Eagle Eye Opener: Investors Flee Equities for ETFs; Golden Solution to India’s Debt

Eagle Eye Opener

Oil Industry in Transition for Users & Investors (Yahoo.Finance.com)

Two enormous changes in the oil industry demonstrate usage is moving from west to east, and oil investors better take notice if they want to profit in the future. First, three years ago, according to the International Energy Agency (IEA), the demand for oil was roughly the same in Asia and in Europe. Today, demand in Europe has contracted to 2008-09 levels, while Asian demand has remained robust. Second, the oil refining industry is moving from local to global — with end users no longer physically tied to near-by refineries. As a result, while the U.S. remains the largest importer nation, it has been replaced by Russia as the largest exporter.

Investors Flee Equities into Open Arms of ETFs (YahooFinance.com)

In the last five-day trading period, investors removed $4.1 billion out of equity mutual funds, according to Lipper. The natural inclination would be to think those funds were simply plowed into bond funds or other “traditional” hedges against an equities slide. That’s not the case… in fact, it appears these investors took that $4.1 billion, along with another $2.1 billion, and invested it into similarly allocated exchange-traded fund (ETF) investments. Why even change at all? Two words: fear and liquidity. Investors are afraid of not having access to their money should the fiscal cliff — or anything at all — make them lose faith in whoever is holding their investments. Next, liquidity — or the ability to convert shares into cash — isn’t a reality with mutual funds as they usually require a waiting period before conversion. In uncertain markets, flexibility seems to be the asset of the day.

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A Golden Solution to Deficit Reduction in India (Bloomberg)

Indian analysts suggested a novel strategy for reducing the country’s record-setting budget deficit. Because the deficit is based almost entirely on gold and oil imports, reducing those should cut the deficit according to Bachhraj Bamalwa, chairman of the country’s 300,000 jewelers federation. Bamalwa said that India’s households and temples hold about 25,000 metric tons of gold, so he suggests collecting at least 10% of these reserves to “lend” to jewelers over the next three years. At the same time, gold imports would have to be stopped — either through tax incentives or tariffs (depending upon which side of the exchange you’re on).

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