GLOBAL MONETARY EASING
In theory, we have a tremendous amount of monetary stimulus coming into the global economy starting this year. Most of these policies have been announced over the last quarter. But it looks like we could have simultaneous, aggressive monetary easing by the ECB, the U.S. Fed, possibly the Banks of Japan, China, and continued support from Britain. If you think about it, this is likely to be one of the unique times where we actually have a global synchronized monetary event. It should have a fairly significant impact on global growth, particularly starting in the second half of 2013. Most economists feel that monetary policy stimulus takes about six months to work through the system. Markets obviously will react before that. But the actual growth that we should expect is likely to occur in the second half of 2013.
SUPPORT FOR COMMODITIES
Commodities should be supported by economic growth. Really, for our sector, the natural resources sector, and all commodities, emerging growth's extremely important, but in general global growth is very, very important. Assuming this monetary stimulus is allowed to work its way through the system without government policies disrupting the economy in other ways, we should see economic growth, and that should translate into commodity demand. I would actually expect commodities to react before that, possibly starting in the second quarter. Assuming the U.S. works through its fiscal situation, I would expect commodity markets to start to react in that time frame, anticipating stronger growth, particularly emerging markets growth.
FISCAL CLIFF RESOLUTIONS
I would expect risk assets in general to perform extremely well. Commodities which have underperformed equities in the fourth quarter of 2012 should actually outperform equities in this scenario. The equity market has been discounting during late December, but commodities have been relatively sluggish, and I think they need to catch up if this agreement is reached.
FAVORITE COMMODITY PLAY FOR 2013
Gold will be an asset that will become a flight-to-safety asset again. Similar to its situation immediately following the '08 crisis. Monetary stimulus is likely to flow into assets, and I think under either scenario, gold could be the beneficiary. Someone said that you want to own what the central banks can't print. And in my mind, that's gold and natural resources -- hard assets in general.
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