Friday, May 27, 2011

Boom for the financial elites, Ferraries everywhere: Marc Faber

Legendary investor Marc Faber is worried about the vast riches of the financial elites while the middle class and lower class struggle.   

"From my taste in front of luxury hotels there are far too many Ferraries and Maseraties and Bentleys and this is not a good sign," he said in an interview with Bloomberg TV.

 "There is an opulence among a small group of people that is huge when there are lots of people that are struggling," he said.

Faber's statements may sound anecdotal, but there is numerical evidence to back them up.  For example, the top 0.1 percent of earners in America earns 6 percent of all income today while they only earned 2 percent in the 1960s.

Wealth concentration - caused by distorted policies that cause problems like financial asset bubbles - is dangerous to the economy.  One scenario is that consumers don't have the purchasing power to spend, which then causes an economic slowdown .  Another scenario is that they borrow to spend and sow the seeds for future economic crises with their debt.

An IMF study also suggested that if the rich accumulates too much money, they will demand investment products that will ultimately leads to the detrimental over-financialization of the real economy.

Faber thinks part of the opulence of the financial elite is financed by the huge run-up in financial asset prices since March 2009.  He thinks the rally won't last much longer.    

He said he's seen this kind of boom in emerging market countries and they have not ended well.  When he saw them, it was "the time to get out." Seeing so many expensive cars in the US gives him a "bad feeling," he said.


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Marc Faber: Dollar to turn zero; invest in gold and silver

Marc_Faber_photo_01Global investment guru and commodities expert Marc Faber says the best and most enduring currency in the world is gold and silver. He also said that the value of the US dollar will fall to zero in some years. Last week, gold price rose to a historic record of around US$1500.

Talking to CNBC Asia on Monday, Faber who publishes the highly popular Gloom, Boom & Doom report said that it is time investors put their money into gold and silver, as they are the hottest commodities that carry lasting value. Asking investors to become "their own central banks and gradually accumulate gold reserves as a currency,” Faber said that investors are in a contest for the ugliest currency.

He said that most investors in the world have at least 70%-80% of their money in US Dollars and occasionally the money speculators may be heavily into the euro and negative about the dollar. But he said "there is a huge overhang of US Dollars globally. If people could sell their dollars and move into something they believed in, they would do it".

"I still believe the best currency is gold and silver, and this is not the perception of most people. They believe gold and silver are speculative investments," Faber pointed out. Faber advised investors that they should be their own central banks and gradually accumulate gold reserves as a currency, rather than speculating in gold. Faber also recommended holding physical bullion over other gold assets and advised against holding gold assets in the US because of the risk of "expropriation" by US authorities, as they did in the early 1930s.

View the original article here

Tuesday, May 24, 2011

Japanese investors exiting emerging markets; dump Indian stocks

Japanese investors exiting emerging markets; dump Indian stocks

MUMBAI: Japanese funds have redeemed investments in Indian equities worth close to ?19 billion or $0.25 billion in April alone, as they increasingly look to reinvest in stocks of companies back home which are now finding favour with some of the top global investors.

The trigger for this selloff has been the renewed interest among investors, including Marc Faber, author of the Gloom, Boom and Doom report and a global investor, Goldman Sachs and Deutsche Bank, who are now bullish on Japanese stocks, saying returns could be higher with more firms there adding cash on their books.

What has also influenced their decision to dump Indian stocks is the under-performance of the Indian markets this year. The Nikkei has gained close to 13% since March this year, when the country was hit by a devastating earthquake. The rise in the Japanese markets corresponded with losses in the Indian markets with the 30-share Sensex sliding over 11% since the start of this year.

Since May 2010, Japanese funds have been net sellers in Indian stocks except for a couple of months last fiscal. Investors earlier sold fund units worth ?37 billion and ?19 billion in September and October 2010, respectively. 

In 2010, India-focused offshore funds in Japan recorded an outflow of ?145 billion, or about $1.77 billion. This was the highest annual outflow from these funds since 2004. The total asset under management of India offshore funds in Japan declined 3% at the end of the quarter to March at yen 718 billion, according to Morningstar Research- which tracks global funds.

"Japanese investors sold emerging market funds as part of their profit-booking exercise. This does not mean that Japanese investors have lost faith in Indian shares. In fact, we are already seeing them reinvesting in emerging market funds," Toshiro Ishibashi, president & CEO of Daiwa Asset Management told ET.

According to Ishibashi, Japanese investors are putting their money in local mutual funds, most of which have begun paying out high dividends. Apart from local stocks and funds, Japanese investors, who are known to be highly risk-averse, are also investing in property and Latin American real estate funds, global wealth managers said.

"Japanese investors have been exiting emerging market funds for some time now... redemptions in India-focussed funds were higher because India has been an underperformer among emerging markets for quite sometime," said Dhruva Raj Chatterji, senior research analyst at Morningstar India.

According to Chatterji, over-exposure to infrastructure stocks weighed heavily on the performance of several India-focused funds. In their attempt to ride the India growth story, most of these funds had invested in core sector firms such as Lanco Infratech, Reliance Infratel, Jaiprakash Associates and Bhel, which have fallen 15-45% over the past one year. The ET Construction Index, dropped 15% during this period.

PCA India Infra Open and Nomura India Equity are among the funds that have been hit because of huge redemptions over the past few months. A few India-focused yen-denominated funds that managed to generate returns for Japanese investors did it on the back of an appreciating rupee, which gained over 2% in the first three months of this year.

View the original article here

Sunday, May 22, 2011

Marc Faber?s May Outlook: Beware the False Breakout in Stocks

Swiss investor Marc Faber has just released his latest issue of the Gloom, Boom, and Doom Report where he discussed his outlook for the stock market, gold, emerging markets, and other financial topics. Here are a few highlights from the report:

1. Equity Markets–The markets may be giddy about stocks hitting new highs, but contrarian investor Marc Faber is having nothing of this. He is concerned that stocks will fall sharply in May and that the recent breakout in stocks will prove to be trap for the bulls. The markets are due for a correction and the technicals point to a weak market. In particular, Faber points to the decline in new 52 week highs as evidence of an unhealthy internal market. Right now, Faber would stay away from cyclicals, tech stocks, and banks. If you have to own stocks make sure it is something safe like consumer staples (MO, JNJ, PEP, KO, etc).


2. Gold & Silver—Still likes gold as a long-term investment and recommends dollar cost averaging every month regardless of the price. However, when it comes to silver, Faber is more cautious, noting the recent run-up in the price. He expects a 20%+ correction in the metals complex because the inflation trade has become too crowded.


3. Commodities–Dr Copper is issuing a warning to investors. While the S&P 500 has made a new high, copper failed to do so (non-confirmation). This is a significant development because Dr Copper and the SP 500 have a very high correlation. This signal, along with the large declines in other commodities such as sugar and cotton, leads Faber to believe that stocks could follow commodities lower (in the short-term)


4. Buy Housing–While Faber thinks the US housing market has another 10% to fall, he would be a buyer because of attractive valuations. Faber compares the price of US housing to gold and concludes that housing has not been this cheap since the early 1980's. But do not think there will be a quick recovery–there won’t be. The main point about housing is that it is a good inflation hedge and will likely keep its purchasing power of the next 10 years. In a serious inflation environment, Faber would rather own housing than paper dollars.


5. More QE Guaranteed–In Faber’s opinion, QE 3 is a near certainty. The US will be running trillion dollar budget deficits for the next 10 years. There is no way they can finance all of this through bond issuance. The Fed will have to at least partially monetize this to keep interest rates low.


View the original article here

Saturday, May 21, 2011

The Dollar And Gold: A 20-Year Perspective

Yesterday the WSJ told us that World Is Bitten by the Gold Bug.


Gold continued its upward march in a time of global financial tumult, closing above $1,500 an ounce Thursday for the first time as investors seek safe haven in the metal....

The reason for gold's ability to do well in any market lies in its recent role as a haven from concerns about the dollar, inflation and shocks in Europe, the Middle East and Japan.


Today the WSJ observes that the Dollar's Decline Speeds Up, With Risks for U.S.


The U.S. dollar's downward slide is accelerating as low interest rates, inflation concerns and the massive federal budget deficit undermine the currency.

With no relief in sight for the dollar on any of those fronts, the downward pressure on the dollar is widely expected to continue.


With these two WSJ articles as a context for the recent behavior of the Dollar and Gold, let's take a look at the highly inverse correlation between the two over the past twenty years.

chart


Barry Ritholz, who occasionally warns of main-stream media contrarian indicators, commented yesterday on the WSJ gold article: "Front page stories are not great usually for investments — although this is the WSJ, not Time or Newsweek. It has much less of a contrarian indication."


I'm inclined to agree with Barry, and I have the same opinion of the Dollar article. A short-term reversal is certainly possible for either of these assets. But the looming battle over the U.S. budget, with a particular focus on the debt ceiling, underscore the potential for an even weaker Dollar and increased demand for Gold.


View the original article here

Faber: Bulls to Get Slaughtered as Stocks Plunge

Contrarian investor Marc Faber says stocks will fall sharply in May, turning the recent breakout in stocks into a trap for the bulls.

The markets are due for a correction and the technicals point to a weak market, Faber tells Wall Street Pit. In particular, he points to the decline in new 52-week highs as evidence of an unhealthy internal market.


Right now, Faber advises investors determined to buy stocks to stay away from cyclicals, tech stocks, and banks, sticking with safer plays such as consumer staples.


Marc Faber, publisher of The Gloom, Boom and Doom report, likes gold as a long-term investment.


He’s more cautious when it comes to silver because of its recent runup in the price, and expects a 20-percent-plus correction in the metals complex because the inflation trade has become too crowded.


Faber says copper and the S&P 500 are highly correlated, and finds he fact that the stock index reached a new high while the metal didn't is another signal that stocks could follow commodities lower in the short-term.


Faber says the U.S. housing market has another 10 percent to fall, but valuations are now attractive and housing hasn’t been this cheap since the early 1980s. In a serious inflation environment, Faber would rather own housing than paper dollars.


Faber also expects the United States will run trillion-dollar budget deficits for the next 10 years and the Federal Reserve will have to at least partially monetize this debt to keep interest rates low.


But not everyone agrees with Faber. Another notorious equities bear now says he's bullish. David Rosenberg, senior strategist and economist at Gluskin Sheff in Toronto, is telling clients that the stock market isn't headed for a crash.


The market has been rallying since March 2009, yet Rosenberg has been wary of the trend, defending bonds against "inflationistas" and warning that deflation remains the far greater danger, CNBC reports.


Skies seem bluer. "This is not about throwing in the towel," Rosenberg writes in a letter to clients.


"It is an acknowledgment of what the market internals are flashing at the current time from a purely tactical and technical standpoint."

© Moneynews. All rights reserved.


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Faber: Do Like a Central Bank and Buy Gold

John Paulson has done it, George Soros has done it, and you should do it too, says Marc Faber, publisher of The Gloom, Boom & Doom Report – buy gold.

Investors "should be their own central banks and gradually accumulate gold reserves as a currency," rather than just buying gold as a speculative position, he tells CNBC.


Once the Federal Reserve’s latest quantitative easing operation (QE2) ends in June, pressure will build on the central bank to implement QE3. While that may produce a temporary rally for the dollar, the long-term outlook for our currency isn’t pretty, Faber says.


"The value of the U.S. dollar will be precisely its intrinsic value — namely zero, precisely zero," he says. That means full steam ahead for the precious metals.


Gold has hit $1,500. Rising interest rates in emerging markets also will buoy gold and silver, Faber says. Both India and China have been lifting rates, with China ordering its banks to boost reserves Monday.


Faber recommends holding physical gold over exchange-traded funds (ETFs) and stocks of gold miners.


Others are bullish too. The latest supportive news for gold is that Standard & Poor’s has shifted its outlook on the U.S. credit rating to negative.


“The perception that a downgrade would even be possible for the U.S. is driving the gold market,” Frank McGhee, head dealer at Integrated Brokerage Services tells Bloomberg.


Gold futures for June delivery rose $2.20, or 0.1 percent, to settle at $1,495.10 at 1:38 p.m. on the Comex in New York. Earlier, the price climbed as much as 0.5 percent to the record. Gold for immediately delivery was little changed at $1,495.35 at 2:33 p.m. New York time. Earlier, the price rose as much as 0.3 percent to an all-time high of $1,499.32.


Silver futures for May delivery rose 95.7 cents, or 2.2 percent, to close at $43.913 an ounce. After the settlement, the price reached $43.95, the highest since 1980.

© Moneynews. All rights reserved.


View the original article here

Can Doctor Doom call the ups as well as the downs?

Can Doctor Doom call the ups as well as the downs?

The high profile investment analyst and economist Marc Faber earned the ‘Doctor Doom’ soubriquet after being one of the few investors to foresee the financial crisis and the extent of the ensuing fallout.


The Swiss national is a long-standing and regular commentator in the media having initially rose to prominence back in 1987 when he told his clients to sell out of equities a week before October crash.


Although he is sanguine about the difficulty of timing the market- he branded his call that year ‘accidental’- he has cemented his reputation over the last decade by also accurately calling the rise of Asia, the decline of the dollar and the commodity boom. Here we put the recent predictions of the founder of Marc Faber Ltd and author of the Gloom, Boom & Doom Report newletter to the test.


Retail spending to drop off a cliff


‘Short retailers except Walmart, perhaps using the consumer discretionary SPDR ETF- [expect a 10% correction by the year end].’


Verdict: In keeping with his negative overall view on the economy, Faber expected non-essential consumer spending to plummet as the housing market dive gathered momentum and equity markets started to roll over. The consumer discretionary ETF was close to an all-time high when he made his call and it subsequently fell from $40.17 to $30.84 by the year end, far higher than his anticipated 10% correction and troughed at $17.53 the following February. Walmart meanwhile fell by 10% over the following two months before ending the year just under 5% down and rallying by over 40% overall in the 12 months following his call.


Sell risk assets and beware inflation


‘In the next few months we could get a severe correction in all asset markets. In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate. I am not a great buyer of assets now. We might be in a situation where consumer price inflation comes back and will have a negative impact on the valuation of assets.’


Verdict: The S&P actually rose by a further 8% over the next two months, but then began the precipitous slide that saw the market more than halve from 1,561.8 to 683.38 the following March. Although interest rates began their downward spiral, investors backing Faber’s calls would have preserved capital well as the financial crisis began to take hold.


Back silver, gold and other hard assets


‘You want to be in gold, silver, platinum and also oil. If you believe in a recovery of asset prices as a result of money printing, you should be in hard assets, particularly precious metals. If you want to own shares, I would own some resource companies- I would also own some Asian shares.’


View the original article here

Friday, May 20, 2011

Marc Faber: Dollar to turn zero invest in gold and silver

Global investment guru and commodities expert Marc Faber says the best and most enduring currency in the world is gold and silver. He also said that the value of the US dollar will fall to zero in some years.

Last week, gold price rose to a historic record of around US$1500.


Talking to CNBC Asia on Monday, Faber who publishes the highly popular Gloom, Boom & Doom report said that it is time investors put their money into gold and silver, as they are the hottest commodities that carry lasting value.


Asking investors to become "their own central banks and gradually accumulate gold reserves as a currency,” Faber said that investors are in a contest for the ugliest currency.


He said that most investors in the world have at least 70%-80% of their money in US Dollars and occasionally the money speculators may be heavily into the euro and negative about the dollar.


But he said "there is a huge overhang of US Dollars globally. If people could sell their dollars and move into something they believed in, they would do it".


"I still believe the best currency is gold and silver, and this is not the perception of most people. They believe gold and silver are speculative investments," Faber pointed out.


Faber advised investors that they should be their own central banks and gradually accumulate gold reserves as a currency, rather than speculating in gold.


Faber also recommended holding physical bullion over other gold assets and advised against holding gold assets in the US because of the risk of "expropriation" by US authorities, as they did in the early 1930s.


View the original article here

Beware the False Breakout in Stocks

Marc Faber?s May Outlook: Beware the False Breakout in Stocks

by Nathaniel Crawford


Swiss investor Marc Faber has just released his latest issue of the Gloom, Boom, and Doom Report where he discussed his outlook for the stock market, gold, emerging markets, and other financial topics. Here are a few highlights from the report:

1. Equity Markets – The markets may be giddy about stocks hitting new highs, but contrarian investor Marc Faber is having nothing of this. He is concerned that stocks will fall sharply in May and that the recent breakout in stocks will prove to be trap for the bulls. The markets are due for a correction and the technicals point to a weak market. In particular, Faber points to the decline in new 52 week highs as evidence of an unhealthy internal market. Right now, Faber would stay away from cyclicals, tech stocks, and banks. If you have to own stocks make sure it is something safe like consumer staples (MO, JNJ, PEP, KO, etc).


2. Gold & Silver – Still likes gold as a long-term investment and recommends dollar cost averaging every month regardless of the price. However, when it comes to silver, Faber is more cautious, noting the recent run-up in the price. He expects a 20%+ correction in the metals complex because the inflation trade has become too crowded.


© 2011 Beacon Equity



View the original article here

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