If you’re looking to short Western currencies, one possibility is to short them against emerging-market currencies, such as the Chinese yuan, the Indian rupee, the Brazilian real and the Russian ruble.
India and Brazil are running large government budget deficits, in spite of their amazing booms, and both currencies are highly vulnerable to a sudden monetary tightening or a downturn in the global economy.
China, tightly manages its currency. There is certainly potential for the yuan to rise, provided that China maintains its present policy of allowing fairly free inflows of foreign capital while barring outflows of its own savers’ money.
Canada and Australia are reasonably well-run countries with large commodity exposures. So they should do well as long as the current commodity boom continues.
In the Asia-Pacific region, South Korea, Taiwan, and Singapore all have superbly-run economies that are structurally sound.
A currency portfolio that contains those five currencies – the South Korean won, the new Taiwan dollar, the Singapore dollar, the Canadian dollar, and the Australian dollar – could thus be relied upon to maintain its value better than most.
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Gold prices will hit $2,500 in the near future.
Government Pushing Gold in China, although it’s rarely mentioned in the Western media, the Chinese government is encouraging their citizens to buy physical gold bullion as part of an effort to cool further investment in the red-hot real estate and housing sectors.
“Unlike the property market, investment in the gold sector is something the government is encouraging,” ICBC’s Zhou told Reuters.
“There is frantic demand for non-physical gold investments. We issued 1 billion yuan ($151 million) worth of gold-price-linked term deposits in 2010, but we managed to sell the same amount over just a few days in January this year,” Zhou said, adding that investors will deposit more than 5 billion yuan ($759 million) in gold-linked accounts this year…
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Right now, China is where America was back at the dawn of the Industrial Revolution, and into the 1800s. Development is highly concentrated in the coastal regions, the financial system is maturing and the country’s economy is characterized by rapid growth across the board. And everything – from intellectual property to real estate values – is under tremendous pressure … to grow. So there are some real parallels. China is not going to stop growing anytime soon nor is it going to fail. But it is likely to have some hiccups…again, just as we did with two world wars, the Great Depression, 20 or so recessions and all manner of boom-and-bust cycles. Some of those hiccups will be quite wrenching in nature.
The key will be to “follow the money” into the best profit opportunities. And no matter what happens, there will always be opportunities – if you know what to look for.
I am convinced that China will affect every asset class on the planet – even if only indirectly – for the rest of our lives. I am also convinced that it represents the single-greatest-wealth-creation opportunity of our time, which is why I have spent a good portion of my life and career in the Pacific Rim – studying, participating and actively investing in related markets.
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