ThxPORTAL - My OnlinE InvestmenT ProgresS

The recent earthshaking announcement from Dubai World indicates that the U.S. is not alone in dealing with an overleveraged economy. In fact, many countries are in more dire straits than the U.S. As with real earthquakes, the financial aftershocks of Dubai World’s semi-default will be felt far and wide, particularly farther to the north in Europe. (Be sure to read our Special Section on Dubai, p. 34.)

Some of the weakest European countries have their own acronym, which runs counter to the positive overtone of the BRIC economies (Brazil, Russia, India and China). They are collectively called the PIGS (Portugal, Italy, Greece and Spain). Each of these economies has problems, but none more so than Greece. It has the least-loved bond market in the EU, as evidenced by its having to offer the highest interest rates. It also has the lowest bond rating in the union and the highest debt-to-GDP ratio at over 91%.

Many of Greece’s problems stem from problem banks. Greek banks poured money into the capital-starved Balkans to take advantage of the higher earnings potential. However, now that the Balkan economies have stopped growing, the potential for losses is staggering: Banks have extended loans to the region equal to 20% of Greece’s GDP. So, in 2008, Greece followed virtually every other nation as it bailed out its banks that weren’t smart enough to see a recession coming.

The Greek bank bailout cost 28 billion euros, which is equal to 10% of Greece’s GDP. Was it enough to prevent further bank problems? The President of the National Bank of Greece thinks so, as he recently stated that the naysayers are wrong and that the “rumors [of default] are exaggerated.” It reminds us of Bear Stearns CEO’s comment, “There is absolutely no truth to the rumors of liquidity problems,’’ six days before Bear Stearns was acquired before it had to declare bankruptcy.

Further problems are on the horizon for Greece with its budget deficit projected at 12.7% of GDP this year (4 times the EU limit). Greek businesses are hurting from a stronger euro, which has crimped tourism. Construction and shipping, of which Greece claims 20% of the world’s fleet, have also been slow due to the global recession. Add to these problems the fact that Greece needs $75 billion this year to meet expenses and for debt repayments. This leaves higher taxes and loans from the IMF or EU as the only likely stopgaps.

Both the stock and bond markets in Greece suggest economic weakness is dead ahead. The Greek stock market has rallied in corrective three waves with two equal legs up from its March low. And it’s already fallen 25% from its October 15th high. Investors in the Greek bond market demand almost 2% more from Greece than they do from Germany on a 10-year bond; investors see a fracture in the EU. The EU has stated that it won’t let Greece default, but it’s clear that investors have concerns.

U.S. investors should remember that Greece is simply one nation of many that are likely to produce further shocks to the global economy. Therefore, capital safety still seems to be the best option for most investors, while speculators may want to focus on the PIGS, and Greece specifically, for downside opportunities.

source HERE

As you read this, the Chinese government is doing an extraordinary thing... something nearly unheard of in the modern world.

It is encouraging citizens to put at least 5% of their savings into precious metals.

The Chinese government is telling people gold and silver are good investments that will safeguard their wealth. After last year's meltdown in the stock market, people believe it. After all, Chinese citizens don't receive government retirement money... and they don't have company pension plans like people in many other countries do.

This is why folks in China are lining up outside of banks, post offices, and the new official mint stores to buy gold and silver (they especially like silver because it's cheaper per ounce).

The Chinese attitude toward gold and silver is a striking contrast to the American attitude right now. I don't recall a TV or radio ad from my congressman or President Obama encouraging me to buy gold or silver. Does your bank sell silver bars? Are gold mints popping up in your neighborhood? Are any of your friends, family, or coworkers scrambling to buy precious metals?

In spite of a few ads on television and satellite radio, buying gold and silver in the U.S. is still largely seen as a fringe-group activity. That's not the case in China. And in the big picture, there are three distinct trends occurring in China today that many in the Occidental world are not paying attention to.

more HERE

Jim Chanos, head of investment firm Kynikos Associates and famous for his call to short Enron in 2001, has found his next big target.

Chanos and other China bears say the country has overcapacity in just about every sector of its economy, and the government's massive stimulus isn't working. They think China is simply covering things up with faulty statistics.

For example, they point to the huge reported increases in car sales in contrast to numbers showing little growth in gasoline consumption, which suggests state-run companies are buying huge numbers of cars and putting them in storage.

Chanos thinks the collapse of China could be just as bad for the global markets as the U.S. housing crash.

Traders interested in playing this trend could consider shorting big names like China Life Insurance, China Mobile, and PetroChina, or buying the UltraShort FTSE/Xinhua China25 Proshares ETF (FXP).

source HERE

When it comes to the 2010 outlook for commodities, who better to ask than commodities whiz Trader Vic?

Victor Sperandeo (also known as "Trader Vic") is one of the world's most outspoken commodities traders, with over 40 years of market experience. He has invested independently for the likes of George Soros, Leon Cooperman and BT Alex Brown, and has written a book, "Trader Vic on Commodities." Mr. Sperandeo also created the popular Diversified Trends Indicator, a long/short rules-based trading methodology based on a highly diversified basket of commodity and financial futures contracts.

At last month's "Inside Commodities" conference, HAI Associate Editor Lara Crigger caught up with Trader Vic between sessions to ask about his general outlook for commodities in 2010.

Lara Crigger, associate editor, HardAssetsInvestor.com (Crigger): Which commodities do you think are going to do well next year?

Victor Sperandeo, "Trader Vic" (Sperandeo): Well, I'm on record across the world as saying that gold is the best investment in the world for the next two to three years. It's fundamentally obvious, but when you're printing huge amounts of paper vs. something that is considered money, the paper will depreciate and the hard assets will go up. So gold and silver will do well—silver a little less so—but gold certainly.

Even when it was about $830-$850/oz, I basically said, "I don't see any scenario where it can come down." But I wouldn't say that it can't correct at any given moment. When the Fed decides to raise interest rates, at that point, gold will sell off. It will be a steep correction.

But it's also a buying opportunity, because if they raise rates, it would only be to try to stabilize the dollar. But it wouldn't affect the kinds of huge deficits and the printing of money that's going on for the next 10 years. It's unsustainable. So gold, that's my most favorite, if you will.

Crigger: What about the idea that gold's starting to move into bubble territory?

Sperandeo: I don't agree. If you go back to its lows, and you compound where it is today, it's about 6.5 percent compounded. That isn't a bubble. You know, when oil went from $10 to $150 in 10 years, that was more froth.

Crigger: You just mentioned that you thought silver would rise "a little less so" than gold. But many analysts have suggested that silver actually has better long-term prospects than gold.

Sperandeo: Possibly, except that gold has been universally and historically seen as money. It is the preference to silver. I'm not saying that you shouldn't own silver. I'm only saying that gold is the preferred item. There is an industrial use for gold, yes, and in jewelry, but it's more used as money. Silver has several other industrial uses.

Crigger: What's your outlook for some of the other precious metals, like platinum or palladium?

Sperandeo: I like those two. They've obviously done well. But they are more connected to economic circumstances. So as you get more and more problems from these economic circumstances that come about because of the huge deficits and inflationary times, they will run into more resistance.

So when I say I think gold's the best investment in the world for the next two to three years, I'm trying to take a lot into account. Because you may not see me again for awhile, so I can't correct myself.

Crigger: Let's switch gears and talk industrial metals. Do you think China will continue to drive demand into 2010?

Sperandeo: I think they will, and if I were China, I'd be selling my Treasury bonds and I'd be buying things like copper and platinum and palladium—other industrial metals, like aluminum, etc., that you need to produce. Especially with interest rates at zero. So if China gets that, then you'll have a real bull market. Buy the stuff, not the paper.

Crigger: Recently both China and Russia have publicly called for a move away from the dollar as the world's reserve currency. Do you think this will ever happen?

Sperandeo: I do think it will happen. It's not easy, because with the nature of the U.S. dollar as a world currency and acting as reserves to many banks and loans, there are just not enough assets to take the place of the dollar right now. But I believe it will eventually occur.

Crigger: What takes the dollar's place?

Sperandeo: It will be a basket. Not just one currency, but a multicurrency basket. I would guess gold would be in there for sure.

Crigger: In terms of regulation, where do you come down on the debate? Do you think position limits would be useful for the commodity markets?

Sperandeo: Well, I think indexes should be exempt for sure, because that's how institutions get exposure. But the bottom line is: Every 30 years, you will get an attempt like the Hunts trying to corner silver, for example. But it's very few and far between, with the regulations the way they are now. They're very rare. The only reason a bureaucrat would want to change things is so that he could promote more of the printing and borrowing of money that commodities offset. So they're trying to have their cake and eat it too.

Crigger: What do you think is the best strategy for investors approaching the commodities space?

Sperandeo: It's got to be a long/short strategy. So whether it's indexes—we have indexes that are long/short—or it's a managed futures approach, you should take a long/short approach. With long-only, you don't go anywhere. You just don't make money.

source HERE

Gold fell almost 5% [on Friday] to below $1,160 an ounce on the latest jobs data. Unemployment unexpectedly fell to 10%. Employers only cut 11,000 jobs in November. That's the least since the recession began, and less than the 130,000 expected cuts. This could be the beginning of the gold correction so many are predicting...

Economist David Rosenberg says we're in a secular bull market for gold. He says central bank purchases, led by China, will eventually push gold to $2,600. Like Jim Rogers, though, Rosenberg thinks the short dollar/long gold trade is crowded. He expects a short-term correction in gold of as much as 20%. That would bring gold near its 200-day moving average of $970 without violating the trendline.

Making a gold correction even more likely, Rosenberg's biggest gold catalyst, China, already said it won't recklessly chase prices up...

"We must keep in mind the long-term effects when considering what to use as our reserves," said Hu Xiaolian, the vice-governor of the central bank. "We must watch out for bubbles forming on certain assets and be careful in those areas."

With China's $2.3 trillion in reserves, it's difficult to buy gold without moving the market. Expect China to buy on the dips, creating a floor for the metal.

source HERE