YEAR END 2011

Dear Clients,
Dear Readers,

2011 has been a problematic year with extreme price movements driven by a financial crisis never seen before in our lifetime. The financial state funding crisis which started in Greece soon infected many European countries and the USA. At the same time, the political dawn in many North African and Arab countries added to the instability most people felt throughout the year. With the Libyan, Tunesian and Egyptian dictatorships abolished, 2012 may bring additional political news and massive changes.

The state funding crisis will stay with us. Just look at the structure of our own country. While private industries had to adjust to an ever changing economic environment, state enterprises continued their rather lavish life. In today's Austria, a teacher for instance earns more than most managers in the private industry, not to talk about their safety of workplace and other privileges hardly seen anywhere. It becomes abundantly clear that countries have to adjust their financial planning to more realistic levels in the very near future. If not, there cannot be another solution but added money supply, maybe in the form of repurchases of bonds through central banks. While this procedure still leaves open the chance that the added funds can be withdrawn at a later point of time, any other option will automatically raise the chance of a runaway inflation.

While the financial markets have calmed down in recent months the sideways movement shows indecision and lack of direction. The dollar is unable to gather strength, the Euro does not really fall due to the dollar's weakness and not due to its own strength. Precious metal prices stay high, however do not shine anymore and the danger of a sudden price collapse is there because no investor can afford to hold on to an investment tool which does not appreciate and does not pay interest. Oil still remains the commodity of the year.

Together with US stocks, oil remains well bid. A solid break of $100.00 may lead its price up to $120 or even to a retest of the all-time-high next year. The Euro looks weak at the close of the year and while an ultimate movement to 1:1 versus the dollar cannot be excluded, we currently target 1,22 to 1,25 as decisive support levels.

I may wish you all

A HAPPY & SUCCESSFUL NEW YEAR 2012
Gerhard Pilz