The miscalculation by the Troika in Cyprus has finally put the last nail in the medium term short gold (NYSEARCA:GLD) investment thesis. For just over a year and a half the central banks have coordinated, very effectively, to build an edifice of confidence in the global financial system that would allow the idea that quantitative easing would no longer be needed to finish the job of cleaning up the mess post-Lehman Bros. The Troika, and most explicitly, the IMF, overplayed their hand last weekend with their demands for explicit looting of savers in order to go forward with a rescue plan for Cyprus’ over-leveraged banking system.
This act and the subsequent chaos it has spawned has now firmly put in place a bottom in the price of gold. Regardless of the final outcome in Cyprus – exit from the eurozone, acceptance of the bail-in, civil unrest, etc. – the net effect will be a steady loss of confidence in the banking system, capital flight from both the US and the EU and grater movement into gold as a vehicle for savings and wealth preservation. While I would have preferred a close above $1620 per ounce this week, closing above $1600 as we approach the end of the month is strength enough given the current sentiment.
HSBC (NYSE:$HBC), the biggest Asia-focused European bank, has agreed to pay a record $1.921 billion fine to settle the U.S. money laundering probe being conducted by the U.S. Department of Justice and other regulators, the biggest ever by any bank. Earlier in June, ING Bank (NYSE:$ING) was penalized $619 million for similar crimes for dealing with Cuba and Iran. HSBC was allegedly involved with Mexican drug cartels and Saudi terrorist organizations. More recently, after HSBC, another British bank Standard Chartered Plc was also slapped a fine of $327 million by U.S. regulators over its dealings with Iranian clients in violation of U.S. sanctions. This is in addition to the fines imposed earlier and has taken the total tally to $667 million.
It is the beginning of a new calendar year and with it come the inevitable (and interminable) lists of ideas which will mark why this year will be different than the last one. The very act of creating yet another Top 10 List serves as an ironic reminder of the one constant of what we as investors, traders, and advisors have to plan for every year, which is change itself.
For US investors interested in Southeast Asia, here are a few ideas that should help you navigate a lot of the noise that will attempt to confuse you in the coming 12 months.
Peter Pham is an author, international fund manager, and a registered financial director by the Cayman Monetary Authority (CIMA). In 2013 he published his first book entitled, The Big Trade: Simple Strategies for Maximum Market Returns. He currently manages the portfolio of a global hedge fund and runs an asset management company, Phoenix Capital. (read more)
The Big Trade: Simple Strategies for Maximum Market Returns
This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities.