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Thursday, 2 April 2020
Recently trending Why we’re not buying the market yetDrawdown reductions needed for retirees - UPDATED POLICYWhat are the possible economic effects of COVID-19 on the world economy?Note to Australia: be more French in the COVID-19 warHow $200 billion is magically created
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The ratio of the S&P500 to the gold price is a useful indicator of the mood of the market. A high ratio indicates that equities are expensive relative to gold, and the ratio has been falling recently.
Although gold is not an income-producing investment, the price tends to do well when equity markets fall and interest rates are low. The recent strength is in response to perceived greater risks in financial markets.
It’s been 21 years since the RBA sold the majority of Australia’s national gold reserves. The decision cost the nation AUD5 billion. Is it time to rebuild gold reserves with the opportunity cost now much lower?
For many Asian families, getting money into safe haven countries often takes precedence over what to do with the money when it gets there. This year the hot fad was Australian residential property.
Great speculative mining booms occur about once every 30 years or so in Australia. This year marks the conclusion of my decade-long plunge into mining stocks. I will probably be very old or gone before the next price surge.
The deep financial, economic and political crises came to a head at the end of the 1970s when the US Government defaulted on its debt. It became the dawn of a brand new era of growth and prosperity for Americans.
Falling gold prices this year have scared off many gold investors, and traditional financial asset buyers are unlikely to return in time for a rally.
For much of the last 2,500 years, one ounce of gold has been able to buy items worth the equivalent of around USD500 in today’s dollars adjusted for inflation. But retail buyers are rushing to buy physical gold at current levels.
Amid the bucket loads of optimism and faith, just as you want to rush out of the room and buy some gold bullion or gold shares, along comes somebody to spoil the party.
The Australian market bounced back last Friday (13th) and Monday (16th) tempting analysts to call the bottom of the coronavirus scare. This is too early as the impact on companies is not yet evident.
During the GFC, in the face of rapid falls in super balances, the minimum drawdowns required for pensions were reduced by 50% to help preserve overall retirement savings. It's time for a repeat.
In a widely-quoted scenario using estimated attack and fatality rates of coronavirus, about 0.07% of the population of the US dies. That's about 230,000 people, which the market is not ready for.
Andrew Baker is well-known as a superannuation consultant. Now working in the UK, he was caught in France with his family and is in lockdown. He worries Australian policy was too slow.
Australia is in a relatively good position to borrow $200 billion, with the RBA using printed money to buy bonds in the market. The long-term consequences are better than the alternative.
This detailed analysis of infections, deaths, drugs and vaccines includes an optimistic scenario: perhaps US and Australian infection numbers will peak in early to mid-April with a decline after.