Wednesday, June 29, 2011

Marc Faber, Q&A on India investing

Faber says he won't put money in India at this point, but is positive on its economy in long term. Excerpts:

The Fed clearly has indicated that after QE2, no QE3. One is getting a sense that the cost of capital is moving up. Do you think the risk-off trade could start again?

No further stimulus. We have to qualify that statement. I think they will end QE2 and not tighten monetary conditions, but there could be a relative tightening the way we had it after the end of QE1 until QE2 was announced last August. So for the next three months or so, asset markets will continue to drift lower. Traditionally the month of May is very weak.

Also June and then from June on, we have some seasonal strength developing until the end of July, early August and then we have weak September-October months, seasonally speaking. The markets are oversold at the present time. We could re-bounce somewhat from herein to the end of July and then have another ground draft in October-November, but my forecast is very simple. If the S&P were to drop from here by, say, another 10-20%, for sure, for sure you will get QE3. There is no doubt about this.

How big a risk then is a crisis in the US economy for markets like us?

It depends on how you define a real crisis. Basically we had a boom into 2007, but the boom did not really help the average person in the United States. The boom was concentrated in asset prices and the financial sector and well-to-do people. The workers did not benefit much. Then we have the crisis in 2008, unemployment goes up and since then, employment has hardly gained, but we have the boom in emerging economies because of the money printing and the transmission mechanism.

So a crisis in the US, we are to some extent still in crisis for the workers, for the lower middle class, and we had a recovery in asset prices, notably equities, but not real estate, which essentially means the Bernanke would have liked to see rising real estate prices. So whether we will have a further crisis, I am not so sure, but the global financial system will eventually blow up because we have not solved the problems, we have postponed them.

Marc Faber Continues to Like Gold and Silver and Accumulating - Warns Against Trusting Central Banks

Overnight Marc Faber, publisher of the Gloom, Boom & Doom report, told Bloomberg this morning (see interview below) that he still favours gold and silver. He said there could be short term weakness but that he will keep accumulating gold. Faber warned against shorting the precious metals as they are likely to keep going up.

He also warned regarding recent incidents of fraud and corruption by newly listed Chinese companies and said this was indicative a bubble.

In his usual contrarian and witty manner, he said that "not to own any gold is to trust central bankers and that you do not want to do in your life."


Tuesday, June 28, 2011

America needs to go through "a devastating crisis"

Economist Marc Faber warns investors that America needs to go through "a devastating crisis" before a meaningful recovery can begin.

Given his Dr Doom moniker it is hardly surprising that Faber is once-again bearish on the US economy, yet his track record commands respect – he called both the bust and the subsequent stock market rally.

Comparing an economy to a human body, he tells US financial paper Barron's that "there are periods when rest is required. In economic terms, that is a recession". Faber thinks the economy still needs a long rest.

He points out that America's debt problem hasn't gone away – it has just been switched from the private to the public sector. The only way to reduce public debt would be "to impose a flat tax and cut government expenditures by 50%". But only a disaster could make that happen.

As for US-listed companies, they've already had their disaster. The 2009/10 recovery means US markets look OK in dollar terms - but look at them in terms of Swiss francs, Australian dollars, Japanese yen, gold or silver and they're down 50% to 80% since 2007.

This has made US equities and properties "inexpensive relative to other countries, but they aren't the bargain of the century". Indeed, they could be due a correction of up to 30% from here, warns Faber. If you have to invest, go for consumer staples and healthcare stocks.

More important, says Faber, is to own some gold. "Not to own gold is to trust the value of paper money and the government's integrity. No one in his right mind could trust the US government any more."

The 65-year-old also dismisses claims that gold investing is becoming a bubble. The world is actually "grossly underweight gold" but "flooded with US dollars".



Sunday, June 26, 2011

Gold to go down next three months or so

Dr Faber says about Gold ‘they will go down over the next three months or so’. He warns: ‘Not to own gold is to trust central banks and that you do not want to do!’


His reasoning is apparent from this video from Bloomberg, and he predicted the two-month correction in stock markets correctly. Now he is seeing a three-month continuation of this sell-off including gold and silver.

ArabianMoney does not have a crystal ball, although last December we did say to buy silver because there would be a $50 spike early in 2011 (click here) and we maintain that silver will be the best performing major asset class over the whole of 2011 (click here). Silver should close the year substantially up on that $50 spike.


Marc Faber thinks Ben Bernanke will wait until later in the year before starting to print money again and that will push precious metal prices back up again. This fits with the recent ArabianMoney column suggesting that a sell-off in stock markets will last until a climactic sell-off in late October (click here).

Last week US stocks closed slightly lower again and the yield on treasuries hit a new low. That pushed up the value of the US dollar and pulled precious metal prices down. Silver fell to $34 and gold dipped below $1,500 an ounce.

If this trend is extrapolated for the next three months then the S&P 500 could well be down 20 per cent or more. But we doubt whether gold will go much below $1,450 and silver $30 an ounce as the investment demand remains from those positioning for renewed dollar weakness when the Fed resumes its money printing as it must for an election year.


Tuesday, June 21, 2011

Faber: US Needs Devastating Crisis to Recover

Marc Faber, editor of the Gloom, Boom and Doom report, says the United States must go through "a devastating crisis" before a meaningful recovery can begin.

"An economy is like the human body. There are periods when rest is required," Faber told Barron’s. "In economic terms, that is a recession."

Faber also says there's no gold bubble forming.

"Not to own gold is to trust the value of paper money and the government's integrity," says Faber. "No one in his right mind could trust the U.S. government any more. The government's economic statistics are distorted and there is no consensus on how to solve the budget crisis."

So people should own some gold, even though the price can correct by $100 or $200 an ounce, but investors should buy it as an insurance policy.

"The world is grossly underweight gold," Faber says. "It is flooded with U.S. dollars."

"Investors might be bearish about the U.S. dollar, but international dollar reserves exceed $9 trillion. Compared to that, there is very little gold."

Faber notes that the world has a dual economy. “In the economy of the super-rich, Bentleys and Rolls Royces and Ferraris and Porsches sit in front of fancy hotels,” he says. “At the same time, the economy of the workers and lower middle class is doing very badly.”

“Wage increases don't match cost-of-living increases. One symptom of inflation is a weakening currency.”

Bloomberg reports that the current-account deficit in the United States increased less than forecast in the first quarter as the country's income surplus climbed to a record. Economists forecast a $130 billion deficit, according to the median estimate in a Bloomberg News survey.

Meanwhile, others share Faber's dire prediction.

Economist, author and Yale University Professor Robert Shiller says
chances are 'substantial' that the United States is headed back into a recession.

A weak U.S. housing market and a murky global economy indicate that the country is at a "tipping point" at the edge of a fresh economic contraction.

Even though economic models suggest the economy is on the path to recovery, the United States is in unchartered territory, which makes models less valid due to all the unknowns lurking on the horizon.

"Forecasting models would say no" on the question of whether the U.S. will face a double-dip, Shiller tells The Wall Street Journal. "But I’m seeing signs that encourage me to worry about that."

Meanwhile, warns former Sen. Alan Simpson warns that a crisis will strike the U.S. economy within two years if politicians don't roll up their sleeves and address fiscal spending like they did in the 1990s.

Simpson, a Republican who co-chaired President Barack Obama's National Commission on Fiscal Responsibility, says the United States faces "the most predictable economic crisis in history" by 2013. His remarks echo comments made by his partner in studying deficit reduction, Democrat Erskine Bowles, according to CNS News.

The tipping point "will come when the rating agencies find out we Economy, Alan Simpson, Erskine Bowles have no plan" to seriously address federal spending and the national debt, Simpson says.

Ratings agencies such as Standard & Poor's and Fitch have said the United States could lose its top-grade ratings if it cannot manage its debt burdens and ensure timely payments to bond holders.

View the original article here

Thursday, June 16, 2011

Silver In Focus

By Scott Pluschau, Contributing Editor to the ETF Digest.

Let's take a look at the Silver Exchange Traded Fund symbol SLV again. It was back on May 5th, 2011, that I did a write-up on SLV that can be found here:

I mentioned at that time that markets rarely make V-tops and there is a good probability that once we have a new balance area form in the intermediate term time frame and it can breakout to the upside the highs will be tested again. I also felt that there would likely be minor support in the $33-35 area.

I also felt that since Silver was in vertical development (strong bull market trend) in the weekly time frame, that a new consolidation area would likely be forming sooner then it retracing back to the prior balance area where it would likely have found major support. This market to me looks healthy in the big picture. I have marked these consolidations or as I call them from an Auction Market Perspective “Balance Areas” with blue rectangles. It is in the weekly time frame, that the market has currently found value in my opinion. The price action inside this balance area is likely to resemble randomness or noise. I want to avoid that at all costs.

I have no interest in buying silver or selling silver in the intermediate term time frame and from a technical standpoint unless it is at the extremes of the balance area. If I had to sell silver it would either be on the next rally toward the top of the balance area or on a breakdown from this balance area.


Let's look at the chart again and imagine this is an intraday chart with five minute bars rather than a weekly chart? Auction market principles can be applied to all markets in all time frames. Would you be looking to sell here? I know I wouldn't. I would be looking to buy at the appropriate price or add to my position on the breakout and in the meantime I would be stepping aside. My bias is to the long side until the price has broken down from this balance area. A rally back to the balance area after a breakdown would then become a low risk short trade for me.

Right now I am looking to for a low risk entry to buy on a reversal from the extreme lows of this balance area, (approximately $32.50), and I will be adding to it on a breakout to the.....

View the original article here

Marc Faber's Defensive Stock Picks

Barrons released its Summer Roundtable with luminaries such as Marc Faber and Felix Zuluaf.

Marc Faber gave some stock picks for the second half of 2011.

First, Faber reiterated his bullishness for gold, particularly physical gold.

"Not to own gold is to trust the value of paper money and the government's integrity. No one in his right mind could trust the U.S. government any more. The government's economic statistics are distorted and there is no consensus on how to solve the budget crisis. So, yes, people should own some gold. It can correct by $100 or $200 an ounce, but you own it as an insurance policy. The world is grossly underweight gold. It is flooded with U.S. dollars. Investors might be bearish about the U.S. dollar, but international dollar reserves exceed $9 trillion. Compared to that, there is very little gold."

Faber has been a long term gold bull for at least nine years.

In addition, Faber is bullish on defensive stocks that will likely outperform in a market correction.

"Defensive stocks such as Procter & Gamble, Johnson & Johnson [JNJ], Roche Holdings [RHHBY.Switzerland], Nestlé [NESN.Switzerland] and H.J. Heinz [HNZ] are likely to outperform. Believing the whole Middle East and Pakistan will blow up, I recommend having exposure to defense companies. Therefore, I would buy Raytheon [RTN] on weakness."

Faber has usually recommended commodity or cyclical stocks. This means that his current recommendations are due to the expectation of an economic slowdown in 2011.

The sectors that Faber did not recommend are almost more instructive than his stock picks. For instance, Faber was previously bullish on oil, natural gas and Japan. However, he made no recommendations for these sectors during the mid-summer Barron's Roundtable.

As for the broad stock market Faber expects a rather significant correction.

"Stock and commodities markets, including precious metals, will head lower for the next three to six months. Therefore, defer any new buying for now. You can buy again after the S&P 500 has corrected by 15% from its late-April high."

View the original article here

Barron's Midyear Roundtable with 10 Investment Pros

Usually I don't pay much attention to a lot of these end of year or mid year investment predictions because much of the information is very cookie cutter, but Barron's midyear roundup has some interesting folks speaking who don't parrot the normal investment house speak.  Felix Zulauf is especially interesting. 

Barron's is offering the article for free so jump on over following this link if interested.

Roster of participants: Felix Zulauf, Scott Black, Bill Gross (were you expecting anything less?), Fred Hickey, Meryl Witmer, Oscar Schafer, Archie Macallaster, Marc Faber (doom! gloom! boom!), Mario Gabelli (always happy), Abby Joseph Cohen (still living off one call from 20+ years ago).

Sino Clean Energy moved 10.75% higher after Benzinga Pro reported the Chairman share purchase. Try Benzinga Pro for free now and don't miss out on profits like these!

View the original article here

Wednesday, June 15, 2011

Bill Gross Is In A Hole, And Now He's Digging Like Crazy


bill grossImage: Tech Ticker

That's pretty much the only way can interpret the latest from Bill Gross...

The "bond god" -- who has been one of the worst performing managers this year thanks to his bearish view on Treasuries -- is now sounding like Marc Faber or some other doomsayer, warning that the US is in worse shape than Greece.

If sovereign debt were only measured by debt to GDP it's possible he may have a point, but what Greece has really taught us is that the entire Euro monetary system is flawed.

The US situation bears no similarity to Greece, as yields just grind lower and lower despite public finance numbers that are a mystery to nobody in the market.

Of course, Gross would say that it's all the Fed keeping yields low, and that it all will unravel on June 30, when QE ends.

We'll revisit this point then, but the fact that everyone else knows about this June 30 date -- and nobody is concerned -- should certainly be an eyebrow raiser for anyone buying into his thesis.

View the original article here

Saturday, June 11, 2011

Diversify Your Assets

My advice would be to diversify heavily and have money in other jurisdictions than the United States, in other assets than US assets. In say Asia, Asian equities, Asian real estate. And I would have some money in custody outside the USA, in Australia or in Singapore or in Hong Kong or in Switzerland and not have all my assets here in the United States. - in InsiderMonkey

Real Estate Is Reasonably Cheap In The US

I think that real estate value in America is reasonably cheap, but I don’t think that it will go up a lot. - in InsiderMonkey

Tickers: Lennar Corp (LEN), DR Horton (DHI), KB Home (KBH), Toll Brothers (TOL)

Friday, June 10, 2011

Marc Faber: Why I am bullish on gold

Noted global economic analyst and investor Marc Faber says gold is the best investment among commodities and there is no harm in investors amassing the yellow metal even at these high prices.
In his latest June outlook on the global economy, Faber asked investors to stay away from industrial commodities. “Global growth is slowing, which means weaker demand and lower prices for industrial commodities,” he said………………………………………..Full Article: Source

View the original article here

Monday, June 6, 2011

Government Is Stabbing the Private Sector

The Private Sector Is Hurt by Too Much Government Involvement, Says Marc Faber

Business Intelligence Middle East

Marc Faber the Swiss fund manager and Gloom Boom & Doom editor predicted the US fiscal deficit will remain very large and it will mean that over time the US dollar will lose its purchasing power, more money will have to be printed, and additional easy measures will have to take place.

Speaking in an interview with Insider Monkey during the recent Ira Sohn Conference, Faber blamed big government and Barack Obama for the current tumultuous period, characterizing the US President as "by far one of the worst Presidents the US has had" because "none of what he said he would do, mainly change, has actually occurred".

"The priority would be to essentially make the US competitive, but by pursuing expansionary fiscal policies that enlarge the government, you atrophied the private sector," he said.

"The private sector is hurt by too much government involvement, Faber added.

Asked about the next election cycle, Faber said he expected Obama to be reelected "because we have some kind of a tyranny of the masses."

"You have essentially more people getting handouts than large tax payers. And so they are huge voting bloc. Then you have the unions, also large voting bloc. And then you have the government officials. They don’t want to have cutbacks in government and be fired".

"It’s very difficult to cut entitlements. In other words, social security, Medicare, and Medicaid because nobody wants to do that. so essentially the fiscal deficit will stay very large and it will mean that over time the US dollar will lose its purchasing power, more money will have to be printed, more quantity of easy measures will have to take place, and so forth," he told Insider Monkey.

Where should investors be?

You shouldn’t own cash and government bonds but you should be in assets like real estate or equities or precious metals or in commodities, Faber advised.

"The more negative you are about the world and the geopolitical trends which will lead to war, the more likely it is that you will do better in equities than say in bonds and cash," he stressed.

View the original article here

Friday, June 3, 2011

Famous Contrarian is Bullish on Mexico

Famous contrarian Dr. Marc Faber, author of the Gloom, Boom and Doom Report, recently sat down with Bloomberg news to give his current views on the global economy.

Dr. Faber remains bullish on gold and silver and he anticipates a huge spike in U.S. inflation - nothing new there. However, I was quite surprised to see how bullish he is on the Mexican economy.

According to Dr. Faber, Mexico, the thirteenth largest economy in the world, is largely misunderstood. Most investors seeking emerging market exposure focus on the BRIC countries. But as Faber points out, Mexico is one of the world's largest developing economies as measured by GDP. On a per capita basis, the Mexican economy is larger than China, India and Brazil.

It is true that our neighbors to the south are coming back from one of the country's worst recessions on record. Reports of upward revisions in growth could translate into the potential for a good long-term investment.

Dr. Faber seems to think so. He continues to be pleasantly surprised by how well the Mexican economy is doing and he thinks it will continue to outperform most emerging markets over the long-term. The following chart from Bloomberg shows Mexico's outperformance.

His reasoning is as follows; ten years ago Mexican wage rates were 270 percent greater than China's. Now Mexico's wages are only 45 percent higher than China's, and they are trending lower. What this means is that over the next 5-10 years we could see Mexico take over the manufacturing prowess that China currently holds, particularly with Mexico's close proximity to the United States. In theory, as the Mexican wage rate trends lower in comparison to China's, Mexico will attract more manufacturing jobs - thereby growing its middle-class and its economy.

If Dr. Faber is correct, and the Mexican economy is going to outperform the majority of global markets, investors want to have their portfolio's positioned accordingly. How can small cap investors take advantage of the opportunity?

***Look no further than the Global X Mexico Small Cap ETF (ARCA: MEXS). The ETF was appropriately launched on 'Cinco de Mayo' (Mexicans recognize their army's unlikely defeat of the French at the Battle of Puebla in 1862 on this day) of this past year. It is the first ETF to target Mexican small-cap companies and provides an excellent opportunity to play Mexico's ongoing domestic growth story.

With only 28 holdings and seventy-two percent of the holdings heavily weighted towards consumer discretionaries, industrials and consumer staples, this ETF offers a targeted approach to the country's local economy.

There are a couple of drawbacks to the MEXS however. While I like the idea of investing in Mexico's growing economy, I am a bit concerned by the low average volume and market capitalization of the ETF. It has an average volume of only 4,013 shares a day. However, given the potential long-term growth prospects in Mexico, I do not want to miss out on what I think is an excellent investment opportunity.

Therefore, until more volume moves into MEXS I would opt to invest in the first Mexican ETF, iShares MSCI Mexico Investable Market Index Fund (NYSE: EWW). The fund was launched over 15 years ago and uses a mix of small, mid and large-cap stocks. More importantly the average volume is over two million.

So as much as I would like to invest in Mexican small caps, I always steer clear from low-volume ETFs until they pick up in popularity with investors. Low-volume ETFs have a greater risk of being folded by the fund provider, and if this small cap ETF doesn't catch on soon, I could see it having a similar fate.

Again, I would prefer move into EWW to take advantage of the Mexican economy and patiently sit on the sidelines, keeping a close eye on the volume to take a


Wednesday, June 1, 2011

Chinese housing market about to burst?

 China’s real estate market has a lot of international analysts in disagreement about its future.  Bubble or not?

American hedge fund Jim Chanos has repeatedly predicted the Chinese market will burst, suggesting that 70 per cent of the mainland’s economy relies on construction and infrastructure.

Swiss analyst Marc Faber is in the same camp, saying the market runs the risk of falling sharply, reported The Standard.

Interestingly, some US investment banks like Bank of America-Merrill Lynch, Citigroup and Goldman Sachs appear to be more bullish in this sector.

However, after the People’s Bank of China raised the reserve requirement ratio for banks, and subsequently the interest rate several times, the mainland’s property market began to cool down.

To some degree, this has mitigated the real estate bubble.   Whether the market is stable after a steep correction remains to be seen.

If buyers are willing to bear the cost of housing at the beginning of the market’s correction, then there won’t be much room for prices to fall.

Both the increase in people’s wages and the market orientation of China’s interest rates will enhance the purchasing power of home buyers, which in turn will limit the correction of real estate prices, wrote The Standard.

China still controls its asset prices, and wants to see a stable economy. What it doesn’t want to see is a sharp rise or a big slump in housing prices.

View the original article here

High and Going Higher, Low and Going Lower

Pretty interesting commentary from Marc Faber in this Bloomberg video, considering he is usually a mega Asian bull. While his terminology for a recession is different than what is commonly used (two quarters of negative GDP growth) we saw what even a mild slowdown in China did post 2008 Olympics spending spree. If this comes to bear, the impact on the commodity market would be of course enormous as China is the world’s marginal buyer of everything, dominating some markets to the tune of 50% of all global purchases.

Ironically lower commodity prices would be helpful to the strained U.S. consumer, but I don’t think the stock market would be looking that far ahead. Anyhow, just one man’s opinion but someone I enjoy listening to. His indicators of why he is seeing bubble activity on the ground in China are also quite interesting. As for the Chinese market? It’s not acting well at all lately.

Marc Faber Predicts that China will Fall into Technical Recession in a Year

Marc also touches on the long term implications of the soaring inequality of wealth distribution in the U.S. – something I’ve been flagging from day one on this site.

Dr. Marc Faber lives in Chiangmai, Thailand and is the author of Tomorrow's Gold.

The Best of Marc Faber

View the original article here

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