No solid consensus view from Agora conference in Vancouver
Posted on 24 July 2009 with no comments from readers
Perhaps it was to be expected in the current environment that even contrarian investors seem unable to make up their minds what to buy or short. The 800 speakers and visitors to the Agora Financial conference in Vancouver, Canada this week seemed unsure and a few brave souls even challenged the ruling mantra that gold is good.
They were of course strongly rebuked. South African gold analyst Paul Van Eeden upset some with his view that gold has a fundamental value of $815 and that silver was the most overvalued of the metals.
Both valuation methodologies can be easily challenged. Also markets are always heading to over or under valuation so establishing a base point is not necessarily very helpful in predicting where precious metal prices might go next.
Stock rally doubts
Last year apparently the Agora event was strongly negative about the outlook for stocks, and was very soon proven spectacularly correct. Now there is a reluctance to challenge the bear market rally, although Dr Marc Faber was drawn to say that it looked overvalued. But again markets can remain irrational for longer than many can stay solvent.
Shorting bonds seemed a more popular choice as the bond market has already started a down trend this year, and the scale of US government borrowing to come suggests that further weakness will emerge. But when that might occur is a far more difficult call and short positions are vulnerable to mistiming.
Where a consensus probably did emerge was a belief that there is a worse financial crisis to come. If there is a recovery of some kind now then it is just a postponement of the final day of reckoning.
Stimulus confused with recovery
This thesis rests on the idea that the government bailouts and stimulus packages have been so big that it was bound to produce an upturn, but other than that nothing else has fundamentally changed. Indeed, more debt is bound to make a problem caused by excessive debt even worse with inflation and devaluation down-the-line.
My own view is that contrarians are a bit caught in the headlights of the charismatic new president and a human desire to think things can not possibly get worse. But the die-hards remain.
Newsletter publisher Doug Casey said that in many respects the recession had not really started. And you know just a simple extrapolation of previous downturns suggests that he just has to be right.
The trend is always for a multi-year growth pattern and a multi-year down swing. It is hardly likely to be different in the worst recession since the 30s.
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So much for greenshoots in the UK:
By AFP on Friday, July 24, 2009
Britain’s recession-battered economy shrank in the second quarter of 2009 at its fastest yearly pace since records began, official data showed Friday.
Gross domestic product (GDP) contracted by 5.6 per cent in the three months to the end of June, compared with the same period of last year, the Office for National Statistics (ONS) said in a statement.
The economy also shrank 0.8 per cent during the second quarter, compared with the first three months of the year. That marked the fifth quarterly economic contraction in a row as the recession tightened its grip.
“GDP decreased by 0.8 per cent in the second quarter of 2009, compared with a decrease of 2.4 per cent in the first quarter,” the ONS said.
The British economy had already contracted in the second, third and fourth quarters of 2008, as the country sank into a fierce recession as a result of the global financial crisis.
“The provisional UK GDP figures for Q2 are shockingly bad and firmly dash any hopes that the UK had already pulled out of recession,” said economist Vicky Redwood at the Capital Economics consultancy.
Stick with gold it is going up!