Wednesday, January 4, 2012

Growth will be sub-par in Europe----By Shan Saeed

Europe is on the road to recession. Austerity is contractionary in nature. Governments need to use cut tax and stimulus in order to avoid the economy going into recession or might be zero growth in Europe. Tax hike and stimulus cuts may not be able to revive the economic growth.
Austerity measures such as tax hikes and public-sector layoffs imposed in debt-ridden southern European countries may be going overboard. Countries such as Greece have agreed to undertake tough austerity measures in exchange for aid or investor turnout at bond auctions, although layoffs and tax hikes designed to streamline the public sector and ease debt burdens mean less tax revenues down the road.

Less people working means less money coming back in for the government. Plus, a small government means less economic output as well meaning lower GDP growth, less income, lower purchasing power and decrease in living standards of people. Every government in Europe with the exception of Germany is bending over backwards to prove to the market that they won’t hesitate to do what it takes. They are going straight into a wall with this kind of policy. It’s sheer madness. Europe is heading for recession. "Europe is likely to have a meaningful recession in 2012.
While U.S. businesses may not be directly exposed to problems in Europe, protests stemming from austerity measures could spark worries in U.S. capital markets. US might be hit as well.

Powerful street protests could bring it back to the front pages. I have seen episodic crises in Europe over the past two years. It's a recurring event. Greece, Spain, Italy must prepare for another tough year that includes sticking with austerity measures. A very difficult year is ahead of Europe. It must continue the efforts with decisiveness, to stay in the euro, to make sure some countries do not waste the sacrifices and do not turn the crisis into an uncontrolled and disastrous bankruptcy

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

Monday, January 2, 2012

Gold prices to set record highs in 2012 by Shan Saeed

Gold prices may be off from highs seen earlier in 2011 but get ready for a rebound because gold is set to soar again and may break records in 2012. Gold prices broke records in 2011, shooting to over $1,923/oz on 6th September although they have fallen by about 16 percent more recently. Gold appreciated 12% in 2011. As the prognosis for U.S. recovery looks better, the outlook for Europe looks even worse. That scenario allowed the dollar to resume its status as a safe haven asset that it lost amid economic uncertainty, which sent investors running to the yellow metal on fears the dollar was getting too weak. Dollar is a bubble which might bust going forward. Chinese yuan is the next global currency. All big investors are placing bets on Chinese yuan since its appreciation is on the rise for the last 5-years

While Europe [ esp PIIGS] debt crisis looks increasingly worse, investors will still run to dollars early in 2012, but watch out for gold bugs jumping back in later in the year, when inflationary pressures rise in the U.S. as a side effect of loose monetary policies over the last couple of years. Although investors are currently not focused on an inflationary environment, longer term I believe with the amount of stimulus injected globally and higher inflation expectations will continue to support investment demand in gold. Others agree that as long as bad news seeps in from Europe and while the U.S. recovers amid a sea of inflation-fueling liquidity, gold will rise again even if at a more modest pace. The gold price is primarily supported by investment demand. Investors look to gold as a safe haven and the limited supply of the metal could push prices to very high levels in 2012, potentially exceeding $2,000 in the next six months

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