Can gold survive a Chinese bust? Strong dollar for 2011?

[Chomsky]

Re: Can gold survive a Chinese bust? Strong dollar for 2011?

nero3,

you disappeared for a long time (~ 1.5 years! your last post before starting this thread was here) and now are back. What's up? What's the sudden interest in returning to iTulip? Just curious.

[aaron]

Re: Can gold survive a Chinese bust? Strong dollar for 2011?

I am very happy to see that he is back. There are a couple of other new posters as well with interesting points to share. I really appreciate it.

[Chomsky]

Re: Can gold survive a Chinese bust? Strong dollar for 2011?

oh me too, just curious what happened.

[nero3]

Re: Can gold survive a Chinese bust? Strong dollar for 2011?

It was hard to justify all the time spent, however it's nice to send a few messages again. One thing I notice about Chinese stocks is that small cap stocks are very cheap on certain measures such as P/E for growth stocks. Some of these companies also have some insider buying lately. It's really difficult to know just how it will turn out or how bad an outcome the market have priced in. I think it's interesting that Andy Xie thinks the US or China will crash in 2011. He is certainly an interesting commentator when it comes to China. I think it seems more logical that China will crash and that this will give the dollar and US treasury market a boost as this have happened before. This will be interesting to observe. I think one of the countries that might stand to suffer the most is North Korea as they are dependent on China.

[nero3]

Re: Can gold survive a Chinese bust? Strong dollar for 2011?

One thing I have been suspecting is that some of the car imports to China, especially from Germany are so high because these cars seem cheap relative to the money growth generated inside China. It's not just cars, but other things as well such as quality jeans.

[flintlock]

Re: Can gold survive a Chinese bust? Strong dollar for 2011?

I wish you were right, I just don't think you are on this. The US worker is becoming more and more irrelevant. Too many US workers lack even the basic education to compete on a global level. And with the easy financing bust, Americans can no longer find employment just selling each other worthless trinkets.

[nero3]

Re: Can gold survive a Chinese bust? Strong dollar for 2011?

I wish you were right, I just don't think you are on this. The US worker is becoming more and more irrelevant. Too many US workers lack even the basic education to compete on a global level. And with the easy financing bust, Americans can no longer find employment just selling each other worthless trinkets.

In one sense you could say that globalisation replaced our economies as empty shells driven by bubbles and asset inflation, sort of a last gasp of the inflated living standards. Still I can't really articulate how strong I miss the late 1990's. I remember the new years evening leading up to year 2000. Those were the times.

But when it comes to living standards I think the most important thing is the productive capacity of a country including natural resources, divided by the number of people, some countries in Asia are simply to populated for them to ever reach a living standard that can be compared to many european countries and the US. Even if no bubble shows up for the US, assets will eventually be so cheap that living standards and asset markets will get a true boost, even relative to gold. Now the Dow/Gold ratio is at a 1990 like level. It could turn around here and go in the direction of a new 1990 like bubble, or it could just go further towards the levels seen in 1980, given how close we already is to those levels, I don't think the decline will really be that hard. I think if we add the decline of the last 10 years, and then think the next 7 years will be even a little worse, then I think it is around as bad as it could get. If it does not turn around before, I think it will turn around in 2017, I don't think the decline for the US will extend any further than that (the much stronger inflation climate in the US makes the bad period slower relative to Japan). Then I base myself on the model Warren Buffett use with secular trends lasting 16-18 years.

[jk]

Re: Can gold survive a Chinese bust? Strong dollar for 2011?

the last secular bear was 1966-82, so given that the last inflation adjusted peak was in 2000, that timing sounds reasonable. i wonder if this time will be different, however [dangerous words, i know], because we are also encompassing a transition to a new global order and a new monetary regime. i don't think the 1971 renunciation of convertibility by the u.s. is of comparable magnitude to the transition we are in now.

[nero3]

Re: Can gold survive a Chinese bust? Strong dollar for 2011?

the last secular bear was 1966-82, so given that the last inflation adjusted peak was in 2000, that timing sounds reasonable. i wonder if this time will be different, however [dangerous words, i know], because we are also encompassing a transition to a new global order and a new monetary regime. i don't think the 1971 renunciation of convertibility by the u.s. is of comparable magnitude to the transition we are in now.

You mean a new dark age? Hyperinflation? money printing in the US like India in the 80 and 90's while emerging market's have the sort of boom we had in the 80 and 90 s, while we just stay in some sort of permanent decline?

[jk]

Re: Can gold survive a Chinese bust? Strong dollar for 2011?

You mean a new dark age? Hyperinflation? money printing in the US like India in the 80 and 90's while emerging market's have the sort of boom we had in the 80 and 90 s, while we just stay in some sort of permanent decline?

the last time the world went through a transition of this magnitude we had two world wars bookending the rise of fascism and stalinism and maoism, and tens of millions dead in europe and asia. i'm hoping we can manage it a little more sedately this time, but i can't say i'm confidant we will.