Focus: Metal
>> welcome back, everybody. metals are falling this morning because there’s worries that this year’s rally may be exaggerated. axel merk is joining us in our new york studios spep is joining us for more. axel, why are these markets so weak this monday morning?
>> hi. good to be here. we have seen the market go up in a straight line over the last couple of months. indeed, it’s not just the commodity markets , but if you look at any market , equity market , bond markets , commodity ace cross the board have been going up. it’s about time we have had a correction or increased volatility. we have seen the added volatility a little bit at the end of the last week. people forget we have more of the normal times. people new to investing in commodities don’t know something like the silver market can move a lot in ten minutes. we have had it happen, and it’s good to have it happen to shake out the new money and insure the commodity boom can be more sustainable at a reasonable level.
>> where is that reasonable level? how much further down do you anticipate it’s going to go before sustainability comes in?
>> well, it’s difficult to talk about the absolute level. what we can say is that the entire world is trying to keep growth going, and the resources are limited, and it’s very difficult to ramp up production, so commodity booms last for many many year, some say ten years or longer than that, and as such, long term, the forces remain in place, but nothing goes up in a straight line, and when you have more tools available such as exchange rated funds to buy the commodities directly, that’s adding to the spike in these prices, and as such, it’s very good to have a pullback here.
>> was the gold e.t.f. the top of the market , if you will?
>> that’s what people said, but since then, gold has risen sharply. the gold e.t.f. has the advantage and not the risk of the producers. we have had the silver e.t.f. come on the market and the same voices are calming it down. there are slight differences in the two. notably, the silver market , there is just not enough silver out there, should there be a storm on silver. in gold e.t.f., gold is traditionally horded as a value for money. silver is used much more in the industry for value for money. the industry will cry we need the silver, you can’t just store it, and there might be additional regulations in the market . that definitely contributes to the push higher as retail investors have the opportunity to participate at that market .
>> just a couple of questions, axel. we have seen volatility in the stock market , the options on these commodities certainfully the fixed income markets and financial markets don’t seem to be rising at all. i wonder why that is the case.
>> well, we have seen―it’s been a trend in the making for many, many years, actually. there are fewer and fewer opinions in the market . the markets are getting larger and larger, but the decision-makers are getting few heer. we have a few hedge funds that follow the same strategy. they have the same training and once they reach a certain size, they have the same ideas. it’s high time we have diversity and opinion out there. most folks nowadays have only experienced the last ten or 20 years in the market . that’s a similar markets . we need different markets and different volatility and maybe a crisis to get new opinions and new quality of investor into the market .
>> were you one of the sellers this morning?
>> no, we were not any of the sellers this morning in our hot currency fund. we don’t try to trade in and out of the market . we provide investors to gain exposure, in our case, to hard currencies. it’s difficult to trade this market . traders, if they enjoy doing it, so be it, but a retail investor who gets into the commodities of precious metals have to be aware of the volatility. most folks who invest in gold do so as a store of long term value. they have the difference―the difference to what used to be 20 years ago is you have the e.t.f. available.
点击播报
Listen Focus: Commodity prices
>> in terms of industrial metals we like zinc. it looks like china is starting to accelerate imports or consumption of zinc. imimports are especially tight. we also like gold. we are long gold but wheel think it is getting pricey here. it is beyond what we would consider fair value. were there to be a correction of greater than 5% in a commodity, we scale back our positions there.
>> well, okay, folks. there is some opinions. now back to our discussion in our chat with dave darce, the chief investment strategist at the now called stanley morgan global wealth management group. he likes zinc, copper and oil, and the next guest says gold is pricey here. who is right?
>> i think gold has run up so fast, it’s very possible for it to have a pullback. the gentleman was right on target. everyone says that this year that zinc is this year’s copper. copper has also made these new highs and people are thinking that zinc, as china continues its demands for zinc particularly. investors need to think about non-correlated assets. we like japan. japan, we believe, made an important low in april of 2003, 7607. it’s 16,900 now. it’s run up a lot. we like japan. we think they’ve restructured, reform and recovery. we like, matt, we like the currency area. have some euroforce e.t.f.’s. japan’s e.t.f. will come later this year. it’s not there yet. pay attention to currency, matt.
>> let me ask you this―i have this chart put together. it is a ten-year comparison of simple year on year plain vanilla inflation versus the s&p 500. as you can see, it will look like they’re moving in tandem here, dave. ininflammation has gone up but the s&p is down. why is this going to break down the stock market in the next decade?
>> the high correlation between inflation and stock prices works between the 20-0-yard line and the 20-yard line at the other end of the field. at low levels of inflation, deflation and disinflation, that breaks down. at high levels, it breaks down because when inflation gets above a certain level, it causes interest rates to start rising, which through the discounting mechanism, causes stock prices to come under pressure.
>> interest rates are going to start falling. they are closer to starting to fall than to continue rising.
>> that’s what the consensus is, that the 5.1% for the ten-year and $4 -- and 4.80 for the treasury bill is a generous return, and it’s time to put some over there. for stocks, stay with pricing power. stay with precash flow and dividend growth and stay with return on equity. we think as the market moves through this year, and as the dollar continues to come under pressure and maybe with rates a touch higher, we don’t know that the fed is particularly done yet. maybe there is one or two more raises this year. it doesn’t matter, does it?
>> i think we’re the economy. you have said this on your show many times. you said it this morning many times, the fed and everyone has been blown away by the strength underlying the global economy. there is tremendous underlying strength all over the world right now. japan has come back. europe is doing better than expected and the u.s. is doing very well.
>> stick with the football team. we got a minute drill here. the poor viewer in boise is saying i was talking zinc and e.t.f.’s in japan. have you changed your forecast here in the last month?
>> no. we think the s&p 500 can have a total return this year of 10 to 12% and we stick with that. it pulled back a little bit. it got up to 6. it is now 4 4 ½. we are halfway there. don’t forget. two years ago, it was 29% up. then 11% and the last year, 4 ½. we think it could do 120 this year because the market and the world are surprised by this strong economic market .
>> what is the achilles heel in the forecast?
>> a rout in the dollar. if the dollar comes down too quickly, the fed will be forced to raise rates more which could crack the housing market which then cracks summary consumer. that’s the achilles heel.
>> it is a pleasure and that is an understatement. david darce at the morgan stanley global wealth management group. final time-out. we will wrap up the week that was and tell you what you need to focus on for the week to come.
>> ben bernanke makes his first public appearance after he took the benchmark rate higher for the 16th straight time. suzanne has more on that and other upcoming events. >> thank you very much. fed chairman ben bernanke delivers a speech on innovations in real estate markets . three months into his term, the top banker is confronted with surging oil and metals prices that threatens to push consumer prices higher across the board. potential banks made it clear that incoming economic data will determine interest decisions. investors will be listening closely to the fed chairman for his view on the economy and any tips he gives about future policy moves. last week he provided a guide to what policy makers expect, a slowdown led by cooling housing market and consumers pain over ga
