German Bundesbank Slashes Growth Forecasts
The Bundesbank (the central bank in Germany) slashed its forecast for economic expansion in Germany for 2013 after the sovereign debt crisis pushed the euro area into recession and global growth slowed.
The Frankfurt-based Bundesbank cut its 2013 projection to 0.4 percent from the 1.6 percent predicted in June and said the economy, Europe’s largest, will grow 0.7 percent this year, down from its previous forecast of 1 percent. The economy will contract in the fourth quarter and stagnate in the first, the Bundesbank said. It will expand 1.9 percent in 2014, according to the new forecasts.
Furthermore, the Bundesbank revised down its 2013 inflation forecast for Germany to 1.5 percent from 1.6 percent and predicted annual consumer price gains will average 1.6 percent in 2014. This year, inflation is seen at 2.1 percent. That may help alleviate German inflation fears and open the door for further interest rate cuts by the European Central Bank.
ECB President Mario Draghi said the euro area would not be able to shake off its slump until the second half of next year.
Some Gold Traders More Bullish, some less
Gold traders are the least bullish in seven weeks as Goldman Sachs Group Inc. said the metal’s longest winning streak in at least nine decades will peak next year amid accelerating U.S. growth. Fourteen of 31 analysts surveyed by Bloomberg expect prices to rise next week and 10 were bearish. A further seven were neutral, making the proportion of bulls the lowest since Oct. 19. Goldman lowered its 12-month estimate by 7 percent to $1,800 an ounce on Dec. 5 and said the metal would average $1,750 in 2014.
However, Morgan Stanley said bullion will be among next year’s best-performing commodities. Some are saying it is a good time to use this possibly last low as an opportunity to buy!
Is a Global Gold Supply Crunch Forming?
A number of market analysts and gold-industry insiders are warning about a possible shortage of gold supply. Barrick CEO Jamie Sokalsky recently stated that since gold production is inelastic (i.e., insensitive to price changes) there will be a very limited increase in supply from gold producers, even during sharp increases in the gold price.
The issues facing gold miners are well-known: depletion of existing mines, lower grades, and fewer new discoveries – especially big and rich ones. Further, miners face increased calls for nationalization, demands from workers for higher pay or from local communities for better infrastructure, and – of course – environmental concerns. Many mining company representatives say it’s getting harder to not only find large deposits but to get those deposits into production. Some estimate it now takes twice as long to go from discovery to production vs. a decade ago.
Commodity Super Cycle Is Not Over
Growing populations and urbanization in emerging markets will fuel raw-material demand, indicating the bullish commodity “super cycle” hasn’t ended, said Renee Haugerud of Galtere Ltd.
“I definitely don’t think it’s over,” Haugerud, the founder and chief investment officer of the New York-based hedge fund, said in an interview on Bloomberg Television’s “Market Makers” with Stephanie Ruhle and Erik Schatzker. “Stocks-touse are extremely low. We’ve got 20- to 40-year global lows of supplies.”
Best Picks for 2013, According to Morgan Stanley
Morgan Stanley reiterated its call for gold, silver, corn and soybeans to outperform other raw materials as a weaker U.S. dollar and investor demand bolster precious metals and supply curbs support grains. Silver will track higher prices in gold, which is poised to rally on low real interest rates, buying by central banks and more geopolitical uncertainty, analysts including Peter Richardson and Hussein Allidina wrote in a report. Corn and soybeans should benefit from production delays in South America, they said. The bank is bearish on aluminum, nickel, sugar and uranium as supplies are set to outpace demand.
Morgan Stanley joins Goldman Sachs Group Inc. in predicting the so-called super-cycle isn’t over. “Higher prices in recent years have brought both a supply and demand response, bringing many to call for the end” of the super-cycle, the analysts wrote. “We view this as too simplistic. Commodities are cyclical, but the elasticity of supply and demand, as well as the length of the cycle, varies significantly across the complex.”
Best Places to Be Born in 2013, and Beyond
Though America may be the “land of opportunity,” Switzerland will be the best place to be born in 2013, according to a quality-of-life index from the Economist Intelligence Unit. Income estimates for babies born in 2013 are based on projections for the year 2030, when those children will come of age.
The top ten best places to be born in 2013:
7. New Zealand
10. Hong Kong
Argentina’s 11-Year War with Hedge Funds
A story you should read and think about thoroughly… It is not covered prominently, although it does have considerable implications, and not just in Argentina: Since it defaulted on its debt more than a decade ago, Argentina’s economy has engaged in a Cold War of sorts with international investors. Buenos Aires stuck bondholders with a take-it-or-leave-it exchange offer of 30¢ on the dollar, the harshest sovereign debt haircut in at least half a century.
However, a hardy group of “holdout” creditors, including U.S. institutional investors and a handful of elderly Argentinean pensioners, refused to participate in the nation’s 2005 and 2010 debt restructurings, wagering that they could band together to get better terms out of Buenos Aires. Last month’s scorched-earth volley: A court in Ghana, of all places, detained an Argentine frigate at the request of a hedge fund that says Buenos Aires owes it $300 million on old debt. Argentina escalated the affair to the United Nations.
The nervously awaited outcome could either sink Argentina’s economy or make it ever more hostile to the global capital markets. And what might the international court’s ruling imply for other possible defaults and restructurings…?
Brits Continue to Prefer Running Their Own Ship…