Channel NewsAsia

[savio]

Hi friends,

As the global economic scenario gets more and more complicated it is going to be a challenging time for both investors and traders in coming months and years.
Will the $ really collapse ? Will gold really go to 2000$ per ounce? Will commodities just go one way up? All these are questions are fuelled with speculation. As traders we are nothing but speculators.
One of the great economists Noriel Roubini has rightly stated that there is eventually going to be a crash in emerging markets and risk assets classes due to the carry trade. For those who do not understand carry trade it means buying a currency at a lower interest rate and investing it in assets where returns are potentially higher. So currently there is a buying of dollars and investing the same in Emerging markets and risk assets. Eventually according to Roubini when the US finally is forced to raise Interest rates there will be a withdrawal from these markets leading to a crash. On the other hand another great investor Jim Rogers says gold must see 2000$ an ounce which Roubini does not agree with. So no one is really sure of what is happening.
Let us think with some common sense. Who in India will buy gold at 2000$ an ounce? maybe very few. So prices do appear unrealistic but does that mean they cannot go up ? i guess not. When gold was at 700$ and i had said it would go to 1500$ many though i was out of my head. But eventually it is nearly there.
What we must understand is Valuation of any asset class is a perspective. This perspective keeps on changing with new information and data coming in.
For eg. If US does not raise interest rates it is not going to lead to any collapse in markets. So people may continue buying riskier assets with a cheap dollar and the bubble will keep building. Investors rarely know all this and often get trapped at high values.
Eventually US will have to do something about the dollar from preventing it collapsing. So the fact is there that a BIG COLLAPSE is waiting to happen sooner or later. We cannot time this however we should also realise not to get trapped in this. So even if markets go up one should wait for this collapse where all Stocks will be available cheap once this froth is out of markets.

Now for traders, we are only interested in movements. As said earlier that the nifty would reverse and the first target of 4820 came in and we will likely see 4950 where we must again stay on the sideline before taking a call. 4700 call more than doubled.