From: Derek Hillen
Sent: Thursday, February 16, 2012 2:49 PM

Do you think that when they asked George Washington for ID that he just whipped out a quarter?  - Steven Wright

The number “888” is extremely lucky in Chinese but for 94 mint workers exactly 888 years ago during the reign of Henry I in 1124, luck ran out when the good king had them castrated for producing poor quality coins. Royal ire was dangerously raised when the future castrato mint workers actively debased coinage by using less precious metal content than was specified and pocketed the difference, of course. I note last week the Obama administration quietly applied to Congress for permission to debase the metal content in the American penny (97.5% zinc, 2.5% copper) and nickel (75% copper, 25% nickel) by using cheaper metals. Previously content to debase the US dollar through continuous waves of quantitative easing, the administration is now resorting to penny clipping on a grand scale to accelerate the process in a direct and physical manner. Obama is likely to escape castration (he’s the king, after all) but the same cannot be said of the currency and those the middle class who save it. As we see G3 central bank synchronization flooding the world with liquidity further currency debasement will surely result. I am lucky to own gold and happy to buy more.


Global Economist, Bill Belchere, writes today in “Macro Matters” he is more bullish on Asian asset prices. Bill is using three things to cut through all the noise out there:

1)       Data is surprising to the upside and inflation is falling

2)       G3 monetary policy is now synchronized

3)       Debt and deficit negotiations are moving in the right direction

He doesn’t believe we are out of the doo-doo yet and says this is a “tactical” call.

You already know my view. The Greeks are going to take the next euro 130 bn in bailout funds and change them into 2 trillion drachmas. The drachma was the Greek currency for 25 centuries. The euro is a foreign idea that occupied just a blink of an eye in the historical record. And that is a history the Greeks will be keen to forget.


Analyst Ricky Ng, hits us today with a sector report on the Chinese power producers. Ricky retains his bullish stance on the sector and his views of another tariff increase this summer in China dovetail nicely with economist Joy Yang’s call for Chinese inflation to bottom in July at a below consensus level of 2%. Aside from benign inflation, Ricky’s argument for another tariff increase rests on the fact it is necessary to encourage enough investment in the sector to avoid massive, hysteria inducing power shortages and blackouts 2013 – 2014. His top picks are Huaneng (902 HK, Buy), CRP (836 HK, Buy) and CPI (2380 HK, Buy).



Derek Hillen, CAIA




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