not exist as it is structured today and "simulate" break-up scenario (weak country leaves, strong country leaves...) and try to anticipate the possible consequences.
To conclude they answer the question "How should investors invest in case of a Euro break-up?" The answer:
The only way to hedge against a Euro break-up scenario is to own no Euro assets at all.
You can read the report below.
xrm45126
CHF is now effectively pegged to Euro at 1.20
In a dramatic move, the SNB has decided to put a floor on the price of the CHF vs Euro, a floor at 1.20 CHF per Euro. This is a defacto peg to the Euro as the Swiss franc is unlikely to decline and this resulted in a massive 8% move in the Swiss Franc / Euro exchange rate a massive move (probably unheard of) in the currency markets. (See chart below. Source: Yahoo Finance)
Another battle has been fought in the currency war and the Swiss Franc is no longer a safe heaven. There remains the Yen (but I wonder why) and possibly the Singapore dollar (SGD) which appreciated around 6% against the USD since the beginning of the year. Of course, there is still gold and silver which should remain the real safe heavens.
Another battle has been fought in the currency war and the Swiss Franc is no longer a safe heaven. There remains the Yen (but I wonder why) and possibly the Singapore dollar (SGD) which appreciated around 6% against the USD since the beginning of the year. Of course, there is still gold and silver which should remain the real safe heavens.
Monday, September 5, 2011
Marc Faber: The Euro Will Survive
Marc Faber was asked the question "What is your take on the future of the Euro ?" on Bloomberg Radio (August 2011) and answered:
I think it will survive... but the question is: will it survive as a Euro of France and Germany and maybe 2 or 3 other countries, and the other countries will leave, or will it survive as a Euro of the weak countries and Germany will leave? This is the big issue.
Sunday, September 4, 2011
China purchases Gold to undermine the US Dollar
Zero Hedge has reported on one of the recent Wikileaks cables where China explains its view on Gold in that it helps it undermine the role of the US dollar as the reserve currency and would help internationalizing the RMB .
So now let's assume that China bring the level of its gold reserve to the same levels as developed countries.
As you can see from the Wikipedia table above, as of December 2010, China only had 1.7% of its foreign currency reserve in Gold, and to reach the level developed countries this would have to reach around 60 to 70 %. Let's say China forex reserves are now 3 trillions USD, it would need 2 trillions USD worth of Gold. At today's price (1880 USD per ounce ~ 66,000 USD per kilogram), it would represent around 30,300 tons of gold. To put that in perpective, a total of 165,000 tons of gold have been mined in human history, the total amount of Gold the USA hold is 8133,5 and the amount of Gold helf by the SPDR Gold Shares ETF is 1239 (May 2011).
So the Gold price would have to go much higher if China decided to convert 2/3 of it forex reserves. This would be a process taking several years (or maybe decades) , and China would finally need to hold less than 30,300 tons of Gold, as the Gold price would go up.
If the US, Europe, Japan or Great Britain experience massive inflation or even hyperinflation, the Gold reserve required by China to reach 2/3 of forex reserves would also decrease.
One last point, that is not directly related to China: Pension funds in the US currently hold around 0.3% of their assets in Gold bullion and gold mining shares whereas the historical norm during between 1960 and 1980 was around 5% and it went to 20% during the Gold bubble in 1980.
3. CHINA'S GOLD RESERVES
"China increases its gold reserves in order to kill two birds with one stone"
"The China Radio International sponsored newspaper World News Journal (Shijie Xinwenbao)(04/28): "According to China's National Foreign Exchanges Administration China 's gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the U.S. and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold's function as an international reserve currency. They don't want to see other countries turning to gold reserves instead of the U.S. dollar or Euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB."
So now let's assume that China bring the level of its gold reserve to the same levels as developed countries.
Rank | Country/Organization | Gold
(tonnes) | Gold's share
of national forex reserves (%)[10] |
|---|---|---|---|
| - |  Eurozone | 10,792.6 | 60.7% |
| 1 |  USA | 8,133.5 | 74.7% |
| 2 |  Germany | 3,401.0 | 71.7% |
| 3 | IMF | 2,846.7 | - |
| 4 |  Italy | 2,451.8 | 71.4% |
| 5 |  France | 2,435.4 | 66.1% |
| 6 |  China | 1,054.1 | 1.7% |
As you can see from the Wikipedia table above, as of December 2010, China only had 1.7% of its foreign currency reserve in Gold, and to reach the level developed countries this would have to reach around 60 to 70 %. Let's say China forex reserves are now 3 trillions USD, it would need 2 trillions USD worth of Gold. At today's price (1880 USD per ounce ~ 66,000 USD per kilogram), it would represent around 30,300 tons of gold. To put that in perpective, a total of 165,000 tons of gold have been mined in human history, the total amount of Gold the USA hold is 8133,5 and the amount of Gold helf by the SPDR Gold Shares ETF is 1239 (May 2011).
So the Gold price would have to go much higher if China decided to convert 2/3 of it forex reserves. This would be a process taking several years (or maybe decades) , and China would finally need to hold less than 30,300 tons of Gold, as the Gold price would go up.
If the US, Europe, Japan or Great Britain experience massive inflation or even hyperinflation, the Gold reserve required by China to reach 2/3 of forex reserves would also decrease.
One last point, that is not directly related to China: Pension funds in the US currently hold around 0.3% of their assets in Gold bullion and gold mining shares whereas the historical norm during between 1960 and 1980 was around 5% and it went to 20% during the Gold bubble in 1980.
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