Gold Rush or Dollar Hold Up

Much has been said about the current gold rush. Unlike the one in California, 21st century 49ers can be found in any corner of the world.

According to www.24hgold.com in the last 52 weeks (April 25th, 2010 - 2011), gold has risen 32.67%. A nice return for an American investors, however, for a Swiss investor this is not quite true. Gold has risen a mere 8.84% indicating a 23.83% loss of value from the USD. 

As you can see from the table below is a combination between a rush and a hold up!

	Gold Price Change April 25th 2010 - 2011 in local currency
	CHF	AUD	JPY	GBP	CAD
Gold Rush	8.84%	14.68%	15.76%	23.52%	26.30%
USD Hold Up	23.83%	17.99%	16.91%	9.15%	6.37%

Got MILA ?

Later this month the integration of the stock markets of Chile, Peru and Colombia will begin.
What does this mean?  A new trans-national stock market is created; MILA (Mercado Integrado Latinoamericano). Investors from these countries will be able to freely invest in each other.
How big of a deal is it? Well it will have 564 companies listed in it. Compare that to 406 in Mexico or 386 in Brazil

There is even talks about inviting Mexico to participate.

What do you think?  Got MILA now?

BRICs or BICs or nothing?

Are the BRICS falling out of favor? It looks like it in the next chart.  Returns for the last 6 months of several ETFs are plotted.
PEK=China, INDY=India, RSX Russia, EWZ=Brazil, GSPC= S&P500... Only Russia outperforms...
Do they really?


   

The next chart shows what happened with exchange rates for the last 6 months...

Russia greatly underperforms, taking all the gains away

BRICs or BICs or nothing?

Mantega and the BRICs

Guido Mantega, the finance minister of Brazil became famous when he stated in September of 2010 that "We’re in the midst of an international currency war". This statement was aiming at how countries were manipulating their currencies (lowering) to acquire a competitive advantage in international markets.
What has happened since then?

QE1 and QE2

What has been the effect on the BRICs?

The USD has lost value amongst all BRIC currencies, specially the RUB and BRL.

Was Mantega right?

Codelco

Codelco, the state owned copper producer is huge. With 2010 sales of $16 billion, it represents almost 10% of Chile’s GDP ($160 billion in 2009). What should Chile do with it? One thing is to keep it, run it and benefit from it. This alternative forces Chile to deal with commodity price risk. Does Chile really want to bear this risk?

Another alternative is to sell it. How much? Well… P/E ratios in the industry range from 9 -15 times. If we take a conservative 10, then Codelco's $5.8 billion in earnings would turn to $52 to 87 billion valuation. Not bad? People tend to get greedy. According to a study made by Goldman Sachs in 2005 Chile would have been happy to get $26 billion for it. Looking at the price of copper it looks hard to find a better time to sell. If you think the price of copper will go higher, then sell only 10% of Codelco.

Chile spends $10 billion per year in education.  How different would Chile’s future be if we could increase spending by 50% for the next 20 years? 

It is my opinion that investment in education is the only way to break into the developed world.

The real unemployment

Unemployment is particularly hard to measure. What to do with those who are unemployed but not looking for a job? Are they "resting" or simply gave up looking after trying so hard?
How about those who are working a job they don't want (perhaps waitresses and bartenders) but need the money? How do we count those who are working part time but would like more hours?
The official un-employment figure, around 9 percent, simply ignores them

The latest Gallup poll published in IBD shows a more comprehensive picture. If we include them, unemployment is closer to 20% than to 9%.

Gadaffi: Good of bad for oil?

I made this chart based on intrade figures and oil prices (iPath S&P GSCI Crude Oil TR Index ETN ).

As the chances of Gadaffi being ousted are decreasing, oil prices are not. It tells me in the early stages of the crisis, the colonel staying was a solution, now Gadaffi's staying in power is becoming a liability.