Is Friday again, just as the last when I attempted take a position in US Treasury. That position worked pretty well but the sellers were quick to return on the next trading day. The dead cat bounce in US stocks continued for a week or so and now the S&P 500 is hovering between 900 and 1,000. Warren Buffett [1] was on the record recently saying that he would rather own stocks than anything else. In fact, between Gold and stocks, he would prefer stocks. Readers of bhc investment knew that I had long said Gold and commodities will outperform stocks in the long run -- that remains the core of our investment thesis. So is fair to say that our investment thesis is now in disagreement with Buffett's. I could write about these more in the coming days and weeks I suppose -- is not the first time I found myself in disagreement with some of the legendary names.
Italy could impose tax on Gold.
I am not going to talk about Gold, because I already did when the herds were panic selling. Gold is dumb. It's not a company that can generate revenue and profit. Gold works when there's monetrary inflation -- as simple as that. In fact, we would like to caution readers once again that Gold is the ENERMY of central banks. If governments impose taxes on Gold or the IMF does sell its Gold reserve, it can easily take it down a great deal.
"I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola will be making money, and I think Wells Fargo will be making a lot of money and there will be a lot – and it's a lot – it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that. The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset."
-- Warren Buffett
But now I am just going to focus on the following:
- S&P 500, China
- Japanese Yen, US Treasury
We at bhc investment never bought into the Decoupling Theory, not before the credit crisis, not now. China is, afterall, an export economy. It should have and could have developed a domestic consumption economy during the boom time, but it didn't. Recent rally in the S&P as well as Shanghai, in my view, is nothing more than some sort of LIQUIDITY DRIVEN STUPIDITY. The Fed is printing like crazy, so is the Chinese. All these can pop things up in the short run but is not going to be enough to reflate the bubbles. Therefore, I am going against the consensus here: S&P 500 will fall, so is China. Enough said.
The Yen and US Treasury will be the safety trades that I believe will be taken by the smart money.
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