We thought we would try something a bit different. We are getting approximately a thousand page impression per day at present, so we think we may have reached a large enough audience to start asking a question or two.
We will leave this post at the top of template for a while to see how many answers we can collect over the coming weeks, and if this experiment works we will try again later with another question.
Our first question is about hedging. We note once again that gold and its little brother silver have hit a record which would suggest many people are not convinced the recession is really over.
Gold has hit a record high for the fourth day in a row, boosted by growing expectations for US interest rates to remain exceptionally low as the economy struggles, while silver came in range of 30-year peaks.
Obviously gold is seen as a safe haven, but is also being traded by those who think others will see it as a safe haven.
In Australia the economy is rolling along, but is leveraged to China and housing speculation which requires ever increasing private debt. Today we note that many are claiming that the Australian dollar is very overvalued.
Australia’s dollar, this quarter’s best performing major currency, is now the most overvalued.
Purchasing power parity, a measure of the cost of goods relative to other countries, shows the so-called Aussie is 27 per cent too expensive, according to data compiled by Bloomberg. The median estimate of strategists and economists is for it to weaken 6 per cent by year-end, the fourth-worst performance of 31 currencies tracked by Bloomberg.
If you believe this then gold could be a double whammy. You could get the “fear trade” and the “forex” effect all at the same time.
Maybe you believe physical gold is at the end of the line, but still think it will hold its value, so a purchase of shares in Newcrest or an up and coming gold small cap that is not exposed to iron might be your idea. We note that Ausgold found lots of the shiny stuff just yesterday according to BusinessSpectator
Ausgold Ltd has identified a 241,800 ounce JORC-compliant gold resource after studying over 100 km of previously unmapped Archaean greenstones at the Boddington South gold project in Western Australia.
However maybe you think it is all rubbish and are just waiting for a good price for RIO/BHP because China has a long way to go and India is just getting started.
If you are worried about the Australian housing bubble then maybe you are shorting the Oz banks or something more permanent such as selling your house and stowing the cash. On the otherhand maybe you think commodities are all doomed, and like the look of Government bonds. Again if you believe the overvalued AUD story then US bonds would give you a US government backed investment with a forex effect.
Or maybe you just think everything is an illusion, you are waiting for reality to catch up and are busily installing a bunker and loading up on ammo.
Lets us know. Are you hedging? and if you are how. Even if you are not, let us know how you think you should.
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