Chinese stocks are screaming! Ned Schmidt says that Westerners poured $11 billion into the Chinese stock market in one month alone. To do that, most investors must sell dollars and buy Chinese renminbi, which Ned believes will eventually crumble the dollar. Jeff Christian of CPM Group expects gold to resume its secular bull market this year. Don Coxe is bullish on stocks but believes a cornered Putin is much more dangerous and fears a major geopolitical black swan event in 2015. And Satyajit Das discusses the striking parallels between the 1997-1998 Asian currency crisis and today.
Here are a few excerpts from this week’s set of interviews, which recently aired to our subscribers (click here for more info).
Ned Schmidt believes hundreds of billions of US dollars being sold to buy Chinese stocks will crumble the dollar in the years ahead:
On November 17th, China opened up stock trading to the Western world. That market is screaming. It's up 50% in the last six months. It was up almost 25% this month. They're going to settle $485 billion worth of IPOs. Now [for the first time] Western investors can buy Chinese stocks through Hong Kong. So far, in one month, they've bought $11 billion in Chinese stocks. Now, to do that, you have to sell $11 billion in dollars and buy $11 billion in renminbi to buy the Chinese stocks. Well, if you annualize it, it's working out to something like $100-$125 billion at an annual rate. We've got $100 billion of dollars being sold going into the Chinese market. And it's not just going to happen this year—it’s going to happen next year, and every year because there's no big money manager than can avoid the Chinese stock market. I mean, this stock market is going to double in the next five years. With all that money coming out of dollars and into renminbi, the dollar is going to crumble…(click here for more)
Gold’s secular bull market will likely resume in 2015 and see sharp increases in a couple of years, says CPM Group’s Jeff Christian:
Do you think the bear market in gold since 2011 will continue further as it did in the 80s and 90s?
No…the underlying economic issues are worse now than they were then—larger deficits, larger debt, more structural deficits in Europe, Japan, and the United States, greater volatility in the currency market, reduced international cooperation among governments, reduced domestic cooperation within the US government—all of those problems are worse than they were then so…we started saying in 2010 that we felt we'd go through a cyclical dip/decline in a secular bull market. And we actually issued a buy recommendation on gold at $1180 in June of 2013 and we thought that would be the low and it was the low until late last year until it dipped down to $1130 for a period of time. So, we think that the period from 2011 to 2014 probably represents the cyclical bear market and from 2015 forward we think that we resume in the bull market but we don't think that the prices are initially going to rise as sharply as they were in 2006-2008…(click here for more)
Don Coxe says another major geopolitical event is the greatest black swan facing 2015:
What is the greatest risk to the markets this year in your view?
I think it's mainly geopolitics. I'm worried that Putin may feel he's cornered and a cornered bear is more dangerous than one that's peacefully grazing on blueberries. And I'm concerned about whether or not a deal is going to be done with Iran and if Iran gets a nuclear bomb the risk in the world will expand exponentially. So, it's not economics and it's not even politics that can produce a terrible outcome for us—it’s geopolitics. Geopolitics was the most important event in defining financial returns last year. People were surprised by what the Saudis did and I have a feeling that also this year it will produce a surprise…(click here for more)
Satyajit Das on parallels to '97-'98 currency crisis:
I have a lot of scar tissue on my body from 1997-1998 because I had quite a degree of involvement particularly after the crisis helping unwind some of the problems that occurred. So…there are similarities [between now and then] and the most striking thing is you will recall that the 1997-1998 crisis had probably 3 components. One was the Asian monetary crisis, which was really an emerging market crisis. The second was problems in Russia and the third was, flowing from the first two, the problems that hit a hedge fund called Long term Capital Management. And we certainly have two of those elements now present, which are Russia and the emerging market. So let's talk about what this is doing. The first thing is that debt in emerging markets is much much higher than it was in 1997-1998. And what happened during that time is that it was a result of very aggressive easing by Japan and the parallel is very striking on that front as well—the US dollar started climbing. And what it did was trigger huge problems for companies which had borrowed very heavily in US dollars because of the low interest rates and a belief that their currencies were somehow pegged to the US dollar and I personally think that the parallel is actually very relevant because if the Fed—and I think it's still an if—they push up interest rates, that combined with the stronger dollar will have huge problems for some of these countries...(click here for more)
Our market technician for this Saturday’s podcast is “bullseye” Craig Johnson from Piper Jaffray whose year-end forecasts for the S&P 500 have been extremely accurate for the past two years. He’ll provide his 2015 outlook and forecast for the market, which you won’t want to miss. Then, on the Big Picture, Jim Puplava outlines the consensus view and also lists the wild-card, outside-the-box predictions of such forecasters as Byron Wien, Doug Kass and Saxo Bank, the Danish investment bank famous for outlandish predictions. All of the above is available on our Newshour Podcast page this Saturday. Be sure to tune in through our site or in iTunes!
