Dear Friends,
I talked about a high possibility that the world stock market will continue to rally after the Dow Jones Index has reached historical high. This prediction seems to be still holding out. The world markets pushed upwards with many markets attaining new historical high.
Higher & Higher
It has been 6 months since the market correction on May 10 occurs. During those days, the market is fearful of an economic slowdown due to excessive interest rates hikes. We have spoke of the horrors of the Asian Markets when it went on a freefall. Now that all these are over, we are experiencing a great boom in the stock market. New highs have been reached.
The Slowing Economy
Major economies in the world are exhibiting slowing economic acitivity and this is expected to persist well into year 2007. How will this affect the world market? The question now is that whether a slowing economy will lead to a recession or just merely stagnatation. A recession of course will lead to a major fall of commodity and equity prices whereby a stagnation will merely result in a mild correction and flat stock market. Data from US for the next few months will be crucial in putting the final puzzle in place and a more defensive action in bonds and property will probably be the best bet for now.
The Shine of Gold?
Gold prices has corrected sharply since the early part of the year and has been stagnating at $600 since than. Has gold become attractive since than? The problem of gold is that there is no proper way to value whether it is too expensive or too cheap. The reason is because gold has no practical use in our everyday life and manufacturers could find little use of it other than as ornaments. Gold does not produce a dividend, unlike equities, bonds or property and gold mining companies are usually not very profitable. Therefore, the two only reliable data for gold is the demand of it as a jewellery and the state of the US dollar.
The main demand of gold as a decoration are from Asia, particularly the Indians and Chinese. With their affluence raising, demand for gold has appreciated tremendously. Secondly, many analyst are predicting a slow down in the US economy and the central bank may lower interest rates to boost the economy. A relatively lower interest rate will usually lead to a depreication of US dollar and gold might just sparkle again.
The Last Word
The year end bull run looks unstoppable now. We will continue to monitor the data coming in from US and that should give us an idea, the direction we should go next.
I talked about a high possibility that the world stock market will continue to rally after the Dow Jones Index has reached historical high. This prediction seems to be still holding out. The world markets pushed upwards with many markets attaining new historical high.
Higher & Higher
It has been 6 months since the market correction on May 10 occurs. During those days, the market is fearful of an economic slowdown due to excessive interest rates hikes. We have spoke of the horrors of the Asian Markets when it went on a freefall. Now that all these are over, we are experiencing a great boom in the stock market. New highs have been reached.
The Slowing Economy
Major economies in the world are exhibiting slowing economic acitivity and this is expected to persist well into year 2007. How will this affect the world market? The question now is that whether a slowing economy will lead to a recession or just merely stagnatation. A recession of course will lead to a major fall of commodity and equity prices whereby a stagnation will merely result in a mild correction and flat stock market. Data from US for the next few months will be crucial in putting the final puzzle in place and a more defensive action in bonds and property will probably be the best bet for now.
The Shine of Gold?
Gold prices has corrected sharply since the early part of the year and has been stagnating at $600 since than. Has gold become attractive since than? The problem of gold is that there is no proper way to value whether it is too expensive or too cheap. The reason is because gold has no practical use in our everyday life and manufacturers could find little use of it other than as ornaments. Gold does not produce a dividend, unlike equities, bonds or property and gold mining companies are usually not very profitable. Therefore, the two only reliable data for gold is the demand of it as a jewellery and the state of the US dollar.
The main demand of gold as a decoration are from Asia, particularly the Indians and Chinese. With their affluence raising, demand for gold has appreciated tremendously. Secondly, many analyst are predicting a slow down in the US economy and the central bank may lower interest rates to boost the economy. A relatively lower interest rate will usually lead to a depreication of US dollar and gold might just sparkle again.
The Last Word
The year end bull run looks unstoppable now. We will continue to monitor the data coming in from US and that should give us an idea, the direction we should go next.
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