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INVESTMENT: Assessing the Global Financial Outlook: What the Experts are Saying
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If you were an alien who had just landed on Wall Street or outside any of the world’s major stock exchanges, you would probably think that we are in the midst of a raging bull market and that the economic future is very bright. A quick glance over the statistics and news headlines would certainly indicate that this is the case. However, considering a range of less than favourable underlying factors, such as the tapering off of quantitative easing policies, weak growth in the western world and the troubling economic situation in China, the recent run up in equities could well be a bubble rather than a sustainable bull market.

For this edition of our investment column we will examine what some of the experts from the world of money management have to say about what lies ahead and we will give you our own verdict on what moves you should be making to increase your own financial prosperity in the coming months.

The Bulls

The us economy is improving, not at a rapid clip, but the country has done well since 2008, at least compared to the rest of the world. The period from 2008 until now has been a much better time to buy stocks than it will be 10 years from now.

Warren Buffett, the most successful investor of all time, Chairman of Berkshire Hathaway


It’s not going to be a straight line upwards. There will definitely be some consolidations on the way up. But we are betting that if you take a longer term view, this will remain a good year for equities.

Edward Painvin, CIO of Chase Investment Counsel


The fact of the matter is that the global economic picture continues to show signs of growth. There are some shrinkages going on in Europe, but the rest of the world, particularly the Asian markets, are still growing rapidly. No matter how you slice the current figures, stocks are still set for an upward trend. When you compare the yield you can get from owning government bonds or savings accounts these days, people are really thinking hard about where to park their money for retirement, and stocks are the best option.

Ben Willis
, leading analyst at Albert Fried & Co.


I see the overall market continuing to pick up substantially. This is in contrast to the last two years whereby you had to pick individual stocks and take a risk on long term growth. This year you can really ‘throw some darts’ and see some good bounces. I am seeing a lot of positive trends, with employment picking up in the US and even just going out to the bar listening to people being interested in stocks.

Jason Raznick
, founder of financial news website benzinger.com


The Bears

We are not in the early stages of a bull market because it began back in 2009. We are now 4 years into a very weak economic expansion because it is being pumped up by central banks ‘printing money’ (QE). This policy doesn’t do much for businesses but it boosts equity markets. Sure, the corporate sector is very liquid at the moment, but nobody feels like building a new factory. Added to that, consumption has only remained high because people are continuing to get into debt. The next crisis will come soon and it could lead to a huge deflationary bust which will be worse than 2008.

Dr. Marc Faber
, prolific investor and editor of the Doom, Boom & Gloom Report


The big point to understand is that unlike past economic recoveries, government stimulus has been massive. They are trying to inflate the economy back through propping up the banking sector, but because firms are not lending they are simply creating an artificial rise in stocks and blowing up a bubble that will burst at some point in the future. We will see a massive crash in 2013-14. The Dow Jones index could easily go as low as 3-500 very soon.

Harry Dent
, financial writer and founder of HS Dent Investment Management


Real assets, commodities and currencies are the best bet if and when the world economy does recover. Interest rates will have to go up to combat inflation, which we all know is going up-despite what the official figures are saying. Keeping rates near zero is wiping out sensible savers and is rewarding risk takers. This has never had a positive effect on an economy. It is beyond doubt that we will see an even bigger economic collapse than before, most likely towards the end of 2013 or 2014.

Jim Rogers
, legendary investor and author


If you adjust the stock market for inflation we are nowhere near an all time high. Stock market investors are oblivious to the problems that we are facing in the real economy, just like they were in 2007 before the last major crash. They think that the problems have been solved and that the Fed has a credible exit strategy from its quantitative easing programs, which it doesn’t. I think we are still heading for a bigger crisis than we had in 2007-8.

Peter Schiff
, prolific author and president of Euro Pacific Capital


Business Tianjin’s Verdict

There has clearly been a lot of bullish sentiment for some time now and it probably won’t stop until either economic circumstances in the US and/or China take a turn for the worse or, more likely, the Federal Reserve announces a significant reduction of its monthly liquidity injections. Given the catch 22 situation central banks are in at the moment, it is hard to say when the monetary pullback will kick off, but the point is that it will happen at some point in the next year or so.

It is probably harder now to predict the markets and investor sentiment than it has been for decades. Our conclusion is that now may be a good time to hold on to your growth stocks, but it is certainly risky to be buying more equities given the amount of uncertainty and the current valuations of blue chip equities. If and when the major stock indexes undergo a big correction there will be ample buying opportunities which will allow you to tap into better long term capital growth!

Investment News


altInsurance giant Aviva springs back into profitability

British insurer Aviva said it had swung back into profit during the first half, recovering from a huge write-down suffered the previous year. Net profit stood at GDP 693 million (USD 1.07 billion) in the six months to the end of June compared, with a losses after tax of GBP 688 million during the first half of 2012- also on reduced costs and a jump in new product sales. Last year, Aviva tumbled into a net loss owing mainly to a massive write-down following the sale of its US business.

Source: AFP

Infonetics forecasts DDoS prevention market to grow by double digits through 2014

Market research firm Infonetics Research released excerpts from its DDoS Prevention Appliances report, which tracks distributed denial of service (DDoS) vendors and analyses DDoS appliances built to protect enterprises and carriers. According to the report, DDoS prevention for mobile networks will see strong growth, with a 25% CAGR from 2012 to 2017, thanks to the transition to IP and data, massive increases in capacity, and a new role as a juicy and highly visible target for attacks.

Source: Business Wire

U.S. steps up probe of JP Morgan over Bear Stearns mortgage bonds

The U.S. Department of Justice has stepped up a probe in recent weeks into Bear Stearns & Co's mortgage dealings in the run-up to the financial crisis, according to two sources familiar with the situation, raising the possibility that JP Morgan Chase & Co may face yet another case over mortgage bonds.

Source: Reuters

Rio Tinto stops sale of aluminium business as prices fall

Mining giant Rio Tinto says it has given up trying to sell its aluminium business and has reported an 18% fall in underlying half-year profits. Rio said it had not found a buyer and it was "not possible" to sell Pacific Aluminium in the current environment. Many commodity prices are well below the record highs of recent years as China's economic growth rate slows. Rio said lower iron ore, copper and coal prices all contributed to the fall in profits. Pacific Aluminium, which has five aluminium smelters, a bauxite mine and an alumina refinery in Australia and New Zealand, was put up for sale in 2011.


By Josh Cooper
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