October 31, 2012
The Bank of Japan and the government have battled but are coming to a resolution. The government is introducing some reforms that the BoJ wanted, and the BoJ eventually will cooperate by weakening the yen. The root of the changes is the deterioration in Japan’s balance of payments, which will allow the Bank of Japan to weaken the currency more dramatically than otherwise would be the case. A weaker yen will help the Japanese economy and particularly export industries. The yen trades at 79 to the dollar. It could fall to 100 in the next two to three years.
His views On China
“The biggest recorded credit and investment boom in history has gone bust. The Chinese stock market has given back almost 90% of its rally off the 2008 lows. After the government changeover in mid-November, expect some economic stimulus. That could help Chinese stocks rally. In the next six to nine months, Chinese stocks are an interesting bet, and Chinese exchange-traded funds such as the FXI and the GXC could be good vehicles.”
His view On Gold
Felix Zulauf: “Gold is in a secular bull market. The correction to the low-$1,500s is over. There is a lot of optimism in the market, and gold needs to come down a little. If Obama wins, the price could shoot up again. If Romney wins, the market could be weaker going into December, after which the price will rise. Next year, gold will go to new highs.”
Felix Zulauf was born 1950, and is the owner and president of Zulauf Asset Management, a Zug, Switzerland-based hedge fund. Felix has worked in the financial markets and asset management for almost 40 years. Mr. Zulauf has been a regular member of the Barron's Roundtable for more than 20 years.