Thursday, February 11, 2016

GOLD @$1500 /OUNCE...NIFTY MORE PAINS...GLOBAL ECONOMY MORE TO SLOWDOWN

Gold prices have started rising since this is not only the safe heaven assets but also saver of these times. Please don’t forget that Bond Yields Are ZERO and tocks are falling. There is no reason for stocks across the globe to rise as there are hardly any macro factors to support the same. Further we witness that Banks across US and Europe are in trouble similar to subprime crisis where they hold these OIL bonds where they are no buyers. Best place to invest before it melts away is Gold.  Gold will find more limelight as Dividend payouts across the globe have come down significantly and will come down further next to ZERO. If we look at the chart we find that dividend payouts are declining. 

 Hence gold is safe heaven. It might climb $1500/ounce or can create new historic highs. If we look at the demand and consumption pattern of Gold in China we get clear understandings WHERE Gold will be heading.  Gold was silently building ups its market and demand. A quick look at the numbers reveals the story where sales of American Eagle gold bullion coins reached 124,000 ounces in January, up 53 percent from a year ago. And last year at the Austrian Mint, one of Europe’s largest, consumers bought up 1.75 million coins, four times the volume sold in 2008 before the financial crisis

 Stock Markets across the globe will fall dramatically as Investors are more cautious and redemption trigger have been pressed from all angles of investments. Asian Markets remained mostly closed hence their opening up on Monday 15th will create massive sell off. Toxic trades and asset class exchange did not stop even after 2008 recession. Greed is more powerful than bear and Bull. This is well proved. Nifty will find some more pains as global markets and particularly Asian markets are yet to react properly. Further Indian banks are under pain and we are waiting for more plunge so that when during Budget they inject funds into the banking system through Budget banks will fetch good returns. The strategy is clear and we are all awaiting for the same. Don’t blame SBI it alone books are clear ,the burden which its carry is the merger of all those banks over the last 10 years which have been executed under UPA 1 and 2. Nifty will get more pressure from the winding up of Margin funding story which is yet to be taken into account.

Sovereign Funds are getting liquidated and the recent testimony of US FED CHIEF that she is not in hurry for interest rate hikes has spooked alarms that it’s better to exit sovereign funds and invest in their own economies from where the funds belongs. Rupee is also working according to its destiny during these times. In between European banking new rules are yet to be implemented as they took 1 year time to implement the same which was passed in 2015. Hence again tax payers funds will be used to save the European Banks and that what they wanted. Bank Recovery and Resolution Directive, the legislation is yet to be implemented. Further many banks and industries will be freezing up pay hikes and more job cuts might come up which will decline the consumption pattern of the global economy. This might not be an appropriate time to speak these but truth is just like Sun. The biggest pain will be cut down in global investments to the tune of $300 to 400 billion dollars. This will be have a significant effect on the global economy altogether. It’s a liquidity crisis and it has just began.

Coming to crude there is hardly any chances apart from a war to lift the prices. I don’t know how much trust to be relied on the news that Saudi and Iran and Russia are coming together for crude production cut down to lift up prices but Iran is already stated delivery of its crude to many countries. A tanker chartered by Glencore loaded 80,000 metric tons of fuel oil on Friday and is bound for Singapore, according to Thomson Reuter’s ship tracking data. Iran has aggressive plans of raising more than $40 billion of foreign investments for its oil industry. Well the world is also looking forward for viable projects to invest and that crude looks lucrative as well as negative. Japan is going to receive its crude shipment by the end of this week from Iran. Vitol Group brought crude from Iran. In between as I repeated told in my previous mails that Junk Bond Market of crude will explode its has happened this time with European banks. Wells Fargo CFO John Shrewsberry highlighted the bank's $42 billion in total oil and gas credit in his presentation at the conference; 41 percent ($17.4 billion) is already outstanding.

European banks are defaulting and the crisis is going to be havoc. It might be the begging of another asset class bubble burst which will drag the world economy and market into deep red or recession. I am adding fuel to the fire but I am trying to figure out where the plunge will end.  Bank of America's total energy credit exposure amounts to $43.8 billion, but more than $21 billion of that has already been funded. Morgan Stanley has thus far funded about 30 percent of its $16 billion exposure to energy credit. Banks credits and their exposure is just going to take a toll on the global economy and more on tax payers funds. In between Sweden has moved into negative interest rates to 0.50% from negative 0.35%. Toxic and junk bonds are just getting. If we look at the historical numbers we find that the oil industry had $455bn of bonds outstanding in 2006, which increased to $1.4tn by 2014, according to the Bank for International Settlements (BIS). Oil companies had $1.6tn of syndicated loans in 2014. The point of default is that investors will not get back their funds. For example according to Moody $2tn of bonds had been issued by mining companies since 2010. They are now rated as junk and their market is collapsing. Hence tax payers funds and banks will have to inject liquidity into the system. A company named Glencore, which has $36bn of net debt and a market value of $20bn. Its size might be high as $100bn. 


Only advice STAY AWAY FORM STOCK S.GET ALL IN CASH. Buy large caps and avoid margin trades.

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