January 22, 2011

Market Wrap: for the week ending 21-Jan-2011

Weekly Snapshot
• Gold posted a third straight weekly loss, Silver dropped to a seven-week low (Bloomberg)
• Irish Prime Minister has been forced to call an early election on March 11 (FT)
• China's economy grew a faster-than-expected at 10.3% in 2010 (FT)
• German IFO business-climate index rose to a new record of 110.3 (WSJ)
• Larry Page new CEO at Google; Eric Schmidt to chair Google's board (AP)
• The leading economic index for the U.S. increased 1.0% in December to 112.4 (Conference Board)
• Brazil raised its benchmark interest rate by 50 basis points, to 11.25% (Economist)
• China's economic growth accelerated to 9.8% in Q4, beating consensus estimates of 9.6% (Bloomberg)
• Apple CEO Steve Jobs announced an indefinite medical leave from the company (Reuters)
• Worldwide oil consumption in 2011 is projected to rise by 1.6% to 89.1 million barrels per day (IEA)
• Goldman Sachs will only allow non-U.S. investors to participate in a private offering of Facebook shares (WSJ)
• US regulators have missed or postponed several deadlines for writing final versions of Dodd-Frank rules (WSJ)

Market Barometers 

st-2011-0121 fx-2011-0121

Chart Of The Week
Courtesy of the Atlantic Magazine, please consider this insightful chart of how the recession changed us.

Source: www.theatlantic.com

Is There A Direction For Precious Metals?
The year 2011 hasn't started all that well for precious metals. Bearing the 3rd straight weekly loss in a row, Spot Gold closed the week at $1,343 per ounce. Silver is off almost 12% since it reached a 30-year high during the first week of this year. Taking nothing away from an incredible bull-run during the past decade, investors should keep in mind that precious metals are in essence commodities even though gold and silver are often considered investment assets. As such, an investment in gold or silver provides no inherent yield other than price appreciation. The commodity aspect comes to light now and then when prices are on the run. From the perspective of the average investor therefore, an investment in precious metals is not to be taken lightly, particularly the slightly dubious sounding gold investments touted on TV ads. 

In terms of assessing prices it helps to remember that a fair amount of the recent precious metals price increase was driven by the loss of value (both perceived and actual) in the US Dollar. When you value Gold in other currencies, its price strength is somewhat muted, particularly against high yielding currencies such as the Australian Dollar. From the perspective of the Australian Dollar, Gold had already peaked in early 2009 and has since been in a sideways pattern. If you believe the technicians, we should soon find out where Gold versus Aussie Dollar is leading to as a break-out from this triangle pattern should emerge in the coming months.

Gold valued in Australian Dollar

Musical Chairs 
The curious mind is wondering about some of the recent changes in corporate management – a game of musical chairs or a revolving door?

  • Google co-founder Larry Page is replacing Eric Schmidt as CEO; Schmidt will become executive chairman of the board.
  • Hewlett-Packard announced that four directors would be leaving its board. New board members are: Meg Withman, former CEO of eBay; Shumeet Banerji, CEO of Booz & Company; Gary Reiner, former CEO of GE and a current special advisor to private equity firm General Atlantic; Patricia Russo, former CEO at Alcatel-Lucent and Dominique Senequier, CEO AXA Private Equity.
  • Peter Orszag, the former budget czar under President Obama is now vice-chairman of global banking at Citigroup.
  • GE’s CEO Jeff Immelt will chair the President's Council on Jobs and Competitiveness.

And on a sad note, Apple CEO Steve Jobs announced an indefinite medical leave – wishing him all the strength to win the battle against his disease.

Music Sales 
Speaking of music, the Wall Street Journal reported that the recent weekly sales of music albums marks a low point, underscoring waning sales of music…

In the latest sign of waning consumer demand for recorded music, the Billboard 200 album-sales chart just registered a dubious distinction: The No. 1 position was held by an album that sold fewer CDs and downloads than any predecessor since at least 1991, when accurate weekly tallies first became available.

Along with this, I’d like to share a fascinating chart of the media universe, courtesy of Nielsen.

Source: http://blog.nielsen.com

Recommended Video 
It’s all about China these days.  This week’s state visit by the Chinese Premier Hu Jintao in Washington only ads to the plethora of news.  Along with the markedly greater interest and the obvious stronger role China seems to have on the world stage these days, there seems to be an overabundance of China experts as well. Some of the most vocal ones however, are not Chinese.  It is almost a rare event when a slightly more outspoken assessment of China’s economic and political ambitions is actually expressed by a Chinese individual. In a recent FT video, a panel of experts were debating on how China was shaping the world. Steve Tsang, fellow of St Antony's College in Oxford, had a number of interesting things to say, I thought.
But were the Western “experts” really listening to what the Chinese China expert had to say?  See for yourself…


Good luck and good investing!

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