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China and The Case of The Missing Gold... (Repost with good link... tnx rono)
I continue to be surprised that China doesn't simply purchase gold companies (many of which did not do well last year) via their sovereign wealth fund or some other means. So, pick the company up more cheaply, then the production of that company just never sees the market - does not pass go, goes directly to China.
The Chinese government is always going to look out for China's best interest. I believe that a major goal for them is to have their currency be one of the world's reserve currencies at some point. It will happen, maybe not in the next 5-10 years, but it will happen. One of the ways to do this is to stockpile as much gold as they can. Another way is to corner the market on rare earth elements, which they essentially have already done. Another is to supplant the U.S. as the trading partner of choice/necessity fo all of eastern Asia. That is virtually accomplished.
Meanwhile the U.S. worries about whether other countries LIKE us or not, our government spends its way into oblivion, and we talk about raising economic barriers to protect ourselves. This is not a bright picture at all.
While some investors choose to not own any Chinese investments, that will not change the really big picture that is surely bound to happen down the road. I don't have a great solution to this, but I do believe that groups like Matthews Funds could be in a great position for the next decade. No doubt China will make some mistakes along the way...all countries do as they move from a wannabe to the real thing...but from a cultural standpoint, it's hard to envision a future where China is not one of, if not THE major economic power.
Fascinated by your "rare earth elements" observation. As I've mentioned a few times, one of the best books that I've read lately is "The Power of Gold" by Peter Bernstein, wherein he repeatedly observes that gold, in and of itself, is really pretty useless as an element, other than for some applications in the electronics industry, and ignoring of course it's desirability for ornamental purposes.
How much more logical to base "wealth" on something really useful, such as the "rare earth elements"! Of course, if they were to become the new symbol of "wealth", then it would be necessary for every government in the world to stash away a pile of that stuff instead of gold. And of course the very act of stashery would take virtually all of that rare stuff out of useful commerce and bury it wherever governments now keep their gold stash. You know, this whole "we have a pile of something" wealth concept seems to have a certain illogical aspect to it, and frankly I'm not too sure ANY of it makes any sense.
China, and to a smaller degree India, has been the 'floor' if you will, under the POG. In spite of all the naked shorts in the known world, every time they drive down the POG, you have Chinese, Indians, various and sundry sovereign countries, survivalists, ad nauseum, stepping up to the window with fiat paper in hand . . . and buying physical bullion and taking delivery. It's only been since '04 that the Chinese citizens have been able to own gold. It's been nuts. Not only a gold hoarding issue, not unlike India, but a bloody huge bling issue with the nouveu riche.
Nopers, still long and staying that way.
Bob is spot on about the future of the world economy and China. Matthews is still the best house but you can play it indirectly if you study their trading and biz partners. Early on, before you could really play China directly, I played them by owning what's now Vale mining iron ore out of Brazil, shipping it to Korea where Posco PKX with the help of coking coal out of Fording in Canada . . . and shipping the steel to China. Today, you could simply buy a pan-asian fund and put it in the drawer.
Comments
Hope you're doing well.
Repost the link, please.
thx,
rono
Meanwhile the U.S. worries about whether other countries LIKE us or not, our government spends its way into oblivion, and we talk about raising economic barriers to protect ourselves. This is not a bright picture at all.
While some investors choose to not own any Chinese investments, that will not change the really big picture that is surely bound to happen down the road. I don't have a great solution to this, but I do believe that groups like Matthews Funds could be in a great position for the next decade. No doubt China will make some mistakes along the way...all countries do as they move from a wannabe to the real thing...but from a cultural standpoint, it's hard to envision a future where China is not one of, if not THE major economic power.
Fascinated by your "rare earth elements" observation. As I've mentioned a few times, one of the best books that I've read lately is "The Power of Gold" by Peter Bernstein, wherein he repeatedly observes that gold, in and of itself, is really pretty useless as an element, other than for some applications in the electronics industry, and ignoring of course it's desirability for ornamental purposes.
How much more logical to base "wealth" on something really useful, such as the "rare earth elements"! Of course, if they were to become the new symbol of "wealth", then it would be necessary for every government in the world to stash away a pile of that stuff instead of gold. And of course the very act of stashery would take virtually all of that rare stuff out of useful commerce and bury it wherever governments now keep their gold stash. You know, this whole "we have a pile of something" wealth concept seems to have a certain illogical aspect to it, and frankly I'm not too sure ANY of it makes any sense.
Regards- OJ
Hope you folks are doing well.
China, and to a smaller degree India, has been the 'floor' if you will, under the POG. In spite of all the naked shorts in the known world, every time they drive down the POG, you have Chinese, Indians, various and sundry sovereign countries, survivalists, ad nauseum, stepping up to the window with fiat paper in hand . . . and buying physical bullion and taking delivery. It's only been since '04 that the Chinese citizens have been able to own gold. It's been nuts. Not only a gold hoarding issue, not unlike India, but a bloody huge bling issue with the nouveu riche.
Nopers, still long and staying that way.
Bob is spot on about the future of the world economy and China. Matthews is still the best house but you can play it indirectly if you study their trading and biz partners. Early on, before you could really play China directly, I played them by owning what's now Vale mining iron ore out of Brazil, shipping it to Korea where Posco PKX with the help of coking coal out of Fording in Canada . . . and shipping the steel to China. Today, you could simply buy a pan-asian fund and put it in the drawer.
peace,
rono