---------- Forwarded message ----------
From: Ashok Samtani <ashoksamt...@gmail.com>
Date: Mon, Feb 1, 2010 at 6:10 AM
Subject: 3 REASONS
To: Ashok Samtani Emperor - HK <ashok.empe...@live.com>

  Dear All,
Please find attachment sent to my exsisting clients on December 8, 2009 & an
alert issued on Nov.8,2009
Best wishes
Ashok

*****

Nov.8,2009

*BEWARE OF BUBBLES FORMED IN ASSET MARKETS *

*AS RISK & CARRY TRADE MAY BE TAKEN OFF THE TABLES AT ANY IMPULSE  *

*The Next Bust: The "Risk Trade" *

A lot of focus was given to the central banks' meetings this week.

That's because a lot of people would really like to see target rates start
moving up from their low levels.

Some argue for higher rates because they think the world is returning to
normal and the emergency policy

responses need to be removed sooner rather than later to avoid a date with
inflation.

Others are concerned that all of the ultra-easy money will result in asset
price inflation, another bubble and ultimately another bust.

But clearly, the central banks have different concerns.

This week ...The Federal Reserve kept rates unchanged and made no material
change to its statement.

The markets were looking for some language change that would open the
opportunity for an earlier rate hike.

But the Fed did not oblige.

Result: Dovish.

Next it was the Bank of England. The BOE kept its benchmark rate unchanged
and went further in the easy money hole by expanding,

for a second time, its asset purchase program. Result: Dovish.

And finally the European Central Bank followed suit and left rates unchanged
and its bank liquidity program intact.

Result: Dovish.

To sum it up, the central banks continue to position themselves to
accomodate the challenges in the real economy.

Now, for those who have been pleading for higher interest rates ...

While I disagree with the first crowd, the one that thinks economies are
returning to normal, I don't completely disagree

with the second crowd, those concerned about asset bubbles.

First, the U.S. economy and major global economies are nowhere near reaching
a point of sustainable growth,

much less normalcy. In fact the European Central Bank President, Jean-Claude
Trichet, put it very plainly ...

The U.S. economy just printed its first positive GDP number in five quarters
and most of it was attributed to government spending.

Indeed, the purpose of government spending is to get the economy moving. But
the idea is that in the process you create jobs ...

new industries ... demand. And that just hasn't happened.

So the people who think we're back to business as usual have their heads in
the clouds.

I don't completely disagree with them. They fear another asset bubble. And I
think they're dead right.

It's here. Stock markets, commodities, currencies ... all 30%, 50% ... even
100 % higher in past 8 months!

Financial assets have rocketed from their March lows and for no fundamental
economic reason.

Is it because of the mountains of capital that have been plowed into the
system through stimulus programs has ended up in financial assets?

In some cases, clearly yes ...

Take China for instance. Its economy couldn't absorb the massive
half-trillion dollar stimulus and uber-aggressive bank lending.

So that money found its way into investments like the Chinese stock market.
So easy money can find its way into financial markets, for sure.

But can the major economies of the world, namely the U.S., afford to tighten
up the belt to keep this under control?

In my opinion, absolutely not! And that's where I disagree with the second
crowd.

Financial asset bubbles are one thing, and they are a risk. But most of the
risk, at this stage, is to investor and consumer confidence.

A bust that would bring financial assets back in line with the fundamentals
of the economy would be another major blow to sentiment.

And that could be the trappings for another recession — even a depression.

But the *guaranteed danger *right now is the real economy, real asset
deflation, and evaporated demand.

The threat of a sharper deterioration in the real economy leads to a
complete stand-still in economic activity ... i.e. a date with depression.

That's the battle central banks are most worried about.

If you've concluded that this looks like a lose-lose scenario for the U.S.
and the highly interconnected global economy — I'm afraid you're right.

A likely best-case scenario is a very slow and painful rebuilding period,
where weak demand and lower standards of living rule.

The worst-case scenario: A bout with global depression.

As for bubbles in the financial markets, better known as the "risk trade,"
that day of reckoning is coming when prices revert back to fundamental
sanity.

And the time might be closer than many people think ...

*****

*10.2% Unemployment Today on the Way to 33% Tomorrow. *

With one out of every 10 people not working in the United States, could it
get worse?

Yes, if the economy sinks into the deflationary depression

The 10.2% unemployment rate announced on November 6 is the worst in 26
years.

But even that number doesn't reflect the real rate of unemployment.

As a Nov. 6 Associated Press story explains:  "The 10.2 percent unemployment
rate does not include people without jobs

who have stopped looking for work or those who have settled for part-time
jobs. If you counted those people,

the unemployment rate would be 17.5 percent, the highest on record dating
from 1994."

As bad as that unemployment level is now, the upcoming bear market and
accompanying deflationary depression will make it worse,

like the Great Depression of the late 1920s and early 1930s.

"As we have long argued, because the current bear market is of one larger
degree than that of 1929-1932, the depression it creates will be deeper,

which in turn means that the unemployment rate will exceed that of 1933.

The peak rate in 1933 was 25 percent.

Therefore, unemployment in the U.S. should rise to about 33 percent at the
trough of this depression.

Fitting this expectation, U.S. job losses in the fourth quarter were greater
than at any time since 1945, when World War II ended and defense factories

shut down to re-tool. Even after this plunge, however, the 'official'
unemployment rate is just 7 percent.

But the true unemployment rate, as it would have been measured before the
era of government support payments and statistics-fudging such as omitting

the number of people who give up looking for work, is currently 17 percent.
So we’re halfway there.

'When the bust occurs,  governments won’t have the money required to service
truly needy people in unfortunate circumstances.' It’s starting to happen:

Agencies administering state governments’ 'unemployment benefits' are
swamped and running out of money.

In a depression, taking funds from healthy companies to pay people out of
work is a scheme that cannot endure.

Serious suffering will occur when reality strikes and governments are forced
to rescind their promises to the unemployed and stop paying them."

*****

NOV.8,2009

*If Stocks Tank Shouldn’t Gold Soar?*

*
*Large banks and more recently pension funds have suddenly become infatuated
with gold.

They chant the mantras that gold bugs have known for years:  gold is a store
of value;  owning gold is financial insurance;

an ounce of gold will always buy a good suit.  The idea is that if the
economy continues to weaken and share prices decline,

a strategic allocation of the precious metal will hedge and offset some of
the losses in the financial sector.

On the surface it seems to make sense and it’s hard to argue with the
logic.

Even so, logic can sometimes get twisted, whereas facts cannot.

Gold, stocks, currencies (versus the dollar), oil, grains, meats, softs, all
decline in a deflationary environment.

As liquidity dries up and credit contracts, people, businesses, and
institutions sell everything to get dollars.

Cash is once again king.  This is bearish for gold.

Looked at another way:  as the dollar advances from its lows, things
denominated in dollars lose value against the dollar.

As long as the dollar remains the global senior currency, assets will
depreciate:  not just stocks and commodities but residential and commercial
property,

works of art, collectible cars, pretty much everything.  Of course, this
outlook presumes a deflationary environment and that’s been our view for
quite some time.  But that’s another conversation.  The topic here is stocks
down/gold up - or not.

“*The other important aspect to a dollar bottom is the implication to all
the other markets that have been moving opposite to this senior currency. *

*The start of a major dollar rally should roughly coincide with a turn down
in stocks, commodities, oil and the **precious metals**. *

*So there are likely to be important trend reversals across nearly all major
markets*.”

Don’t fall into the trap of group-think.  If investing was that easy we’d
all have (insert your own private fantasy).

Let us help you learn to think for yourself.