Wednesday, March 28, 2012

QE-3 is coming soon and death of dollar is sure---By Shan Saeed

When I shared with people last year that Ben Bernanke will go for the third round of quantitative easing soon,

investors thought, OOOOOOO, Shan you were kidding. Look US Dollar was getting stable. I said NO to few INVESTORS and people. My last 2 predictions would hit the wall soon apart from many others that I have made previously. Read this carefully:


1. US Debt is a Bubble that will bust very soon. Standing at $ 15. 5 trillion. Higher than GDP size $15.1 trillion. US debt will cross $19 trillion in the next 2-years. You bet

2. US Dollar is a bubble and will crash people. You cant fix the economy by printing money. Printing money adds poison for the economy in the shape of INFLATION. US economy is suffering from huge inflation that would hit the household badly. It would be severe than great depression of 1930s. US dollar has lost 98% of its value against Gold since 1913. According to Sam Zell the billionaire real estate investor and my uni of chicago alumni, Living standards of an average american has gone down by 50% since 1986. This is scary.

Federal Reserve will probably signal it plans to arrange a third round of debt purchases when policy makers meet in April. The end of tax breaks enacted by President George W. Bush and $1 trillion of mandatory federal budget cuts are raising concern that declining unemployment will give way to slower economic growth that requires support from the central bank. Policy makers under Chairman Ben S. Bernanke have purchased $2.3 trillion of Treasuries and mortgage debt in two rounds of so- called quantitative easing, known as QE1 and QE2, as they try to sustain the expansion. The Fed is “likely to hint” at QE3 at its April 25 gathering. This hit the dollar even harder. US economy is not growing but declining to the abyss of nowhere.

Federal Reserve chairman is a Helicopter.

The only think he knows is printing money. He will destroy the US economy, crash dollar and kill the household saving for the savvy americans. Be prepared for the worst to come. In the last week, many members of the FOMC argued in favor of ending any form of QE, citing rising inflation expectations. Ben Bernanke said No , we need more printing of money since he is hiding facts. He is not sharing the true picture of the US economy to the whole world, leave alone the american public. According to Ben Bernanke, The printing presses are still on and another edition of QE is coming.

How will the market take this? Will it embrace risk assets (stocks) because more money printing is coming or will it worry that the Federal Reserve is going too far and inflation is coming back?

I fear the latter. As I have pointed out many times before, traders now have a better grasp on the effect of QE on the markets. My analysis of History of QE in the last 5 years.

Stocks peaked seven weeks after QE1 ended (the market was slow to understand QE)
Stocks wised up and peaked three weeks before QE2 ended

Following this pattern, I have argued that this time stocks will peak on the announcement of QE3. Is the hope of QE3 one of the supporting reasons the S&P is up 11% YTD? In other words, has the market already experienced the QE3 rally [buy the rumor] and will its announcement mark a peak in risk assets (sell the news)? If I were correct that stocks (risk assets) fail to advance on more QE, inflation fears would be cited as the reason.

According to WALL STREET PAPER ON WEDNESDAY I.E. 28TH March-2012

The Federal Reserve is propping up the entire U.S. economy by buying 61 percent of the government debt issued by the Treasury Department, a trend that cannot last, Lawrence Goodman, a former Treasury official and current president of the Center for Financial Stability, writes in a Wall Street Journal opinion article published Wednesday. He adds further last year the Fed purchased a stunning 61 percent of the total net Treasury issuance, up from negligible amounts prior to the 2008 financial crisis, He has warned that U.S. economy and markets are “at risk for a sharp correction” if conditions aren’t “normalized.”. I have proved my point again. US dollar is dead and dead dollars dont bounce back. Money from heaven is a hell path for the economy.

Disclaimer: This is just a research report and not an investment advice. All financial transactions carry a RISK.

Saturday, March 24, 2012

Drilling Technology would create revolution / turnaround for U.S. Oil Output--By Shan Saeed

This is the only game changer for the US market going forward. This would jobs, living standards, productivity of work force and above all jump start the economic revival for the USA. Just a decade ago, complete wells were fracked at the same time with millions of gallons of water, sand and chemical gels. Now the wells are fracked in stages, with various kinds of plugs and balls used to isolate the bursting of rock one section at a time, allowing for longer-reaching, more productive horizontal wells. A well that once took two days to drill can now be drilled in seven hours. US would no longer need to import Oil from Saudi Arabia. That is the plan of American establishment for many years to have less dependence on saudis.

Who is leading from the front? Apache, yes its true. Apache Corporation began drilling in the 100,000-acre Deadwood field in the West Texas Permian basin in 2010, there had only been a trickle of production there. The deep shale, limestone and other hard rocks had potential, but for years they had not been considered economically viable. The rocks were so hard, they would have likely sheared off the usual diamond cutters on the blade of any drill bit attempting to cut through.

But new adhesives and harder alloys have made diamond cutters and drill bits tougher in recent years. Meanwhile, Apache experimented with powerful underground motors to rotate drilling bits at a faster rate. Now, a well that might have taken 30 days to drill can be drilled in just 10, for a savings of $500,000 a well. By saving that money, it can spend more on fracking, which translates into more sand and more stages and better productivity of labor force.

Apache has already drilled 213 wells in the field, producing 9,000 barrels a day. With 13 rigs running, it hopes to eventually drill more than 1,000 wells, and produce 20,000 barrels a day there. Its a revolution in the energy market and it is just started to scratch the surface now.

Discalimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.

Friday, March 16, 2012

Malaysian growth strategy---Focused and Revisited. By Shan Saeed

Malaysia is one of the leading members of ASEAN countries driving the economic growth of the region. It has transformed itself from low base to high base manufacturing region with strong labor force and business friendly economic climate. The macro fundamentals are strong with sustainable GDP growth comparing with region members and global players. The government is maintaining its focus on economic growth to provide better living standards, improved health care and enhanced productivity of the people to achieve the strategic goal of becoming a developed country. Indeed, there are critics who would like the government to do more and turn around the situation. Governments are not perfect. They have got some shortcomings and they try to improve upon. However, Malaysian government has weathered the global financial storm with some tactical maneuvering and strategic moves for its economy to keep pace with the global environment and to benefit the local entrepreneurs of becoming major players not only regionally but also globally as well. It is quite impressive when local companies are making investment abroad thus sending the signal to the market players about its strategic intent, capture the mind share of the investors, create employment in the foreign country, make effective use of the productive labor force and above all continue to bolster the GDP growth of the foreign country.

Malaysian growth success: Strategic analysis

Let’s analyze how Malaysian growth has progressed and what are the key factors that can add value to the growth trajectory. GDP was maintained at 5% is above average globally speaking. Inflation is well under controlled i.e. 4% taking into account that government provides subsidiary in many areas like many other governments around the world. Major Banks like CIMB and MayBank are spreading their wings and moving into big markets like Indonesia and India. The market cap of both the banks is over $17 billion according to Forbes magazine Jan-2012 issue. Major development in infrastructure and construction is going on with government planning to invest around $450 billion by 2020 and raising funds through Sukuk. This is huge and clearly illustrates the government intention to give a boost to infrastructure development in order to attract foreign direct investment and to lay the ground work for more MNC relocating their operations in the region. Many companies are relocating their operation from China to Malaysia since cost structure in China is not cheap anymore. If you read the book from my Harvard educated friend, “The End of Cheap China” by Shaun Rein, readers will get lot of insight about the Chinese cost mechanism. Real Estate market in malaysia is getting a lot of foreign investment in the shape of Malaysia As Second Home policy. Financial markets are looking to Malaysia as she is turning into herself as the hub / center of Global Islamic Finance in the APAC region. Malaysia currently holds the largest market share of Sukuk issuance amounting to 67% globally. Toyota has issued Sukuk bonds recently for over $150 million to cite a small example. Islamic Finance is getting strong foothold in Indonesia, Japan, France, UK, Singapore and UAE. Malaysia is leading from the front in the Islamic Banking whose market size is over $1.3 trillion globally.

I came across a recent World Bank paper written by Sohrab Rafiq and Albert Zeufack titled “Fiscal Multipliers over the growth cycle” March 2012 in which they concluded that government spending is the only way to boost GDP growth and stimulating economy. They were less enthusiastic about tax cut reforms can boost growth. In my humble opinion, it is not true. Government spending does not stimulate the economy. Careful analysis of leading economists globally and Nobel laureate provide some interesting facts. The debate hinges on the scale of the “fiscal multiplier”. This measure captures how effectively tax cuts or increases in government spending stimulate output. A multiplier of one means that a $1 billion increase in government spending will increase a country’s GDP by $1 billion.
Read the article in the Economist magazine “ Much ado about multipliers” dated 24th September, 2009 gives you a clear indication the importance of tax cut over government spending to enhance GDP growth. Empirically proven.
The size of the multiplier is bound to vary according to economic conditions. For an economy operating at full capacity, the fiscal multiplier should be zero. Since there are no spare resources, any increase in government demand would just replace spending elsewhere. But in a recession, when workers and factories lie idle a fiscal boost can increase overall demand. And if the initial stimulus triggers a cascade of expenditure among consumers and businesses, the multiplier can be well above one.

The multiplier is also likely to vary according to the type of fiscal action. Government spending on building a bridge or Infra structure development may have a bigger multiplier than a tax cut if consumers save a portion of their tax windfall. A tax cut targeted at poorer people may have a bigger impact on spending than one for the affluent, since poorer folk tend to spend a higher share of their income. Tax cuts are more effective in provide boost to the economic growth going forward. Plus it is the monetary policy that drives the economy and not the fiscal policy. I have attended the lecture series delivered by Christina Romer Ex-Economic Advisor to President Obama titled: " The lessons from great depression" which she read at Brooking institute in March 2009 emphasising the role of monetary policy has in driving the economy for the nation. Malaysian central bank has used the monetary policy in a very strategic and effective manner to stimulate the economy with the right ammunition required for the economy.
Fiscal Multiplier
Crucially, the overall size of the fiscal multiplier also depends on how people react to higher government borrowing. If the government’s actions bolster confidence and revive animal spirits, the multiplier could rise as demand goes up and private investment is “crowded in”. But if interest rates climb in response to government borrowing then some private investment that would otherwise have occurred could get “crowded out”. And if consumers expect higher future taxes in order to finance new government borrowing, they could spend less today. All that would reduce the fiscal multiplier, potentially to below zero. I think Malaysian government is focusing in a strategic manner. GDP does not increase just on the basis on one variable either it is Investment or government spending or Consumption only . 4 factors i.e Consumption, Investment, Government and Net Exports combined together give boost to GDP growth. Prime Minister Najib’s government is focusing and revisiting his strategy to bring about structural reforms to remain on growth path to compete globally with advance economies. So critics and people who write in the newspapers have limited knowledge about basis economics and finance and tend to gain nothing by writing sub-par articles of no economic value. In my humble forecast, Malaysian GDP growth would touch 5% in 2012 taking into account the strong economic reforms and structural measures taken by the government to bring about change to achieve economic prosperity.

Malaysian government is on the right track of attracting foreign investment, focusing on infrastructure development, trained and educated labor force, strong manufacturing base, low inflation, high growth, good governance, sustainable tax structure, good economic climate, stable government and above all Return on Investment is appreciable for any investor and add value for further economic progression.

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK

Thursday, March 15, 2012

Bigger than the Credit Crisis of 2008 is heading USA----By Shan Saeed

To recap my big five predictions that all came true,

  1. Told my readers to get into gold in 2002;
  2. Told them to get out of the housing market in 2006;
  3. Predicted the recession of late 2007;
  4. Told my readers to get out of stocks in the fall of 2008; and
  5. Told my readers to get back into stocks in March of 2009.
  1. In fact, I’m a humble person who prefers a low-key profile. I have a Master’s Degree in Finance and Economic Strategy from one of the top business universities in USA. Most importantly, I’m a successfully predicting about commodity prices and I have a deep love of economic analysis and the stock market.

What I’m about to tell you, my prediction number six, which is about to happen, is so off the wall, so controversial, I didn’t want you to think it was coming from some kind of quack. It’s coming from someone with a proven track record at making economic and financial forecasts.

Let’s fast forward to March of 2012, where we are today.

The economy is slowing. Retail sales in the U.S. are running at their slowest pace in five months. After trillions of dollars the government has pumped into the economy to revive it, U.S. corporations ended the 2011 with their slowest profit growth in two years.

Last year was the worst year for new home sales in the U.S. since 1963! And a glut of foreclosed resale homes still overhangs the housing market. Housing prices are set to fall again in 2012.

What economist like me really like to look at, the underemployment rate (that’s the unemployment rate adjusted to include people who have given up looking for work and part-time workers who want full times work) stands stubbornly at 15% in the U.S.

Banking is still a mess. Europe’s debt crisis is a huge problem for American banks; their exposure is close to $3 trillion.

Many European countries are in a recession again and I believe the United States is on the cusp of falling back into a recession. Some will call it a new recession. I will call it “Recession Part II.” But this is not the real problem.

While my colleagues will dance around the issue, while other economists will not utter the words, I will put it in writing:

“The U.S. is technically bankrupt.”

USA budget deficit this year will be $1.3 trillion. Official national debt exceeds $15 trillion and this past summer Congress gave the Obama Administration permission to increase the debt to $16.4 trillion. Unofficial national debt, when you take into account unfunded liabilities and entitlement to our citizens, is closer to $127 trillion.

By the end of this decade, according to the White House’s own prediction, the official national debt will surpass $20.0 trillion—not including off-balance-sheet items like old-age security, Medicare, and other government promises to its citizens.

And there’s also hidden government guarantees not on the government books…

Fannie Mae and Freddie Mac own or guarantee half the residential mortgages in America. Who owns both of these companies now? Why, it’s the U.S. government. They “censured” both Fannie Mae and Freddie Mac on September 7, 2008.

In effect, the government either owns or guarantees half the outstanding residential mortgages in this country. According to data compiler CoreLogic Inc., some five million home mortgages in the U.S. were either in the foreclosure process or delinquent last month, exposing the government to even more losses.

Politician after politician has failed to reduce government spending. Their belief is that spending more money will fix the economic problem. Well, they’ve spent trillions since 2008 and the economic problems are about to get worse.

The U.S. government and the politicians that run it are addicted to spending more money than the government takes in. If we look at it conservatively, and only look at the government’s “official” figures, by the end of this decade, the national debt will be about 150% of our GDP—about the same level it was after World War II.

Why USA will never get out of this hole

After World War II, America became a superpower. The manufacturing base grew dramatically; the industrialized revolution was so great that the American dollar replaced gold as the reserve currency of other world central banks. There was a U.S. job boom.

Today, what do Americans have to carry into the next boom? Nothing. The Internet isn’t creating jobs. Manufacturing, it’s gone to Mexico, India and China. I doubt George Washington ever envisioned a future where Americans would be suffering so much. It’s embarrassing, but true: Over 44 million people in this country are using some form of food stamps! (Source: National Inflation Association)

America, the Empire, is history. The Standard & Poor's downgrading of the U.S.'s credit rating this past August 5th, 2011 is just the beginning.

“The U.S. lowered interest rates in 2004 to their lowest level in 46 years. And what did Americans do with their access to easy money? They borrowed and borrowed some more, investing the borrowed money into real estate. Looking ahead, perhaps the Fed’s actions (of 2004) will one day be regarded as one of the most costly errors committed by it or any other banking system in the last 75 years.”

I was exactly right.

Artificially low interest rates are actually causing Americans harm

Interest rates have remained so low for so long that inflation will become a serious problem for America in the months and years ahead. With the price of gold having risen 500% in less than a decade, gold is screaming, “inflation ahead!”

How does the government and an economy deal with inflation? Inflation is dealt with via higher interest rates. Mark my words: The artificially low interest rate policies of the past few years will come to hurt us in the form of hyper-inflation and sharply higher interest rates.

It will get worse

My prediction is not only that USA is headed into Recession Part II—my prediction is that this next recession will also be much worse than the 2007-2008 recession and that it will hit as deep as the Great Depression.

You see…

USA government has no money left to bail out during the next recession. The government is over-extended—if it was a business, it would be bankrupt right now.

The Federal Reserve has kept the economy alive the past three years by keeping its printing presses running overtime.

Let’s face two important facts.

The Fed can’t lower interest rates below the zero they are at today. The more money the Fed prints, the greater the risk of inflation, and the higher long-term interest rates will eventually move, stifling the economy.

Let’s move to the stock market

Did you know there is a striking similarity between the years 1934-1937 and 2008-2011?

Look at these facts:

The stock market crashes in 1929. Eighty years later, in 2008, it does the same thing.

The bear market rally that started in 1934 lasted until 1937—and took the Dow Jones Industrial Average from a level of 90 to 185, a gain of 106%. The Dow Jones then plummeted and didn’t recover until seven years later, 1944.

So similar it’s frightening: The bear market rally that started in March 2009 has lasted three years so far and has resulted in the Dow Jones Industrials rising about 100%.

If the current bear market rally follows the same path as the bear market rally of 1934 to 1937, It has only a few more months left before the next phase of this bear market gets underway, ultimately bringing stock prices below their March 2009 lows.

This time around, for reasons I’ve just explained, the after-effects of the next leg of the bear market could be much worse than the Great Depression.

At this point, I assume you are sitting there, watching and listening to this audio-video presentation and saying, “Okay, Shan Saeed, what you say is stark and frightening. But it makes sense, the way you’ve laid out the facts.”

“So what do I do as an investor and
consumer to protect myself?”

The good news is that you could protect yourself from the economic devastation headed the way over the next six months. The better news is that, if you position your portfolio properly, starting today, you could actually make money during the next devastating down leg of this economy, while others struggle like never before.

Here are my five core beliefs about what’s headed America's way and how I plan to actually profit from them.

1. The devaluation of the U.S. dollar that started in early
2009 will accelerate as the U.S. economy deteriorates.

After World War II, the government did a masterful job at convincing foreign central banks they should have U.S. dollars as their reserves instead of gold bullion. Today, 63% of world central banks have adopted the U.S. dollar as their official reserve currency.

As the value of the greenback erodes under a mountain of debt and coming rapid inflation, courtesy of too many dollars in the financial system (thank you, Federal Reserve), foreigners will be dumping dollars and moving away from a system where the greenback is the official reserve currency. China, Russia and Japan have already started lowering US dolalr treasuries from their reserves.

Chart courtesy of

Look at it this way. Since President Obama took office four years, the U.S. national debt has increased by about $5 trillion dollars—50%. At the same time, the Federal Reserve has increased the size of its balance sheet by $2 trillion.

Where are all these trillions coming from? In the end, I believe the U.S. dollar will collapse under a mountain of unsustainable debt.

Shorting U.S. dollars is too risky and complicated for most of my readers. But there is a simple, easier way to make money as the U.S. dollar continues to devalue. There is an ETF you can buy that goes up when the U.S. dollar declines in value.

This ETF is in the currency that I believe will rise the most against the U.S. dollar over the next two years. No, it’s not gold. It’s a fiat currency that is up close to 10% against the U.S. dollar over the past five months alone. It’s a currency of one of the economically strongest countries in the world.

You put your money in this ETF, sit back, do nothing, and watch the value of the U.S. dollar fall as inflation and the national debt rise, and just watch this investment rise in value as the months go by.

2. Gold prices will continue to rise.

When we look at the price of gold bullion today in inflation adjusted terms, it would need to be trading at $2,250 an ounce to be equal to its January 1980 price high of $850 an ounce.

But my public predictions about where gold prices are headed have been much higher. I’m expecting gold to trade at $3,000 before the bull market in the yellow metal is over.

Chart courtesy of

Here’s an important fact I want you to be aware of:

After reaching an all-time record high of $1,921 an ounce on September 6, 2011, gold bullion prices have fallen back.

But we’ve been down this road many times before! In early 2003, the price of gold bullion fell 16%; in the summer of 2006 the price of gold fell 21%; from the spring to the fall of 2008 gold prices fell 28%; in the spring of 2009 gold prices fell 15%-- and each time the price of gold bullion recovered and moved higher by year’s end.

In fact, for 11 years running the price of gold bullion has closed each year higher in price than it started the year. The recent weakness in gold bullion prices (more like a correction in an ongoing bull market) is a tremendous opportunity for smart investors.

I’m a big bull on gold. Rising inflation, a debasing U.S. dollar, out-of-control government spending, and a currency printing press that never seems to stop will continue to push the price of gold higher.

But when I look at gold, if it moves from $1,700 or $1,800 to $3,000 an ounce over the next five years, as I expect it to, my gain will be close to 100%—as an investment, that’s not enough for me. I’m gunning for much bigger profits than that.

The big winners of the gold bull market will ultimately be the gold mining stocks. Look at this way. If a gold company’s cost to produce one ounce of gold is $900, at a price of $1,800, they are making a 100% profit. But, at price of $3,000, they are making a profit of 233%—and the stock market will reward the stock by multiples of 233%.

3. The euro is as done as the U.S. dollar.

I’m blessed to be able to visit Europe once or twice a year to check on the economies of various European countries. Let me tell you firsthand, things are much, much worse in Europe than people read in the mainstream media.

On October 27, 2011, the euro zone leaders said they would bail out Greece, with European banks taking a 50% haircut off the value of their loans to Greece. By February 20, 2012, the eurozone Finance ministers agreed to a second bailout for Greece.

Greece has technically defaulted on its debt. I believe Spain and Italy are not far behind.

Austerity measures are a difficult sell in Europe. On the same day Greece passed its most severe austerity measures yet, February 12, 2012, 100,000 Greek citizens took to the street in protest. A 5,000-man police army was not enough to stop the protestors from setting fires to buildings. In a nut shell, Athens burned as the latest Greek austerity bill was passed.

2012 will bring stronger citizen protests in Europe thanks to even more severe austerity measures that will be introduced this year.

Every morning, I wake up and ask this one question: when will Germany come to its senses and pull out of the euro? After all, Germany is the only real engine of the European Economic Community. Greece’s GDP…it’s less than 10% of Germany’s GDP.

The euro has declined steadily against the U.S. dollar. I actually envision a time when the richer European countries will tire of bailing out the poorer European countries (it’s actually happening right now), when each country will just go back to its own currency. Ultimately, the euro will die, and with it the economies of the weaker European countries: Greece, Spain and Italy.

4. Inflation will become a real problem in America.

According to the U.S. Bureau of Labor Statistics, the producer price index (“PPI”) is running at 4.1% per year.

While few are talking about it, inflation is a real problem in America. That’s what the rise in gold price has all been about: Gold is screaming: “Higher inflation ahead!”

Thanks to years of monetary policies that promoted artificially low interest rates and printing presses churning out dollars in overtime mode, hyperinflation and American sovereign debt issues will become the biggest obstacles for the United States for the remainder of this decade and well into the next decade.

After falling for 30-years, short-term interest rates are bottoming out. The long-term 10-year U.S. Treasury, it’s yielding a pathetic 2%-- a 50-year low. All cycles come to end. And I believe USA is near the end of a long-term down cycle in interest rates.

While it may difficult to see today, and as crazy as it may sound, the government will be forced to raise interest rates to fend off inflation—just like it did in the early 1980s..

Higher interest rates will also put the proverbial remaining nails in the coffin known as the U.S. housing market.

Now you see why I said at the very beginning of this article that it’s not for the faint of heart. Imagine our government, the economy, housing prices and the stock market all collapsing at the same time? But, for smart investors, there is more than just hope. As history has shown us, where there is fear, there is also profit.

5. The stock market will ultimately test its lows of March 2009,
bringing the Dow Jones down 46% from where it sits today.

Yes, this is my final core belief: The bear market rally in stocks will lose steam somewhere in the next few months and move straight down to test its March 2009 lows.

Phase One of a bear market brings stock prices down sharply. That’s what happened when the Dow Jones Industrial Average fell from 14,164 in October 2007 to 6,440 on March 9, 2009—a tumble of 54%.

Phase Two of a bear market is when the bear lures investors back into stocks. The bear gives investors and analysts the false sense that the economy is improving and it’s okay to own stocks again. The bear did a masterful job at convincing investors to own stocks again…and, presto, the Dow Jones got back to over 12,000. But the bear market is getting old and “long in the tooth” as they say. If I compare this bear market rally to the bear market rally of 1934 to 1937, we have a few months left before Phase Three of this bear market gets underway—ultimately bringing stock prices below their March 2009 lows.

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.

Wednesday, March 14, 2012

How China will shake the gold market in 2012? By Shan Saeed

How China will shake the gold markets in 2012 By Shan Saeed

This is quite obvious for many gold investors. Right now, the Chinese government is reinventing both their own internal gold markets and also the international gold markets as well.

Here's what I mean... For decades, Chinese citizens were barred from owning physical gold under penalty of imprisonment. That lasted until 2002. Then, in September 2009, China became the only country in the world that I know of to actively promote gold ownership to its citizens.

In fact, the government started a major campaign to encourage all citizens to buy gold. Chinese government reportedly informed her citizen to hold 25 to 30% of their asset portfolio in Gold and Silver. Locals can now buy gold bars, which come in four sizes, at ANY Chinese bank in the entire country. If you don't think that's unusual, try buying gold at ANY bank in the United States, and watch the funny look you get from the teller.

The government has also set up thousands of gold "stores" around the country, which look like jewelry stores, but instead sell bars of gold.

As Forbes recently reported at the scene of one such gold store:

"The crowds surge shoulder to shoulder... It's one dramatic example of the gold craze in China, which is officially and unofficially promoted by the Communist government."

My friend recently visited one of these Chinese gold stores on a recent trip, and said:
"On the inside, these gold stores look like jewelry shops–armed guards, glass viewing cases, etc. But instead of diamond crusted earrings and white star sapphires, you see bars. Lots of bars. The government mints bars in sizes ranging from 5 grams to 1 kilogram. The prices are updated instantly ... and the bars are all serialized and .9999 purity, the same as you would get from Switzerland. He went into several stores and saw Chinese people buying like crazy... all with cash... the inventory was flying off the shelf."
Why would the Chinese government do this?

Well, China wants to control the world's gold markets. And if they can get Chinese citizens to purchase large amounts of gold in the coming years, it gives the government the potential for easy access to several hundred more tons. I am super bullish on Gold. The Chinese government could ask their citizens to sell all the gold to the government, or could even confiscate it if necessary.

You see, just like the United States, the Chinese government has a history of telling citizens how much gold they could own, and at what price.

Here's a famous photograph from a 1949 issue of Life Magazine, of Chinese citizens rushing to exchange currency for gold. In an effort to promote confidence in their currency, the government offered citizens the chance to exchange currency for gold at a rate better than could be found on the black market, but had to quit the offer after just 21 hours because of the hysteria that ensued.

The point is, the Chinese government has turned their population into gold-crazed investors and savers.

And they've taken further steps too.

For example, recently, the Chinese made available the first yuan-denominated spot gold contract, called the Renminbi Kilobar Gold. As Dow Jones Marketwatchreports that analysts see it as "a step toward making the yuan a global reserve currency."

But here's the thing...

Both of the developments I just mentioned may, at the end of the day, pale in comparison to the big move coming up later this year...

In June 2012, China has announced plans to open something called the Pan Asia Gold Exchange (PAGE). This is basically a direct competitor to the London Metals Exchange and the COMEX in New York.

The way things work right now, the futures market in London "fixes" the spot price of gold each morning and afternoon, based on trading in London and on America's COMEX market.

But both of these markets back gold contracts with only 10% of the actual metal. The new China PAGE market could have a much larger gold backing, and could forever change the way gold is traded.

As James Turk's GoldMoney site recently reported:
"The potential effects cannot be underscored enough – PAGE is clearly preparing the world for a Chinese world reserve currency, and is doing this by bringing gold, and by extension silver, back into the Chinese economy."
Forbes also wrote about this development, and said:
"It means the spot market in gold could be headed for China– and away from London's Metals Exchange or the COMEX in New York."
This new gold exchange is a huge development--a big step towards backing China's currency with gold. Clearly, you can see that the Chinese government is determined to make gold a much bigger part of their financial system in the coming years. Chinese government will dump US Dollar very soon. They are holding over $1trillion in US treasuries at present.

But where is all of this headed? GOLD will become the way of life for most chinese people and the chinese government. Happy investing in Gold for wealth protection.

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.

Tuesday, March 13, 2012


This article comes at a time when UN senior economist appreciated my work and partially agreed with me that water has become a commodity now. Mehri Madarshahi working at United Nations reached out to get my strategic insight about water resources and how to preserve it for the future generation. Here is my insight about water.” THE ERA OF CHEAP WATER IS OVER” Water economics is fast changing and if not preserved, water crisis can lead to global wars and acrimonies issues going forward. Water and oil prices will be moving neck to neck in the next 2-years.

WHEN the word water appears in print these days, crisis is rarely far behind. Water, it is said, is the new oil: a resource long squandered, now growing expensive and soon to be overwhelmed by insatiable demand. Aquifers are falling, glaciers vanishing, reservoirs drying up and rivers no longer flowing to the sea. Climate change threatens to make the problems worse. Everyone must use less water if famine, pestilence and mass migration are not to sweep the globe. As it is, wars are about to break out between countries squabbling over dams and rivers. If the apocalypse is still a little way off, it is only because the four horsemen and their steeds have stopped to search for something to drink.

The language is often overblown, and the remedies sometimes ill conceived, but the basic message is not wrong. Water is indeed scarce in many places, and will grow scarcer. Bringing supply and demand into equilibrium will be painful, and political disputes may increase in number and intensify in their capacity to cause trouble. To carry on with present practices would indeed be to invite disaster.

Major water price increases and supply cuts are underway in many parts in the USA, which is long overdue. Water is becoming a scare resource and consumption patterns are rising fast. In China water prices have gone up by 37% in the last 3-years. Africa is waiting for the clean water. Africa is turning in a desert island with no pure water available for the masses of 1 billion inhabitants according the research done by Mckinsey and Bain in 2011. If you think that the upcoming energy shortage is going to be bad, it will pale in comparison to the next water crisis. So investment in fresh water infrastructure is going to be a great recurring long term investment theme. One theory about the endless wars in the Middle East since 1918 is that they have really been over water rights.

I think “The era of cheap water is over”. Call it peak water, if you like, but the water economics is getting expensive. It is due to with respect to housing and economic development, long disconnected from reality, is finally on its way back to somewhere appropriate — if mostly because there is no choice.

Why? The difficulties start with the sheer number of people using the stuff. When, 60 years ago, the world’s population was about 2.5 billion, worries about water supply affected relatively few people. Both drought and hunger existed, as they have throughout history, but most people could be fed without irrigated farming. Then the green revolution, in an inspired combination of new crop breeds, fertilisers and water, made possible a huge rise in the population. The number of people on Earth rose to 6 billion in 2000, nearly 7 billion today, and is heading for 9 billion in 2050. The area under irrigation has doubled and the amount of water drawn for farming has tripled. The proportion of people living in countries chronically short of water, which stood at 8% (500m) at the turn of the 21st century, is set to rise to 45% (4 billion) by 2050. And already 1.7 billion people go to bed hungry each night, partly for lack of water to grow food*


World Bank Reports 2011

FAO Report


Financial Times

Economist magazine

Deutsche Bank

Citibank report


Wall Street Journal

According to the Economist magazine, people in temperate climates where the rain falls moderately all the year round may not realise how much water is needed for farming. In Britain, for example, farming takes only 3% of all water withdrawals. In the United States, by contrast, 41% goes for agriculture, almost all of it for irrigation. In China farming takes nearly 70%, Malaysia requires 77%, and in India nearer 90%. For the world as a whole, agriculture accounts for almost 70%.

Farmers’ increasing demand for water is caused not only by the growing number of mouths to be fed but also by people’s desire for better-tasting, more interesting food. Unfortunately, it takes nearly twice as much water to grow a kilo of peanuts as a kilo of soyabeans, nearly four times as much to produce a kilo of beef as a kilo of chicken, and nearly five times as much to produce a glass of orange juice as a cup of tea. With 2 billion people around the world about to enter the middle class, the agricultural demands on water would increase even if the population stood still.

Industry, too, needs water. It takes about 22% of the world’s withdrawals. Domestic activities take the other 8%. Together, the demands of these two categories quadrupled in the second half of the 20th century, growing twice as fast as those of farming, and forecasters see nothing but further increases in demand on all fronts. According to my French/Lebanese fashion designer friend Rola Ezzedine, countries should avoid wasting water by adopting new technology for water preservation. Water is life and more conscience effort is required to get the voice heard globally.

The guru of water management said: We're fast draining the fresh water resources our farms rely on, warns Lester Brown, president of the Earth Policy Institute. What will happen if we carry on as we are now? Civilisation as we know it can't withstand the stresses of continuing with business as usual. It has got to move, almost on a war footing, to cut carbon emissions, eradicate poverty, stabilise population. It must also restore the economy's natural support systems: forests and aquifers and soils. No civilisation ever survived that kind of destruction; nor will ours. The world haven't gone over the edge, but we're much closer than most people think. If the heatwave that hit Moscow in 2010 had been centred on Chicago instead, USA would be in deep trouble. The Russians lost 40 per cent of their 100-million-tonne grain crop, but USA would have lost 40 per cent of our 400-million-tonne crop - a massive global setback.

How can we avert a disaster like this?

In many countries, irrigation water is free or comes at a low price, so it's treated as an abundant resource. In fact it's scarce and should be priced accordingly. It must also redefine what I mean by "security". The real threats are not some armed superpower but water or food shortages, climate change and the rising number of failed states. Food and water security are vital for countries and economic survival for many nations.

Disclaimer: This is just a research article and not an investment advice. All financial transactions carry a RISK.

Monday, March 5, 2012

The best currency to own right now--By Shan Saeed

Buy gold to get insurance of your wealth. Gold is your wealth insurance. Act fast and smart to save your wealth.

What a no-brainer to suck at the teat and go long some very transparent and liquid debt that matures in less than three years (how can there not be a rally in global risk assets when Europe's central bank pumps a combined $1.3 trillion into the financial system? Not to mention a second bailout for Greece we were told a year ago there wouldn't be any!). This must be the safest carry trade ever, or at least that is the perception. Put up a tiny bit of capital and lever it up. It is incredible that we live in a world where the difference between going out of business as a bank and prosperity lies with cheap money being accessed from the central bank balance sheet.

At least it was dealing with a possible breakdown of the system since the banks weren't lending to each other. It is clearly an overt policy move from the traditional central bank role of being the lender of last resort to being the lender of first call. There is no such thing as a free lunch, but there is such a thing as the law of unintended consequences. I can't say I know for sure what they will be or when they will show up,but there are going to be repercussions from a central bank morphing from a bona fide lender of last resort to a gift-giving institution.

Somehow a long gold, short euro barbell looks really good here. Bernanke, after all, now seems reluctant to embark on QE3 barring a renewed economic turndown while the ECB is moving further away from the role of a traditional central bank to take on the role of quasi fiscal policymaking, The German central bank, after all, is responsible for 25% of any losses that would ever be incurred by the massive Draghi balance sheet expansion. Why would anyone want to be long a currency representing a region with a 10.7% unemployment rate, rising inflation rates and free money? Mind you — the same can be said for the US (where U-6 jobless rate is even higher), which is why the best currency may be physical gold (or the producers that trade very inexpensively here and you pickup some leverage). Buy Gold and stay free from financial stress.

Disclaimer: This is just a research piece and not an investment advice. All financial transactions carry a RISK.