George Soros, Elections, US Dollar, Oil and Gold

The week has been an eye opener for market watchers, traders and investors alike. We’re at a crossroads. (Aren’t we always at a crossroad?) Australia is going to elections at the end of November on Saturday 24th. US elections are coming too but that’s next year. Billionaire investor George Soros is warning of an impending market correction. The US dollar is continuing to decline all the while oil and gold is seeing all time highs. There you have it, the five topics that have caught my eye in the past week: George Soros, elections, the US dollar, oil and gold.

Australian Elections

First we’ll tackle the Australian elections. The battle for Prime Minister is on between Kevin Rudd and John Howard. With the election coming up in a little over two weeks the campaigning clearly focusing on Australia’s economic management. For those not up to speed, John Howard’s Liberal Party has been in power for four consecutive terms since 1996. Since they’ve been in power the Australian economy has been growing and booming, Australian dollar at 23 year highs (US93.83c on Wednesday), unemployment at record lows and interest rates arguably low. Meanwhile, Kevin Rudd’s Labor Party has been opposition for all those years. The last run Labor had was between 1983 and 1996. And those years' were plagued by high interest rates of up to 17.5 percent. The major concerns for the election is the economic future of the country. The signs are here: Australia is fully employed, employment figures are at 32 and half year lows where the jobless rate was at 3.9 percent in September and the overall unemployment rate is at 4.2 percent. Growth is estimated to be 4.25 percent for 2007-2008. Concerns are: rising inflation, which touched the upper side of the RBA's target band of 2-3 percent and rising interest rates. Interest rates were pushed up again by 25 basis points last Wednesday to curb the inflationary pressures. And Howard apologised about the rate rise: "I would say to the borrowers of Australia who are affected by this change that I am sorry about that and I regret the additional burden that will be put upon them as a result. And I would say to those in the Australian community who think that the way to preserve that stability and strength and growth is to change the government ... where are the new and different policies? Where are the magic answers?'' Also to note was key phrases in the official RBA statement from Reserve Bank governor, Glenn Stevens, released with the announcement: "By the March quarter of next year, both headline and underlying measures of inflation are likely to be above 3 per cent." "The world economy is still expected to grow at an above-average pace, however, led by strong growth in China and other parts of Asia." "In Australia, the tightening in credit conditions resulting from the global turmoil has been less pronounced than elsewhere.

George Soros

George Soros who is famous for his speculative attack on the Bank of England that made him more than $1 billion, has given a lecture at New York University has said this week that: "We have borrowed an awful lot of money and now the bill is coming to us." Asked whether a recession was inevitable, Soros said: "I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Fed Chairman Ben) Bernanke is seeing." Definitely something to ponder about.

US Dollar

Yes we all know the US Dollar is falling. The decrease in US interest rates last week didn’t help it either. The US dollar has fell against all of the world's 16 most actively traded currencies in the past three months as signs of slowing growth in the world's largest economy led the Federal Reserve to reduce borrowing costs twice since September. The US dollar dropped the most against Canada's dollar, falling 13 per cent, and slid 7.4 per cent against the Australian dollar. Interest-rate futures traded on the Chicago Board of Trade show a 62 per cent chance the Fed will lower its rate a quarter-point to 4.25 per cent on December 11, 2007

Gold

With the US dollar falling, Gold is hitting 28 year highs! Gold reached a high of $US810.90, which marked the loftiest level since January 1980 when it set a record peak of $US850. Gold is commonly seen by investors as a safe-haven asset and a hedge against inflation.

Oil

I have great envy for those who are trading the commodity markets and are simply long on oil. On Tuesday, Oil hit a major milestone: trading at $97.07 per barrel. The extra push on that day was caused by fears of dwindling supplies in the United States, projections for strong worldwide demand and a falling U.S. dollar; and to add to all those fundamentals there was a suicide bombing in Afghanistan that killed at least 35 people and a pipeline attack in Yemen. The world currently consumes about 85.6 million barrels of oil a day.