Jaime Carrasco is investment advisor at Macquarie Private Wealth. His focus is on resource and utilities stocks and REITs.
Australian REIT Income Fund
Past picks: June 15, 2012
Total return: –30.01 per cent
Baytex Energy Corp.
Total return: –2.75 per cent
Pembina Pipeline Corp.
Total return: +36.61 per cent
Total return average: +1.28 per cent
It's important to recognize that the money acceleration is starting in Japan, and that this is foreshadowing the inevitability of what will eventually occur in Europe and the U.S.
This process is being fuelled by actions taken by investors as a result of the loss of confidence in the yen and Japanese debt. As they sell, they are re-allocating elsewhere. The best way to understand this process is to think of water rushing down a valley hitting different areas as it travels. Global investors are finally questioning the fiscal stability of Japan and are deciding to invest in other areas. The main beneficiary of this asset shift has, up until last Thursday, been the Japanese stock market which was climbing as investors sold the currency and bonds. Other beneficiaries have also been the U.S. dollar, the U.S. stock market, and physical gold.
This process will continue for a while due to the loss of confidence as a result of the fiscal reality of Japan. Because this reality is also the case in Europe and the U.S., the water will continue flowing until the cleansing process concludes with the U.S.
We should therefore view events in Japan as a good indicator of the fate the other two Western economies. As this money enters these different markets it will cause a temporary rise in the value of assets that is out of line with economic fundamentals. History shows us that in all such unwinding the last man standing has always been the ultimate money: gold.