Jeffrey Kleintop: Gold and Oil Are Buys on Renewed Chinese Growth

By on June 11, 2012

Jeffrey Kleintop, chief financial strategist at LPL Financial and author of Market Evolution: How to Profit in Today’s Changing Financial Markets, still thinks it’s to early to get into stocks.  So said Kleintop in an interview on CNBC this morning.

Kleintop also commented on the Spanish bailout announced yesterday. He characterized it as a victory of Spain over Germany and a positive. Kleintop added that just asking for the bailout caused Spain’s borrowing costs to drop from 7 percent to 6.2 percent. It allows the banks to hang onto a little more Spanish debt and even buy some more. It buys them more time, but not a lot, and with Italy and Portugal needing bailouts later this year this will not be off the front burner for long, according to Kleintop.

There is slowing growth in the U. S. with the end of Operation Twist, slowing growth in China and geopolitical risks with deal with Iran coming up and coming to a head here soon makes it still too early to buy back stocks in Kleintop’s view.

Kleintop believes Bernanke is on the side of the dovish academics at the Fed as the biggest concern going forward is deflation with the pullback in food and energy prices along with declining wages and slack in the economy; the only defense against which is QE3. Kleintop doesn’t believe we’ll get deflation, but since the Fed wants to put a firewall against it we’ll probably see QE3 around the corner, he added.

Regarding China, Kleintop said it looks like the moves there lately have been relatively effective in slowing the pace of decline. The Chinese have used crude policy tools which have been remarkably effective. Kleintop said China appeared to be bottoming out and might experience growth again later this year.

Given the backdrop he sees, Kleintop said it probably makes more sense to buy gold and oil here rather than stocks, since China will be consuming the two commodities.

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