Gold Gains in New York to Narrow Biggest Monthly Drop Since June

Gold gained in New York, trimming the biggest monthly drop since June, as signs of physical purchases countered speculation for less U.S. stimulus. Silver narrowed the biggest monthly drop since June.

Gold futures fell toward a 34-month low of $1,179.40 an ounce set in June after Federal Reserve minutes released on Nov. 20 signaled policy makers expected an improving economy to warrant trimming debt purchases in coming months. U.S. data this week showed jobless claims unexpectedly fell and leading economic indicators rose for a fourth month.

Bullion is set for the first annual drop in 13 years as some investors lost faith in the metal as a store of value. Data showed this week China’s net gold imports from Hong Kong climbed to the second-highest level on record in October, while volumes for the nation’s benchmark spot contract rose to a seven-week high yesterday.

“Physical demand is solid, but not bullish enough to spark significant short-covering,” Victor Thianpiriya, an analyst at Australia & New Zealand Banking Group Ltd. in Singapore, wrote today in a report, referring to closing bets on bearish wagers. “Market sentiment remains less than encouraging.”

Bullion for February delivery rose 1.1 percent to $1,252.10 by 7:45 a.m. on the Comex in New York. U.S. markets were closed for Thanksgiving yesterday and electronic transactions will be booked today. Prices slid 5.4 percent this month, the most since June, and reached $1,226.40 on Nov. 25, the lowest since July 8. Gold for immediate delivery gained 0.7 percent to $1,252.68 in London.

Futures Trading

Futures trading volume was 47 percent above the average for the past 100 days for this time of day, data compiled by Bloomberg showed.

China’s net gold imports from Hong Kong were 129.9 metric tons last month, government data showed. Imports were a record 130 tons in March. Volumes for bullion of 99.99 percent purity traded on the Shanghai Gold Exchange climbed to the most since Oct. 8 yesterday.

Silver futures for March delivery gained 1.6 percent to $20.005 an ounce in New York. The metal is set for a first weekly gain in five, cutting its monthly decline to 8.5 percent, still the largest since June.

Palladium futures for March delivery rose 1.1 percent to $723.95 an ounce, and heading for the first monthly decline in three. Platinum for January delivery climbed 1 percent to $1,336.70 an ounce. It’s set for a monthly loss and fell to $1,351 this week, the lowest since July 8.

Abe No Friend to Emerging Bonds as Nikkei Jumps Most Since 1972

Emerging-market bonds are losing their allure among Japanese investors as Prime Minister Shinzo Abe’s stimulus policies drive the biggest domestic stock rally in four decades.

Investors in the world’s third-largest economy bought a net 1.8 trillion yen ($18 billion) of debt in Asia, Latin America, Africa, Eastern Europe and Russia during the first nine months of 2013,Ministry of Finance data show. That is less than half the amount purchased in each of the last three years and is on course to be the smallest annual total since 2009.

Enlarge image

Shinzo Abe, Japan's prime minister in New York. Since Abe took office on Dec. 26, the Nikkei 225 Stock Average has gained 53 percent and is set for the biggest yearly advance since 1972. Photographer: Scott Eells/Bloomberg

5:29

Nov. 28 (Bloomberg) -- Mohammed Apabhai, head of Asia trading strategy at Citigroup Inc. in Hong Kong, talks about Japan and China's stock markets and his investment strategy. He speaks with Angie Lau, Rishaad Salamat, Zeb Eckert and Mia Saini on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

5:23

Nov. 25 (Bloomberg) -- Binay Chandgothia, managing director and portfolio manager at Principal Global Investors in Hong Kong, talks about global financial markets and his investment strategy. Chandgothia also discusses the prospects for the U.S. economy and the implications for global growth. He speaks with Angie Lau on Bloomberg Television's "First Up." (Source: Bloomberg)

“Sales of emerging-market bond funds, which used to be quite popular, have been sluggish,” said Koya Iwabuchi, Tokyo-based general manager of the Investment Trust Marketing Group No. 1 at DIAM Co. Ltd., which oversees 11.8 trillion yen, said in an e-mail interview on Nov. 25. “We introduced two active funds on Japanese equities in May” to meet a pickup in demand for the products, he said.

Since Abe took office on Dec. 26, the Nikkei 225 Stock Average (NKY) has gained 53 percent and is set for the biggest yearly advance since 1972. So-called Abenomics, a mix of fiscal and monetary policies aimed at spurring growth and ending 15 years of deflation, weakened the yen 15 percent this year to the benefit of exporters including Toyota (7203) Motor Corp. andPanasonic (6752) Corp. The measures come just as the U.S. is preparing to rein in stimulus that fueled a flow of funds into developing nations, driving their borrowing costs to a record low in May.

Bond Losses

Local-currency notes of developing nations have already lost a record 8.4 percent this year in dollar terms, JPMorgan Chase & Co.’s GBI-EM Global Diversified Index shows.

To revive an economy that’s averaged 0.6 percent growth in the past 15 years, Abe announced a 10.3 trillion-yen spending boost in January. In April, Haruhiko Kuroda, his handpickedBank of Japan governor, doubled monthly bond purchases to more than 7 trillion yen in an effort to deliver a 2 percent inflation rate in about two years. Consumer prices excluding food and energy increased 0.3 percent from a year earlier in October, the most in 15 years, data showed today.

Toyota’s shares have climbed 59 percent this year, set for the biggest advance since 1999. Asia’s biggest carmaker raised its net income forecast this month by 13 percent for the year ending March 2014. Panasonic, Japan’s largest consumer-electronics maker by market value, doubled its profit estimate last month and the shares have surged 125 percent, headed for the best annual gain on record.

Carry-trade returns using the yen as a funding currency dropped in the second half of this year from the first and Japanese money managers have cut holdings of local debt in developing nations. The trades involve borrowing funds in countries with low interest rates and investing the money in higher-yielding assets elsewhere.

Carry Trades

Benchmark five-year bonds yield 0.17 percent in Japan, compared with 12.48 percent in Brazil, 4.69 percent in Mexico, 9.2 percent in Turkey and 7.91 percent in Indonesia, according to data compiled by Bloomberg. The developing countries’ bond markets are the four most popular with Japanese investors.

Yen-funded carry trades involving purchases of Brazilian real returned 3 percent to investors since June, down from 7.9 percent in the first half, data compiled by Bloomberg show. Returns for the Mexican peso fell to 3.5 percent from 16 percent, while for the Turkish lira the gain shrank to 2.1 percent from 9 percent. Indonesia’s rupiah swung to an 11 percent loss from a 14 percent return.

Less Outflows

“If you are a Japanese investor, why would you want to put your money overseas to pick up marginal yields with far higher risks when actually you’ve got much stronger performing domestic markets with no foreign-exchange risk,” Simon Derrick, the London-based chief currency strategist at Bank of New York Mellon Corp., the largest custody bank with $27.4 trillion under administration, said in an interview in Singapore on Nov. 21. “There is less sign of outflows from Japan than there has been in times past.”

Assets in the DIAM Japan Value Equity Fund increased about 27 billion yen this year to 33 billion yen, according to data provided by the company. Those in the DIAM Emerging Sovereign Open Class (BRL), which invests in the dollar-denominated bonds issued by developing nations and convert the proceeds into Brazilian real, saw assets drop about 35 billion yen to 98 billion yen.

Japanese holdings of Brazilian debt fell 19 percent this year to 1.22 trillion yen in October and reached 1.14 trillion yen in August, the lowest since November 2009, according to theInvestment Trusts Association of Japan. Ownership of Mexico’s debt dropped 17 percent to 252 billion yen from a record 305 billion yen in May, while that for Turkey’s declined 16 percent to 138 billion yen from a peak of 165 billion yen in May. Holdings of Indonesia’s slid 20 percent to 123 billion yen since reaching a record 154 billion yen in May.

Yields Rising

The yield on developing nations’ local-currency bonds reached a record-low 5.16 percent on May 9 and has since surged 163 basis points, or 1.63 percentage points, to 6.79 percent as of Nov. 28, JPMorgan GBI-EM Global Diversified Composite Yield to Maturity index showed. The 10-year U.S. Treasury yield rose 93 basis points to 2.74 percent in the same period.

Japanese funds may step up purchases of emerging-market debt in the second half of 2014 as developing nations’ borrowing costs rise in tandem with U.S. yields, Vishnu Varathan, a senior economist at Mizuho Bank Ltd. in Singapore, said in a phone interview on Nov. 26.

“Japanese investors are looking for more attractive levels to get in,” he said. “We are still looking at a very gradual and modest recovery” for the developing world next year, Varathan said.

Growth Outlook

Emerging economies will expand 4.5 percent this year and 5.1 percent in 2014, the International Monetary Fund predicted on Oct. 8. Growth in developed nations is forecast to quicken to 2 percent from 1.2 percent.

About $10 billion, or 3.2 percent of assets under management, have been taken out of emerging-market debt funds this year, including $37 billion since May, Rashique Rahman and Vandit Shah, New York-based analysts at Morgan Stanley, said in a Nov. 26 report.

Japanese investors will continue to look overseas for investments, though are likely to cut purchases of higher-yielding securities, according to Takahide Irimura, the Tokyo-based head of emerging-market research at Kokusai Asset Management Co., which manages $37 billion, said in a Nov. 27 phone interview.

“Fund flows to emerging-market bonds will be more selective than before, and massive inflows into broad emerging-market bond markets will not be repeated until we get a clearer picture of U.S. monetary policy,” he said.

Factory Workers of the World, Compete!

GREETINGS from Shenzhen, China, writes Steve Sjuggerud in his Daily Wealth.

 

If you're an American, I have some big news for you...

 

China is no longer the source for cheap labor in the world.

 

The brutal reality is, China simply can't compete on price going forward.

 

For most Americans, that news will come as a shock. So let me explain. First, a little background...

 

I first visited Shenzhen in 1996. At the time, the American view was that China was full of sweatshops...where Chinese workers earned just $50 a month, working in terrible conditions at unsafe factories.

 

But once I saw things for myself in China, I learned that the reality was much different.

 

The first company I visited in 1996 in Shenzhen was Konka Electronics. I was amazed.

 

Most of the workers at Konka had actually traveled hundreds or even thousands of miles to take that job. And at the end of the month, they sent most of their paycheck back home. They didn't have many expenses, since food and accommodations were included in their pay.

 

Even better, Konka's factory was so clean, you could have eaten off the floors. Konka's operation was modern, and working conditions seemed excellent – a far cry from the American image of "sweatshops".

 

At Konka, factory workers earned about $100 a month. Of course, $100 a month sounds terrible by US standards. But the reality was, in 1996, $100 a month was a lot more than the $2 or $3 a month they could have earned back home on the farm. It was worth it to travel to Shenzhen to work for Konka.

 

Fast-forward to today...and my, how things have changed in Shenzhen!

 

The pay for factory workers has soared. (More on that in a minute.) And the city's population has exploded, from 1 million in 1990 to over 10 million today.

 

I thought that huge population explosion would mean chaos – a city bursting at the seams.

 

The reality is much different. Here's Shenzhen...through my car window...in 2013:

 

 

Somehow, they pulled it off. It seems the Chinese managed the growth of Shenzhen pretty darn well.

 

The highways are nicer than at home. The skyscrapers are nicer than at home (and they go on for miles and miles). Heck, even the country clubs are nicer than at home!

 

We ate lunch at the Mission Hills country club. Check it out:

 

 

I can tell you, the Chinese have studied the best of what the Americans have done – and they have copied it well (with Chinese characteristics, of course). I urge you to check out Mission Hills for yourself.

 

My host on this trip was Peter Churchouse of the Asia Hard Assets Report. Peter has lived in Hong Kong for the last 35 years and is one of the top investment guys in Hong Kong.

 

Peter arranged for us to visit a clothing factory in Shenzhen. My expectations were already high. But I was shocked by the quality of the factory and the quality of the products...

"We HAVE to compete on quality," the factory manager explained. "We have no choice."

What did he mean? He went on to say...

"I can't compete with Bangladesh. We pay our factory workers $600 a month. In Bangladesh, the pay is closer to $60 a month. How can we compete on price with that?

 

"We only produce high-end clothing brands here, and we have close working partnerships with them."

We saw the brands he produced at his factory...and they were MOST of the high-end men's clothing brands in America. (Yes, MOST of them.) I asked if we could take pictures. He said we could take pictures of anything, but he asked us to leave out the labels.

 

So here's a look inside his Chinese factory today for you. This picture shows the final assembly of one type of shirt...The guy on the left irons the shirt, the girl on the right folds it:

 

 

It isn't glamorous work. But working conditions looked pretty good – way better than working in America washing dishes at a restaurant, for example.

 

Employees seemed pretty happy. They were chatty and smiling on their way to lunch. In general, they behaved like clean-cut Americans in their early twenties. (The manager told us the average employee age is about 25.)

 

Looking ahead, the factory manager explained to us that China has no chance at competing on cost in the future...

 

Bangladesh and Vietnam have China beaten on price, he explained, and Africa could become a low-cost producer in maybe 20 years. The issue in those places, he explained, will be human rights. They are poor countries.

 

Shenzhen, China on the other hand, is just as modern as any city in America. Don't get me wrong. I wouldn't want to live here. I love where I live in Florida. But I'd be a blind fool not to admit what I saw with my own eyes...

 

Look, China is way more advanced than you think...Americans don't know this, and they are underinvested.

 

In my newsletters, we are heavily invested in China and emerging markets. Based on this trip so far, I am extremely happy with those positions.

Stock Market Madness

VALUATION," writes David Merkel, "is rarely a sufficient reason to be long or short the market," says Tim Price on his Price of Everything blog.

"Absurdity is like infinity. Twice infinity is still infinity. Twice absurd is still absurd. Absurd valuations, whether high or low, can become even more absurd if the expectations of market participants become momentum-based. Momentum investors do not care about valuation; they buy what is going up, and sell what is going down."

Merkel went on to warn, "you will know a market top is probably coming" when...

1. Short sellers are "killed. You don't hear about them anymore." Anyone investing in short-only funds suffers "general embarrassment";
2. Long-only managers "are getting butchered for conservatism". Merkel cites early 2000, when Julian Robertson, George Vanderheiden, Robert Sanborn, Gary Brinson and Stanley Druckenmiller all quit "shortly before the market top";
3. Value investors start to accumulate cash. "Warren Buffett is an example of this," says Merkel. "When Buffett said that he 'didn't get tech,' he did not mean that he didn't understand technology; he just couldn't understand how technology companies would earn returns on equity justifying the capital employed on a sustainable basis.";
4. Growth managers beat value managers. Because, "in short, the future prospects of firms become the dominant means of setting market prices.";
5. Momentum strategies "are self-reinforcing due to an abundance of momentum investors...Actual price volatility increases. Trends tend to maintain themselves over longer periods," and sell-offs are quickly recovered;
6. Markets start to "favour inexperienced investors," who simply follow the trend. Merkel's favourite sign is to check CNBC and "gauge the age, experience and reasoning of the pundits. Near market tops, the pundits tend to be younger, newer and less rigorous." More experienced investors instead expect reversion to the mean.

Notwithstanding Merkel's caveat about pricing, valuations still matter.

 

Assuming that one is investing as opposed to speculating, initial valuation remains the single most important characteristic of whatever one elects to buy. And at the risk of sounding like a broken record, "initial valuation" in the US stock market is at a level consistent with very disappointing subsequent returns, if the history of the last 130 years is any guide. Without fail, every time the US market has traded on a CAPE ratio of 24 or higher over the past 130 years, it has been followed by a roughly 20 year bear market

 

The evidence for the prosecution is visible below, for the peak years 1901, 1929, 1966 and 2000. And 2013? Of course, this time might be different.

 

 

But there is the stock market, and then there are individual stocks. We have no interest in the former, but plenty of interest in the opportunity set of the latter. We're just not that interested in the US market, given general valuation concerns, and the malign role of Fed policy in distorting the prices of everything. As purists and unashamed value investors, we have plenty of other fish to fry.

 

Probably the biggest of those fish is that giant part of the world economy known as Asia. The chart below shows the anticipated growth in numbers of the middle class throughout the world over the next two decades.

 

The solid green circle is the current middle class population (or as at 2009 to be precise); the wider blue-fringed circle represents the forecast size of this population in 20 years' time. The OECD definition of middle class is those households with daily per capita expenditures of between $10 and $100 in purchasing power parity terms. 

 

Note that in the US and Europe, the size of the middle class is barely expected to change over the next two decades. Central and South America, and the Middle East and North Africa, are forecast to grow a little. But one area stands out: the emerging middle class in Asia is forecast to explode, from roughly 500 million to some 3 billion people. 

In equity investing, the combination of a compelling secular growth story and compellingly attractive valuations is a very rare thing, the sort of investment opportunity that one might only see once or twice in a generation, if that. But it exists, here in Asia, today. Once again, however, we have to abandon conventional financial thinking in order to exploit it. 

 

Asian personal consumption between 2007 and 2012 – while the West was suffering from a little localised financial crisis – grew by 5% to 10% per annum. Industries likely to benefit from sustained growth in domestic consumption include food and beverages, clothes, cars and insurance.

 

But the index composition of Asian equity index benchmarks leaves much to be desired. Of the 10 largest companies in the MSCI Asia ex-Japan index, three are low margin exporters in Korea and Taiwan, one is a low margin Chinese telecoms business, three are state-run Chinese banks, one is an inefficient Chinese oil and gas producer, and one is an expensive Chinese internet business. 

 

That doesn't leave much for value investors to go on. Asian equity funds more generally, tending to be index-trackers, are heavy in Chinese stocks of indeterminate value and clunky 'old Asia' exporters with far too much research coverage. 

 

Or one can ignore index composition ('yesterday's winners') entirely and focus instead on 'best in breed' businesses throughout the region on an unconstrained basis. Which is exactly what Greg Fisher's Halley Asian Prosperity Fund does. Stocks that make it into this tightly defined portfolio typically have historic returns on equity of 15% or higher, a history of dividend growth, little or no debt, price / book ratios of 1.5x or less, and price / earnings ratios ideally in single digits (its average p/e stands at around 8x). As Greg puts it, amid a world of worries, "keeping the discipline of holding lowly valued, under-owned and unleveraged companies is likely to continue to protect our capital and earn us both income and capital appreciation over the longer term."

 

In terms of macro analysis, this interview with CLSA's Russell Napier is one of the best we've heard this year, concisely addressing many of the major current concerns we really should be worried about, including the rising risk of emerging markets exporting deflation to the West, the next stage of government abuse of markets including the formal rationing of credit, and the growing attraction of gold (as a deflation and inflation hedge) at its current price.

 

On which topic, David McCreadie of Monument Securities suggests that "if gold is driven down to $1030, and there will be a lot of noise if it does, I think it will offer a very unusual and highly profitable P & L opportunity, both in the physical but especially in the mining shares. Upside of x 5-10 doesn't come along very often and it's definitely one for the SIPP and the kids' education fund. 

 

Nonetheless if you own it here or above then I think you take the pain in this final phase. Nor do I believe shorting is sensible; the main money has been made on the short side and in these metals, the biggest and most explosive profit potential is always on the upside." 

 

Or to put it more plainly, and in the words of Warren Buffett, price is what you pay; value is what you get. US stocks may be expensive, but you can get better economic fundamentals and cheaper valuations selectively throughout Asia. And as insurance against the sort of disorderly currency moves that seem to be almost inevitable courtesy of so many central banks behaving badly, we still maintain you can't do better over the medium term than gold.

Stock Market Madness

VALUATION," writes David Merkel, "is rarely a sufficient reason to be long or short the market," says Tim Price on his Price of Everything blog.

"Absurdity is like infinity. Twice infinity is still infinity. Twice absurd is still absurd. Absurd valuations, whether high or low, can become even more absurd if the expectations of market participants become momentum-based. Momentum investors do not care about valuation; they buy what is going up, and sell what is going down."

Merkel went on to warn, "you will know a market top is probably coming" when...

1. Short sellers are "killed. You don't hear about them anymore." Anyone investing in short-only funds suffers "general embarrassment";
2. Long-only managers "are getting butchered for conservatism". Merkel cites early 2000, when Julian Robertson, George Vanderheiden, Robert Sanborn, Gary Brinson and Stanley Druckenmiller all quit "shortly before the market top";
3. Value investors start to accumulate cash. "Warren Buffett is an example of this," says Merkel. "When Buffett said that he 'didn't get tech,' he did not mean that he didn't understand technology; he just couldn't understand how technology companies would earn returns on equity justifying the capital employed on a sustainable basis.";
4. Growth managers beat value managers. Because, "in short, the future prospects of firms become the dominant means of setting market prices.";
5. Momentum strategies "are self-reinforcing due to an abundance of momentum investors...Actual price volatility increases. Trends tend to maintain themselves over longer periods," and sell-offs are quickly recovered;
6. Markets start to "favour inexperienced investors," who simply follow the trend. Merkel's favourite sign is to check CNBC and "gauge the age, experience and reasoning of the pundits. Near market tops, the pundits tend to be younger, newer and less rigorous." More experienced investors instead expect reversion to the mean.

Notwithstanding Merkel's caveat about pricing, valuations still matter.

 

Assuming that one is investing as opposed to speculating, initial valuation remains the single most important characteristic of whatever one elects to buy. And at the risk of sounding like a broken record, "initial valuation" in the US stock market is at a level consistent with very disappointing subsequent returns, if the history of the last 130 years is any guide. Without fail, every time the US market has traded on a CAPE ratio of 24 or higher over the past 130 years, it has been followed by a roughly 20 year bear market

 

The evidence for the prosecution is visible below, for the peak years 1901, 1929, 1966 and 2000. And 2013? Of course, this time might be different.

 

 

But there is the stock market, and then there are individual stocks. We have no interest in the former, but plenty of interest in the opportunity set of the latter. We're just not that interested in the US market, given general valuation concerns, and the malign role of Fed policy in distorting the prices of everything. As purists and unashamed value investors, we have plenty of other fish to fry.

 

Probably the biggest of those fish is that giant part of the world economy known as Asia. The chart below shows the anticipated growth in numbers of the middle class throughout the world over the next two decades.

 

The solid green circle is the current middle class population (or as at 2009 to be precise); the wider blue-fringed circle represents the forecast size of this population in 20 years' time. The OECD definition of middle class is those households with daily per capita expenditures of between $10 and $100 in purchasing power parity terms. 

 

Note that in the US and Europe, the size of the middle class is barely expected to change over the next two decades. Central and South America, and the Middle East and North Africa, are forecast to grow a little. But one area stands out: the emerging middle class in Asia is forecast to explode, from roughly 500 million to some 3 billion people. 

In equity investing, the combination of a compelling secular growth story and compellingly attractive valuations is a very rare thing, the sort of investment opportunity that one might only see once or twice in a generation, if that. But it exists, here in Asia, today. Once again, however, we have to abandon conventional financial thinking in order to exploit it. 

 

Asian personal consumption between 2007 and 2012 – while the West was suffering from a little localised financial crisis – grew by 5% to 10% per annum. Industries likely to benefit from sustained growth in domestic consumption include food and beverages, clothes, cars and insurance.

 

But the index composition of Asian equity index benchmarks leaves much to be desired. Of the 10 largest companies in the MSCI Asia ex-Japan index, three are low margin exporters in Korea and Taiwan, one is a low margin Chinese telecoms business, three are state-run Chinese banks, one is an inefficient Chinese oil and gas producer, and one is an expensive Chinese internet business. 

 

That doesn't leave much for value investors to go on. Asian equity funds more generally, tending to be index-trackers, are heavy in Chinese stocks of indeterminate value and clunky 'old Asia' exporters with far too much research coverage. 

 

Or one can ignore index composition ('yesterday's winners') entirely and focus instead on 'best in breed' businesses throughout the region on an unconstrained basis. Which is exactly what Greg Fisher's Halley Asian Prosperity Fund does. Stocks that make it into this tightly defined portfolio typically have historic returns on equity of 15% or higher, a history of dividend growth, little or no debt, price / book ratios of 1.5x or less, and price / earnings ratios ideally in single digits (its average p/e stands at around 8x). As Greg puts it, amid a world of worries, "keeping the discipline of holding lowly valued, under-owned and unleveraged companies is likely to continue to protect our capital and earn us both income and capital appreciation over the longer term."

 

In terms of macro analysis, this interview with CLSA's Russell Napier is one of the best we've heard this year, concisely addressing many of the major current concerns we really should be worried about, including the rising risk of emerging markets exporting deflation to the West, the next stage of government abuse of markets including the formal rationing of credit, and the growing attraction of gold (as a deflation and inflation hedge) at its current price.

 

On which topic, David McCreadie of Monument Securities suggests that "if gold is driven down to $1030, and there will be a lot of noise if it does, I think it will offer a very unusual and highly profitable P & L opportunity, both in the physical but especially in the mining shares. Upside of x 5-10 doesn't come along very often and it's definitely one for the SIPP and the kids' education fund. 

 

Nonetheless if you own it here or above then I think you take the pain in this final phase. Nor do I believe shorting is sensible; the main money has been made on the short side and in these metals, the biggest and most explosive profit potential is always on the upside." 

 

Or to put it more plainly, and in the words of Warren Buffett, price is what you pay; value is what you get. US stocks may be expensive, but you can get better economic fundamentals and cheaper valuations selectively throughout Asia. And as insurance against the sort of disorderly currency moves that seem to be almost inevitable courtesy of so many central banks behaving badly, we still maintain you can't do better over the medium term than gold.