E The Bull Market In Gold Is Only Just Starting

As many of you know, my oldest son, John, is an English teacher at a government university in western China. He is fluent in Mandarin, Cantonese, Japanese, Russian, Korean, and of course, English.

I was Skyping with him the other day, and he mentioned something that piqued my interest. There were lines forming outside the country’s newly opened gold coin stores. Gold ownership in the Middle Kingdom carried a death penalty until very recently.

Furthermore, he learned that jewelry stores were packed while shopping for a birthday present for his new girlfriend, with newly enriched consumers loading up on not only gold, but silver and platinum as well.

Many had their heads handed to them last year in the stock market crash. Stocks are now considered too dangerous a place in which to invest ones’ savings, so everyone is now pouring money into precious metals.

I thought “Well, that explains a hell of a lot.”

Then I saw a news item flash across my screen that further focused my interest.

China’s Anbang insurance group was making a $12.2 billion takeover bid for the Starwood Hotel Group (HOT). This was a mere 24 hours after its $2 billion bid for my late wife’s former employer, New York’s Waldorf Astoria Hotel.

This is not the first time that Chinese capital has flooded into the US. Recent years have seen a $5.4 billion purchase of the GE Appliance Division, $3.5 billion for Legendary Entertainment, and $4.7 billion for Smithfield Foods.

So much money has poured into Napa Valley at wildly extravagant prices that a lot of very mediocre winemakers have suddenly found themselves billionaires. Locally owned vineyards have taken to posting “American Owned” signs out front. You can see them when you go winetasting.

The cause for all of the above is the same.

Capital is pouring out of China at an unprecedented rate. It is departing the Middle Kingdom to flee a weakening economy, collapsing stocks, a weakening Yuan, a capricious government, political oppression, censorship, a crackdown on corruption, and the lack of local investment opportunities.