STOP STALKING ME AND GET LOST!

I may sound a little sadistic here but I'm in a morbid way quite pleased by the fact that the Nikkei_225 plunged to the 9,800 levels last week. I feel that the Nikkei is in the long and arduous process of building a solid base for a new bull market; this process could well take months if not years. Investors who are bullish on the Japanese economy and stock market should use these dips as buying opportunities. That being said, let me add the words "caveat emptor" and "buyer beware". There is always the possibility that any Japanese economic recovery would be dragged down by a failing US economy and a falling US dollar (which would make Japanese imports more expensive to US consumers). However, I am heartened by the fact that Japan, unlike the US, is a net creditor to the world (in the sense of having a trade surplus as opposed to the soaring trade deficit in the US), and that much of the systemic damage to the economy has already been done in the last decade. Of course, Japanese banks are still saddled with bad loans left over from the bubble of the late 1980s. Japan's political leaders also often lack to conviction and political will to follow through with their economic programmes. Up to this time, it has been "2 steps forward, 1-and-a-half steps backward" for Japan. Nevertheless, I have made up my mind to buy into a Japanese unit trust fund when the Nikkei falls towards the 9,000 level.

If I were a hedge fund manager I would make the following trades:

(i) long gold
(ii) long silver
(iii) long Pan American Silver

If and when the bear market in equities resumes, I would also do the following:

(iv) short NASDAQ_100
(v) short S&P_500
(vi) short USD index

Last week, COMEX gold tested $398 and COMEX silver tested $5.40 on an intra-day basis. The secular bull market in precious metals is underway.

I agree with John Templeton's analysis that the US$ is set to plunge even further, although I cannot say for certain whether Templeton's prediction of a 40% drop from current levels will materialise.