-- Posted Monday, 22 December 2008 | Digg This Article | | Source: GoldSeek.com
When reading about the $50 billion Madoff hedge fund fraud it hit me on the head: hedge fund redemptions at the end of this year are going to be absolutely huge, and that will mean a massive sell-off in global capital markets in the first quarter. That would also mean a further rally for the the US dollar, as assets sold are redeemed largely in US dollars and thus boost demand for the greenback. Gold might take a slight set back although will more likely be in increased demand as a safe haven asset and diversification against the coming dollar crash. Inflationary stimulusAll this turmoil would really put the wind up the incoming US president and his team who will respond with bigger than expected stimulus packages and bailouts. That will make the upcoming and inevitable inflation even larger when it hits, and at the first whiff of inflation the bond market will tank and with it the US dollar. Investors face a double whammy in 2009 - from hedge fund withdrawals crashing the stock market and later a dollar collapse. That would take capital markets to a real bottom. Market bottomMy prediction of the Dow at 4-5,000 and gold at $4-5,000 an ounce for later next year still stands, and hedge fund redemptions followed by a dollar collapse will be the driving forces to achieve that bottom. It might take until 2010 to get that far but no longer. Now try to argue the reverse: will there be sellers or buyers in capital markets after year-end redemptions come in? What is the chance of a positive tally for redemptions? Zero chance! Is the dollar bond market at a top or about to go higher? Is it hell! Actually this will offer a great point to buy up the finest US stocks at rock bottom prices but who will have the cash to buy by then? Certainly not anybody taking an optimistic view of the market outlook now. I can empathize with those who feel the Madoff fraud is some kind of a warning of things to come. These frauds do not usually happen in isolation and are a symptom of the underlying malaise.
-- Posted Monday, 22 December 2008 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link
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