As for exchanges rates, I focus mainly on the Yen/AUD and wrote about the impact of the RBA cuts on rates in: The Reserve Bank, rates cuts and a possible nasty turn. But the same sort of relationship works for the AUD/USD as well. Although the Yen/AUD is moved a lot by the so called "carry trade".

Finally in regards to oil (and gold) I think it is important not to forget the basics of supply and demand. The best overview I have seen about what moves oil prices is on the Gavekal research forum website...you might want to check that out. As for gold, do not forget that India is not looking too good at the moment and that is a huge market for consumer gold...so there is downward pressure on the demand side. (as well as a reduced demand for gold used in industry)

Cheers!

That said, I am a novice investor, being that I started with the same balance as yourself back in September 07. Not the best time to start really, but really my only goal was to learn about the sharemarket through experience. Thanks to sites like this I managed to avoid most of the hefty losses the rest of the country got hammered with

In fact I followed some of your own investing and bought ALK at 13c, so thanks for that one! CGT isn't going so well, but it is doing a lot better than almost any other stock I could imagine that had done a redistribution at 3c.

I am not sure what Marc Faber's game is actually. We are all only human after all, maybe he is succumbing to the rally? Or maybe he wants to take advantage of it. Then again maybe you are spot on when you say his perspective is different due to his location - perhaps being outside of Australia such investment is wise whilst the USD demolishes itself, but being inside Australia is a different matter?

Someone on here mentioned something that I don't think any article (any i've seen anyway) has covered yet - that is the Australian dollar falling due to RBA interest rate cuts. The reason for this would be lack of attractiveness of Australia for overseas banks due to the low interest rates vs risk. In the past, our higher interest rates would be appealing and outweigh risk...but no longer.

Based on the above, I think buying gold in Australia is a good option, because in relative terms, gold will go up in AUD as our dollar falls (with the assumption that the USD price of gold does not fall at a greater rate).
I think this will also affect oil prices in Australia, which in turn looks good for the Australian oil companies as their USD profits are worth more in Australia.

Incidentally, a stock that has been really good to me is ERH - Eromanga Hydrocarbons(oil). A smallcap with a decent cash balance, the only gripe I have is how much they pay their management (it seems a lot for a company yet to realise it's potential). They're up about 35% today, though personally I wouldnt buy above 15c.

To use an old phrase in an investment sense I'm just a "gentleman's gentleman". Yeah, I've been worrying incessantly about a range of corporate investments over the last 18 months and have been using this forum to form, question, reform, then requestion then reform my ideas and advice. So far the advice has been OK. Giving the wrong advice is a big risk.

This could be a temporary bear rally, as you say, or things could sort of muck along at current levels in the market for the next few years. Gold could reach $2000 per oz or it could continue to fluctuate in the range of $650 to $1000 for the next year or three. I don't know! I do know that the USD will go for a significant dive and take with it a significant amount of US debt. Creditors in Japan, China and South Korea will be the prime losers but there will be significant aftershocks and collateral damage everywhere. After the dust of this event settles, a robust recovery will (in my view) be possible. We need to consider whether, in this environment, a pure cash position or a slightly diversified position as suggested by Marc Faber (RIO, BHP, energy, gold, industrial metals, some juniors etc) will be a better long term position as the purchasing power of fiat currency drops like a stone.

Many corporate investors must ask the question "How do I hedge against the risk of a busting bond bubble and 20% inflation?" For such investors, perhaps a 10% position in gold based stuff and 10% in energy based stuff wouldn’t be such a bad idea in the first instance. Where funds are tied to short or medium term expenditure commitments the money should remain in cash of course.

I understand that Mac Faber is based somewhere in Thailand and that Greg is based in Japan (dealing with the property market there). The location difference turns their respective perspectives into a valuable check on my own (doom and gloom) Australian perspective.

That does not mean that it will last...why on earth would it? Think of all the fundamental problems with the world's finances at the moment...things won't magically go back to normal, and even if the rally does recover a lot of the losses it will only be temporary.

Enjoy it while it lasts, and take the opportunity to relieve yourself of some bad stocks if you have any.

My concern about Israel vs everyone is that it will spread further into the Middle East (such as Iran?). If it does I would expect oil prices to skyrocket.

Concerning junior gold rebounds some have and some haven't yet. Of the 2 Crusoe picks I left here a few weeks ago ALK is up about 60% (11c to 18.5c) while CGT (a much smaller company) continues to jump about (in the range of 3.2c to 4.2c) after a capital raising which will see them remain in business for the time being (with an increased Hong Kong based interest). Marc is not (I guess) so interested in those juniors that have already rebounded but I would argue that some like ALK still have a long way to go (if the gold price holds out that is – and don’t forget this company has a range of industrial metals interests ).

A key question is the nexus between industrial commodities and gold. Marc views gold to be very expensive in relation to the other industrial metals: - but is this significant given gold’s split personality? Only time will tell.

I agree with Marc that some energy stocks now a good long term buy. If only I had the cash to apply in this direction!

Not withstanding the intentions of both the Israeli Government and Hamas to create a latter day version of the Warsaw Ghetto, I’m not as concerned as Marc is about current geopolitical tensions. World War 3 hasn’t started yet! I agree with Chris Mayer’s post that the greatest risk to a world recovery is the likely recourse by politicians to protectionism. Inceased protectionism could easily prolong this depression to a point where national implosions conflicts become frequent.

Cheers!

Question: Does your cash always need to be getting a rate higher than inflation? And why?

Consider scenarios:
a) You put all your money into assets such as shares because they appear to be offering a better return than cash in the short-term. Shares drop in price leaving you with assets that you can now only sell at a loss.

or
b) You leave your cash in the bank whilst it very slowly loses value. Shares go down significantly in price and appear to reach a bottom. You then buy even more shares at the lower price.

In scenario b you lose money initially, however it is only a small amount. The relative position of scenario b compared to scenario a is still ultimately much much stronger.
I guess what I am getting at is to say that if you are going to lose money with every option, why not restrict it to only a small amount. Also cash is an enviable position compared to the person who needs to liquidate assets at a loss.

Personally I would be looking to get into gold by around Feb before the RBA drops rates again and sends our dollar lower. This unfortunately seems to coincide with the start of a bear market rally which will probably drop the price of gold over Feb, Mar, Apr. That is my (probably naive) assumption anyway.