Wednesday, December 19, 2012

Beware of equities in 2013

2013 will not be a favorable year for holders of assets. Investors’ expectations about future returns on their assets are far too optimistic. In a world that currently hardly grows investors will need to reduce their future return expectations.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Monday, December 17, 2012

When interest rates go up

Eventually one day when interest rates go up, the government will monetize the debt and the inflation will go up.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Thursday, December 13, 2012

Gold not a bubble

Gold is not even close to a bubble yet.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Thursday, December 6, 2012

India Inc doing well despite weak macros: Marc Faber - Economic Times

India's GDP growth at 5% or 6% is better than no growth in Europe, US: Marc Faber - Economic Times

ET Now: You have recently made a statement that gold is a must have in every individual investor's portfolio. What premise have you made that call on?

Marc Faber:
Basically we are in an environment where central banks are monetising debts and where the balance sheets of central banks are increasing, and this will continue, especially in the United States and Europe.
We are also in an environment where in the long run, a lot of sovereign debts will either not be paid or will have to be inflated away. So owning some physical gold is a prudent insurance. I am specifying here 'physical gold' because one wants to protect oneself as an investor for the potential of a systemic collapse of the financial system.
ET Now: The FII flows to the Indian markets have grossed 1 lakh crore mark. What explains the strong flow of funds to emerging markets like India?
Marc Faber:
In general, investors realise in the world that we are in a changing environment where emerging economies are becoming more important relative to the rest of the world. So we have to, from time to time, rebalance portfolios into emerging economies. Now I am not sure that I would necessarily buy the Indian market right here, but even if India only grows at 5% or 6%, it is still much better than no growth in Europe and hardly any growth in the United States.
ET Now: Some strategists are making a strong case that global crude oil price prices may weaken significantly from hereon. Do you agree with that forecast?
Marc Faber:
One hears all kinds of forecasts that oil prices will tumble and some are forecasting oil prices to go up substantially. There are all kinds of views. The fundamental fact is simply that not only for oil but for other commodities as well the production cost has risen very substantially. So I think that new oil will cost at least around $60-70 a barrel for the exploration and the capital investments.
Therefore, I do not think that oil has a huge downside risk, but we live in a volatile world. In July 2008 we were at $147 a barrel and within six months, we dropped to $32 a barrel in December 2008. I would not want to necessarily go short on oil for the simple reason that the situation in the Middle East is deteriorating at an accelerating pace.

ET Now: What about the Indian markets? Are they heading to newer highs at 15 or 16 times forward earnings that they are trading at and compared to the other emerging markets, how is India looking like, as a trade?
Marc Faber:
We don't have uniformed performance among emerging economies. You have the Chinese market, which is down from 6000 in 2007 to 2000, and you have markets like the Philippines, Indonesia, Thailand and Malaysia that have made new highs, and so it is not uniformed. In India, you do not have a particularly good macroeconomic background. On the other hand, corporations are doing reasonably well. So I have some investments in India.

ET Now: What is the significance of the fiscal cliff for emerging markets like India?
Marc Faber:
I do not believe there will be a fiscal cliff. What will happen is that there will be some cosmetic spending cuts which will amount to no spending cuts in reality. There will be some cosmetic tax increases that will touch really a minority and the irrelevance on a fiscal deficit that officially is running around $1.3 trillion, but if you added the unfunded liabilities that accrue every year, the fiscal deficit will be more likely above $5 trillion.
So even minor tax increases on the super rich will bring in annually a maximum of $5200 billion. So the total deficit, whatever they will agree upon, will have a meaningless impact and spending cuts will come back dated in 10 years time. So they will be quite irrelevant.

ET Now: Your view on emerging market currencies and the rupee in particular?
Marc Faber: If that is the case, I would argue that the dollar has a chance to actually appreciate, especially against emerging market currencies, but I have some reservations about this optimism. I think that natural gas and the increase in oil production in the US is just one plus factor for the US compared to many negative factors such as ObamaCare.

Wednesday, December 5, 2012

Marc Faber Forecasts Keynesian Catastrophe for Global Economy

Marc Faber explains his views and why the world economy is heading for a catastrophe. Possible opportunities are likely to emerge for institutional investors and nimble traders.

Friday, November 30, 2012

What Marc Faber Said to the LBMA About Gold - BullionVault

The ANNUAL CONFERENCE of the London Bullion Market Association always includes great presentations from the biggest players in gold and silver, writes Adrian Ash at BullionVault. Being in Hong Kong this year, the world's premier event for the bullion industry also got lots of great insights from genuine Asian insiders – ICBC, Kotak Mahindra, the People's Bank of China no less.

"Continuous interventions by governments with fiscal and monetary measures, instead of smoothing the business cycle, have actually led to greater instability. The short-term fixes of the New-Keynesians have had a very negative impact, particularly in the United States." Faber's big beef is with US Federal Reserve chairman Ben Bernanke. But "numerous Fed members make Mr.Bernanke look like a hawk," he said. Nor does it matter who is running the White House. Because thanks to welfare and military budgets, "spending is out of control, tax is low, and most spending is mandatory."

So Federal Reserve policy is inevitable, Faber went on, and while we haven't yet got the negative interest rates demanded by Fed member Janet Yellen, we have got negative real interest rates. The US and the West had sub-inflation interest rates in the 1970s too, and we got a boom in commodity prices then as well. But with exchange controls now missing from the developed world, "One important point," said Marc Faber:

"Ben Bernanke can drop as many Dollar bills as he likes into this room," he told the LBMA conference in Hong Kong, "but what he doesn't know is what we will do with them. His helicopter drop will not lead to an even increase in all prices. Sometimes it will be commodities, sometimes precious metals, collectibles, wages or financial assets. [More importantly], the doors to this room are not locked. And so money flows out and has an impact elsewhere – not in this room."

That elsewhere has of course been emerging Asia, most notably China (see our video pick of the Top 5 Slides from LBMA 2012 on YouTube for more). But back home, these negative interest rates are forcing people to speculate, to do something with the money, said Faber. These rates artificially low, well below the 200-year average.

That's doing horrible things to the United States' domestic savings and thus capital investment."You don't become rich by consuming. You need capital formation," said Marc Faber. Unlike investing in a factory to earn profits and repay your loan, "Consumer credit is totally different. You spend it once, and you have merely advanced expenditure from the future."

So far, so typical for the doom-n-gloomster. Noting total US debt at 379% of GDP, "if we included the unfunded liabilities then this chart would jump to the fifth floor of this hotel!" said Faber, waving his red laser pointer at the ceiling. After the private sector "responded rationally" to the runaway 20% credit growth of 20% by collapsing credit in 2007-2009, the US government stepped in to take over – and "Government credit is the most unproductive credit of all."

In short, the easy money and bail-outs which got us here – from the Fed's rescue of Goldman Sachs during the early '80s Tequila Crisis in Mexican debt, through LTCM in the late '90s and then the Tech Stock boom and bust – have had serious consequences. "Bubbles are a disaster from a social point of view," said Faber. Looking at his charts of the generational shift in wealth, it would take a Fed voting member to disagree.

"Only at the Federal Reserve they don't eat or drive!" exclaimed Faber as he turned on the central bank's inflation target, produced by "the Ministry of Truth, the Bureau of Labor Studies. It is a complete fraud." But even as the United States' persistently mistaken policies lead to the emerging powers side-stepping it ("We are in a new world. China's exports to commodity-producing countries – such as Australia and Brazil – are greater than its exports to the United States. Exports from South Korea to commodity-exporting countries are greater than its exports to the US and Europe combined!"), there will come a slowdown in commodity demand and leveling off in prices in time.

"I would rather be long precious metals than industrial commodities," said Marc Faber. Which was of course what most people at the LBMA conference wanted to hear. Less welcome was his warning not to hold gold in the United States or even Switzerland. Because "if gold is owned by a minority, then in a crisis the government will take it away." But even Faber said that some of his 25% personal allocation to precious metals is still in his home country, rather than in Asia where he's lived for almost 30 years.

Once the deflationary collapse finally arrives (the impossible question is knowing when, said Faber), there will be great opportunities in real and productive assets. But until then, and as for the Gold Price ahead, "Gold is not anywhere close to a bubble stage," he concluded. And every time he thinks about selling to take profit? "I keep in my toilet a picture of Mr.Bernanke. And every time I think about selling my gold, I look at it and I know better!"

Thursday, November 29, 2012

Marc Faber Believes That Owning GOLD Is A Must For Every Individual and ... - ETF Daily News (blog)

Gold Silver Worlds: Marc Faber is one of the very successful investors on earth. He recently explained his view on the monetary policies of the developed regions in the world. Obviously he is no fan of the  Keynesian way of thinking which is applied by the central banks in the developed regions.

The Keynesian policy considers easy money as a way out of economic recession and deflation. They argue that money creation smoothens out the business cycle. In his presentation, Marc Faber demonstrates that these kind of interventions achieve exactly the opposite: they make the business cycles much more violent, create extreme fluctuations in economic activity and result in far more financial volatility. In his opinion, the essential problem is that the Keynesian way of thinking tries to solve long term structural problems with short term fixes, with an emphasis to create bubbles to help the economy. However, Mr Faber notes that bubbles usually hurt the majority of market participants.

Based on the US Fed philosophy you can’t identify bubbles, but if they burst you can take measures to support asset prices by flooding the markets with liquidity (read: by “dropping dollar bills from an helicopter” in order to prevent deflation). In line with that way of thinking, the Fed has slashed interest rates  and created liquidity over the last 30 years on a continuing basis.

Marc Faber believes that these policies have one big problem: central banks simply cannot determine what will happen with the money that is created. The key point is that inflation does not necessarily occur in wage inflation or in consumer prices. The additional liquidity however can create unpredictable sorts of inflations. For instance, it can result in a housing boom in country X, or in employment wage inflation in country Y, or in commodity price inflation in country Z. Furthermore, not every price increase will occur at the same rate, with the same intensity, at the same time. Those are the “unintended consequences” of money printing, which Marc Fabers discusses in detail with a lot of examples in his presentation.

“High monetary inflation brings distortions in the price mechanisms and volatility.” One of the examples Mr Faber used in his presentation is the Mexican deflation, in which the currency debased sharply against eg the US dollar between 1979 and 1983. From the lows in 1983 till its highs in 1988, the Mexican equity market in US dollar increase  44-fold! See slides 41 and 42.

Marc Faber his conclusion: money printing brings more and unpredictable volatility. We saw a major low in equities in March 2009 which we probably won’t see again because “every drop”  comes with a new round of QE. Going forward, he believes that owning GOLD is a must for every individual and investor. Gold is not in a bubble as we haven’t seen rapid acceleration of prices (as an example, look back at 1979 where the gold price doubled in 3 months).

Related Tickers: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), Ultra Silver ETF (NYSEARCA:AGQ), iShares Gold Trust (NYSEARCA:IAU).

Tuesday, November 27, 2012

Want an Australian visa? Try investing $5.2 million - Los Angeles Times

While Australia tries to steer boats crammed with immigrants away from its shores, it is beckoning wealthy foreigners with a new visa that smooths the path to Australian residency — for a price. Under a new visa program that goes into effect Sunday, skilled migrants don’t have to pass the usual tests that rate their skills, experience and English ability. The age limit is out the window. But there’s something extra that would-be Australians need to do to be eligible: Invest more than $5.2 million in Australia.

Migration agents are reportedly calling it “the golden visa.” Immigration Minister Chris Bowen has plugged the program as a way to boost the Australian economy and compete for “high net-worth individuals.” Investors can plunk their money into government bonds, managed funds that invest in Australian assets, or Australian companies that meet specific standards and aren’t listed on the stock exchange. It was no coincidence that the visa category number is 888 — an especially lucky number for the Chinese, immigration attorney Michael Sing told the Sydney Morning Herald. Wealthy Chinese have flocked to other countries to enjoy a better quality of life, from cleaner air to less corruption. "We think this visa is aimed squarely at the emerging wealth in China," Sing told the paper.

The idea has received some blowback from critics who say Australia has put residency up for sale. It stands in stark contrast to Australia trying to push other immigrants away. People who arrive on rickety boats are detained on the islands of Nauru and Papua New Guinea while their cases are processed. Bleak and cramped conditions on Nauru, where detained immigrants could wait as long as five years, amount to “a human rights catastrophe,” Amnesty International said Friday. Australians “like the idea of well-dressed refugees arriving on a plane,” RMIT University lecturer Binoy Kampmark told The Times this year as the Nauru plan was debated. “They do not like the idea of being besieged by the sea." Though the hefty financial investment needed for the new Australian visa is striking, other countries, including the United States and Britain, have similar programs to lure wealthy emigres from abroad. Applications for the U.S. program have skyrocketed, The Times reported last year.

View the original article here

Sunday, November 25, 2012

Saudi Arabia Investing $109 Billion Into Solar Energy, Wants 1/3 Of ... - CleanTechnica

Saudi Arabia is planning to invest $109 billion into solar energy, looking to develop a solar industry that can provide 1/3 of its electricity by 2032. Doing so will free up larger quantities of its reserves for international sales rather than for use domestically. With the price of oil expected to rise significantly in the coming decades, such a move makes sense from an economic standpoint.

Saudi Arabia’s first solar farm is expected to begin operations by 2015, and its first nuclear plant by 2020, according to an official at the agency developing the country’s renewable (and atomic) energy program.

Its first solar power plant is expected to begin construction in early 2013, and will take up to 2 years to complete.

Khalid Al-Suliman, vice president at the King Abdullah City for Atomic and Renewable Energy, said that “the project will get underway once the government approves his agency’s plan for renewable energy.” He’s expecting to officially receive approval by early 2013.

He says that they are currently targeting around “41,000 megawatts of solar capacity within two decades,” 16,000 megawatt of which would be from photovoltaic panels, and the other 25,000 from solar thermal technology. The country currently has only around 3 megawatts of solar installations.

It is also still moving forward with its plan to build sixteen nuclear reactors by the year 2030, for a total nuclear capacity of 14,000 megawatts, which is projected to cost the country around $100 billion.

With how competetively priced the solar power is compared to nuclear, it kind of makes you wonder if they have any ulterior interests in nuclear.

View the original article here

Wednesday, November 21, 2012

Investing in an Automated Economy - ABC News

When will the jobs return? That's been the question in this glacially slow recovery.
The answer? Many of jobs won't be coming back, and that's painful news for all of us.
Job creation ebbed for years before the 2007-2008 recession and is likely to fall far short of what it was in previous decades.
Low consumer demand is one reason. Companies have no reason to hire if people aren't buying their products, and recession-wracked Europe, our biggest consumer, isn't consuming as much.
Yet there's another reason for weak job creation that isn't talked about as much. Automation, aided by new technologies, is increasingly replacing labor, changing workplaces and altering the economy in fundamental ways. For evidence of this trend, just look around your house, your office (if you're fortunate enough to have one) and the nearest shopping center.
• IPhones, iPads, and other devices are changing the way we shop, communicate and get news and information, disrupting old labor-intensive industries, such as newspapers and the U.S. Postal Service, while creating new ones that generally employ far fewer people.
• Online banking, brokerage and mortgages are increasingly making it easier for consumers to never set foot in a brick-and-mortar bank.
• Movie-downloading services such as Netflix and Redbox have hastened the demise of video stores.
• Self-checkout aisles at stores and gas stations have eliminated thousands of retail jobs.
Truck drivers' jobs might soon be on the line too. Experiments with computer-driven vehicles have had vastly improved results in the past several years. In 2005, computer-driven cars could go only a few miles. Recently, Google-operated cars went thousands of miles without a mishap, and California Gov. Jerry Brown just signed a bill to allow them on the state's highways.
As technology evolves at an ever-increasing rate, new jobs are created but not fast enough to replace the jobs that are disappearing. This is creating hardship for millions of Americans.
"At some point in the future -- it might be many years or decades from now -- machines will be able to do the jobs of a large percentage of the 'average' people in our population, and these people will not be able to find new jobs," writes Martin Ford in his eye-opening book Lights in the Tunnel, which can be downloaded for free. This book details the challenges that we face and offers some possible solutions, including shorter work weeks, job sharing, and eliminating payroll taxes so employers have less incentive to replace workers.

Tuesday, November 20, 2012

Marc Faber: Global Markets Will implode

“I don’t think markets are going down because of Greece, I don’t think markets are going down because of the ‘fiscal cliff’ — because there won’t be a ‘fiscal cliff,’ ” Marc Faber told CNBC’s “Squawk Box.”
Marc Faber: Actually, I’m so happy to be on your show, because whenever I feel depressed and I see you, you group of people that are so optimistic, I feel enlightened, and again full of life. So I think actually you should open up a psychiatric clinic for depressed people, and you would do very well, because everybody would be good after talking to you.
Host: But would we be fooling them into feeling good?
Faber: I think the point is this: I don't think markets are going down because of Greece, I don’t think that markets are going down because of the fiscal cliff, because there won't be a fiscal cliff. They'll do some patch work, a little bit of tax increases come into play in five years time, and a bit of spending cuts that come in 100 years, and then everybody will be happy and they'll be a rebound in the market. But the market is actually going down because I think that corporate profits will begin to disappoint, and that the global economy will hardly grow next year, or even contract. And for that is the reason that stocks, from the highs in September at 1470 on the S&P, will drop in my view at least 20%. Apple has already dropped more than 20%.
Host: What's causing this global slowdown? Is there any way out of this or is this a mess that we have created and we’ve got to live with right now?
Faber: Each country has specific problems. In some countries we have overcapacity problems. I was in Vietnam. I’ve seldom seen such an overbuilt real estate market. It will take years to absorb everything. And if Vietnam’s property market is a microcosm of the Chinese property market, it will also take years in China to absorb all the properties that are being built. In the western world, including Japan, the problem is we have too much debt and that debt now will have to be somewhere, somehow, repaid or it will slow down economic growth. And so, I think that we live beyond our means 1980 to 2007 and now it's payback period.
Host: It's payback period, but if you have a situation that you expect, where the fiscal cliff is one that we never address, we just kick the can down the road, and deal with it another day, when does it actually start to catch up with us?
Faber: i can't tell you precisely the day, but I think the whole global financial system will have to be reset at some problem. And it won't be reset by central bankers, but by imploding markets; either the currencies or the debt markets or the stock markets, but it will happen. It will happen one day big time and then we will all be lucky if we still have 50% of the asset values that we have today.
Host: So, if we were to handle the fiscal cliff --
Faber: It's a very optimistic scenario.
Host: There are a lot of people who have talked about this scenario. Something that definitely worries me, too. But, do you is it a situation that could be avoided if we tackled the fiscal cliff and actually made some tough decisions right now? If we grasp at austerity the way some of the Europeans have done it, there are people who say we don't want to do it that way, look at what's happened to Europe, they’ve gone back into recession, but is it your thought we need to deal with the medicine and suffer the pain at some point?
Faber: For sure there will be pain, and there will be very substantial pain. The question is do we take less pain now through austerity or risk complete collapse of society in five to ten years time. And in a democracy, they're not going take the pain now. They'll kick down the problems and they'll become bigger and bigger.
Host: So, you think we won't be able to do anything until it's too late, that we won't have the political will to go ahead and at that time tough decisions now, and that's why we'll end up --
Faber: Correct. But, I don't want to leave you without some optimistic words.
Host: Yes, now that you've talked about the complete collapse of society, tell us about the bright side of things.
Faber: I’ve recently been on to Vietnam, Cambodia, Laos, of course Thailand, because I have a house there, and Myanmar. that whole region is known as Southeast Asia, and I think that region of 250 million people will continue to grow regardless because you have a relatively high GDP per capita in Thailand, maybe 3,000 or 4,000 US Dollars, and the surrounding countries GDP per capita less than $1,000. And these countries are opening up now, and I think with the trade links and transportation links that are being expanded regardless of what happens in the world, can grow. Provided there is geopolitical stability in Asia which is a big question mark.
Host: So the situation in Vietnam, you said the housing bubble is going to take years to get through. But you still think the growth statistics will trump that? Yes, but, you see, in Vietnam from the peak exports in 2008 up to today, the export performance of Vietnam has been the best of any emerging market. Better than China, better than Columbia, and much better than say Eastern European economies.
Host: So, your bright spot is that all of western society is going down the toilet but if we move to Laos, we might be able to make $3500 a year? I know I can buy a lot --
Faber: Joe, you're a nice person, but --
Host: That doesn't sound that great, Marc, to me. And I resemble that you said that we're like Pollyanna’s, that we're constantly optimistic. That's the wrap on -- I got to sue for you definition of character.
Faber: Sorry, I didn't mean to insult you. I wanted to say something nice about you that you're an optimistic person.
Host: I'm buying a gun. I’m not optimistic. Don't throw me in there. I’m reading about the U.S. Military forces training for zombie apocalypse.

Tuesday, November 13, 2012

Educating a Nation of Financial Illiterates - Forbes

Washington has an investor crisis that needs attention. The financial literacy of Americans is at a dangerously low level, at a time when more people have become responsible for their own retirement savings and as the future of government subsistence programs have fallen into question.

A recent government study shows that most citizens don’t know much about how the economy works, they don’t know basic investment concepts such as the difference between stocks and bonds, and they lack rudimentary knowledge about risk, return, and investment planning.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 tasked the Securities and Exchange Commission (SEC) to gauge the level of financial literacy that exists in America among individual investors. The SEC’s goal was to assess general financial knowledge and determine specific knowledge of investment fraud, fees, and risk. The research also evaluated this knowledge based on subgroups defined by age, gender, and race.

The SEC’s published report was sobering. Here is an excerpt from the conclusion:
“Quantitative studies conducted from 2006 to the present on the financial literacy of U.S. retail investors conclude overwhelmingly that American investors lack essential knowledge of the most rudimentary financial concepts: inflation, bond prices, interest rates, mortgages, and risk. Consequently, it is not surprising that investors do not understand advanced financial concepts such as differences between stocks and bonds, the role of the stock market, and the value of portfolio diversification.

Low levels of investor literacy have serious implications for America. We live in an age dominated by defined-contribution retirement plans, where workers make their own investment choices. A lack of basic knowledge will seriously erode individual investment performance in the future and that threatens broad segments of the population who wish to retire comfortably.

Something must be done to increase basic investor awareness, and this effort must come from Washington - because it won’t come from Wall Street. An intense effort to prudently educate investors is essential to the general financial health of Americans and of America.

This help will not come from the for-profit investment industry because product sales are the main driver behind the advice investors receive. Even new ideas that were originally designed to reduce cost and increase return have degenerated into high cost speculative products designed to increase the amount of money the industry takes in.

The exchange-traded fund (ETF) market is a prime example of a good product that has been high-jacked by Wall Street. ETFs were originally created as low-cost index funds designed to generate the return of a market. They gave all investors access to a broad basket of securities and could be used to build affordable portfolios. While many ETFs still provide this benefit, the ETF landscape in general has been heavily polluted in recent years. Many new funds that have launched in the past 10 years are high-cost products that are designed for speculation and to be used as part of a trading strategy.

Wall Street will always figure out a way to turn a product that’s good for investors into a high-fee money machine that aids the industry. I wrote an article about this titled, Thrown Under a Bus With Model ETF Portfolios. Jason Zweig also investigated this issue in a recent Wall Street Journal article titled, When Cheap Funds Cost Too Much.

So, what’s the answer?

Ironically, the federal government’s own Thrift Savings Plan (TSP) doesn’t fall prey to the problems facing the rest of the investing nation. It provides government employees and active duty military an excellent low-fee program. There are no expensive actively-managed funds in TSP, and no fees are paid to advisers for speculating on markets. Most of the investments in the program are index funds, each of which is invested in order to replicate the risk and return characteristics of a particular market.

Washington has already figured out that low-fee index investing is in the best interest of its employees and the military. So, why not take it one step further to help solve the financial literacy in America by giving TSP to the rest of that nation? Require employers who offer a 401(k) or similar employee savings program, to use TSP - or at least use low-cost index funds modeled after it.

Some people will say that mandating employers to adopt the government’s TSP program is too much intrusion. Undoubtedly, the protest will come mainly from financial firms and advisers who have the most to lose. As a compromise, Congress could make the program optional, but give employers who adopt the principles safe harbor from employee lawsuits involving plan investment options.

The financial literacy of Americans is at a dangerously low level and this will create problems for our nation unless something is done. Washington should become more involved. Government already drives K-12 education and is deeply involved in higher education, and tools such as TSP are all ready in place to improve the system on a mass scale. It’s time for Washington to step up and act.

Monday, November 12, 2012

Sensex may not cross 21000 levels anytime soon: Marc Faber - Economic Times


ET Now caught up with Marc Faber, Editor & Publisher of The Gloom, Boom and Doom Report, for his take on the global and Indian markets. Marc says that there can be a year-end rally, but he does not see new highs in the markets. Edited excerpts:


ET Now: Do we brace ourselves for a year-end rally or a year-end fall, given the risk from a fiscal cliff in the US?

Marc Faber: We have peaked out recently a couple of weeks ago and we are in a downtrend. Eventually, the markets will be down 20%, but will be oversold in about 10 days' time to two weeks' time. So there can be a year-end rally, but certainly no new highs in the markets.

ET Now: How real is the possibility of a Euro break-up considering that Spain and Greece are still looking as vulnerable as before?


Marc Faber: Yes, it is a possibility. I do not think it will happen right away because the politicians want to keep the Eurozone intact, but the situation in Portugal, Greece, Spain, Italy and even France is actually unsustainable in the long run because of the unfunded liabilities. So a Euro break up will probably happen sometime in future, but not for another three or five years.


ET Now: Has your stance changed on India because of the slew of reforms that we have seen and do you see the recent announcements call for a rerating of the region?


Marc Faber: Not necessarily. While the government has announced some reforms, there is a huge execution risk in India. A lot of implementation is still to happen, and it will be interesting to see as to what extent they will be implemented and their actual impact on the economy. At present, there is high level of economic activity in India as well as China and Southeast Asia, but India is not growing anymore. Hence, I will take a relatively cautious stance towards the Asian markets.


ET Now: How do you see emerging markets manage the inflation versus growth equation?


Marc Faber: Like in Western countries, Asian central banks will also ease over time and they have done that already in some countries. There are not many countries in the region that are as disciplined as Singapore. I believe that even though there will be some inflationary pressure, but because of the overall weakness in the global economy the energy prices will come down somewhat. Moreover, food prices are already somewhat down after having risen so much, and are currently not as high as they were a few years ago.


ET Now: What do you see in terms of the returns on Indian equities over the next one or two years? Should investors adjust their return expectations?


Marc Faber: I am not exactly a prophet, but we have rallied strongly from the 2009 lows and the outlook for large capital gains at this level is very limited. The high in 2008 and the high last year was around 21000. I do not think we are going above 21000. I would rather expect the market to ease again from here.


ET Now: What regions are you seeing as the most and least attractive for investment right now?


Marc Faber: The Chinese economy is slowing down rapidly. In my opinion, it is not growing at any more than 4% now. The market was at 6000 in 2007, and today we are down to around 2000. Clearly, the market has already discounted a lot of bad news and if a junk country like Greece could rally from the lows of 65%, we can expect a trading rally in China of 20%-30% over the next four or five months. Additionally, the Japanese Yen has begun to weaken and that should be a positive trigger for Japanese equities.


View the original article here


Thursday, November 8, 2012

FABER: Cut The US Government By 50% Now! - San Francisco Luxury News


The debt burden in the U.S. and other Western countries will continue to increase, Marc Faber, author of the Gloom, Boom and Doom report told CNBC on Monday, leading to a “colossal mess” within the next five to 10 years.


“I think the regimes will try to keep the system alive as it is for as long as possible, which means there’s no “fiscal cliff,” there’s a fiscal grand canyon,” Faber told CNBC’s “Squawk Box.”Faber argued that the political systems in place in the West would allow the debt burden to continue to expand. Under such a scenario of never-ending deficits, the Western world would rack up huge deficits.


One day, the system would break, he said. “Eventually, you have either huge changes occurring in a peaceful fashion through reforms, or, usually, through revolutions,” he said. The U.S. is getting closer to such a revolution, he said, as is Europe.


“I think the timeframe would be within five to ten years you have a colossal mess … everywhere in the Western world,” Faber said. “I think the deficit here (in the U.S.) — irrespective of who is in the White House — will stay above a trillion dollars per annum for at least as far as the eye can see.”


Bureaucracies in the U.S., as well as Europe, are far too big, he said, and are a burden on the economy.


“My medicine for the U.S. is: Reduce government by minimum 50 percent,” he said. “The impact would be immediately an improvement in the economy.”


Oulook for Stocks


Faber believes the Chinese and Japanese stock markets could see a rebound, while in the U.S. the S&P 500 is likely to see a 20 percent downward move.


“I think here we’re going to go down 20 percent from the recent top at 1,470. The technical position of the market is poor and the corporate earnings are worsening. And I believe that if the statistics were precise – which they aren’t – (…) I think there’s hardly any growth,” Faber said.


Four months ago, Faber turned his attention to European stock markets, attracted by the low valuations.


“Greece, Italy, Spain, France, Portugal, they were four months ago at the 2009 lows or even lower,” he said.


Faber recommended buying European stocks at the time and for the first time in his life bought them himself.


“I did it simply because the valuations were low. Since then, Greece is up 65 percent,” he said.


He would no longer buy European stocks, he said. “I expect a correction but no new lows,” Faber said.


Now he is focusing on Asia.?


“In Asia, Thailand from the 2009 lows is up 250 percent. Other markets like the Philippines, Indonesia, Malaysia, Singapore, are up by a similar amount,” he said. The Chinese benchmark index on the other hand was at 6,000 in 2007, now it is at 2,000.


“I think China and Japan could have a rebound here. If Greece could rebound by 65 percent the greatest garbage could rebound by 65 percent,” Faber said.


View the original article here


The Nightmare of Government Freebies - BullionVault


Marc Faber on how the nanny state has become unviable...

IN ORDER to exercise control over the population, governments throughout history have made people dependent on government largesse, says renowned investor Dr Marc Faber, publisher of the Gloom, Boom & Doom Report, writing in the Daily Reckoning. A government can make an increasing number of people dependent on its generosity by providing more and more benefits to a larger and larger share of the population.


Because of these "freebies," people will go along with the government's enlargement as a percent of the economy. The masses believe in their free lunch and because the business elite knows it can profit from the growth in government.


However, there comes a point at which the "nanny state" becomes unviable. Raising taxes to pay for the freebies become problematic. Fortunately for the governments, they have a Treasury and/or a central bank that can print money and monetize the government's debts.


As Ludwig von Mises observed in Human Action:


Credit expansion is the government's foremost tool in their struggle against the market economy. In their hands is the magic wand designed to conjure away the scarcity of capital goods, to lower the rate of interest or to abolish it altogether, to finance lavish government spending, to expropriate the capitalists, to contrive everlasting booms, and to make everybody prosperous.


Therefore, the broad population, whose attention will be distracted by the media, won't realize the negative consequences of large fiscal deficits. They will hardly notice their declining standard of living due to the loss of purchasing power of the currency. In the meantime, the media will bombard them with further immaterial news, such as which Hollywood star is divorcing whom, which team will win the Super Bowl, and abortion rights and gay marriage issues.


The government will also become involved in larger distractions, such as arguing for the need to eliminate continuously new (usually invented) threats or foes arising from ethnic or religious minorities, communists, socialists, terrorists, spies, or, as is now the case in the US, the "vicious" 1% of the population that lives well. A political system controlled by an ignorant electorate that is manipulated by a dishonest and controlled media that dispenses propaganda on behalf of a corrupt political establishment can hardly be the path to lasting prosperity.


In fact, I am surprised that economists continue to discuss GDP growth (usually in real terms), when they should be focusing on sustainable growth. Let me explain. Since 2000, US government debt has increased from US$5 trillion to over US$16 trillion. Over the same period, nominal GDP is up from approximately US$9.5 trillion to US$15.5 trillion.


In my opinion, an adjustment to GDP should be made for the increase in government as well as household debt, because both inflate GDP figures, but are not sustainable in the long run, as we now know from some peripheral European countries. I mention this because Eric Fry, writing for The Daily Reckoning, points out the following:


During the last four years, the number of Americans on food stamps has soared by more than 17 million, while the number of employed Americans has dropped by more than 3 million. In percentage terms, the number of Americans on food stamps has soared 60% in four years!… In fact, according to the "Outreach" section of the USDA [US Department of Agriculture] website, the soaring number of food stamp recipients is an absolutely fantastic success story: "SNAP (i.e. food stamps) is the only public benefit program which also serves as an economic stimulus, creating an economic boost that ripples throughout the economy when new SNAP benefits are redeemed. By generating business at local grocery stores, new SNAP benefits trigger labor and production demand, ultimately increasing household income and triggering additional spending."


There you have it. The government increases its borrowings (through fiscal deficits) in order to pay for, among other things, food stamps. In turn, the food stamp recipients go and spend the money in stores (mostly at Wal-Mart), which boosts GDP. But is this real, sustainable GDP growth?


So, not only do fiscal deficits allow the government to expand useless and unproductive programs and expenditures that artificially boost GDP, but they also increase the number of bureaucrats who implement the new regulations that stifle business. To the neo-Keynesians, I can only say: "Well done."


Time to Buy Gold?...


Born in Zurich, Switzerland, and based in Hong Long since 1973, Dr. Marc Faber studied economics at the University of Zurich and obtained a PhD in Economics magna cum laude at the age of 24. From 1978 to February 1990, he was managing director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, MARC FABER LIMITED which acts as an investment advisor and fund manager.


Dr. Faber publishes a widely read monthly investment newsletter 'The Gloom Boom & Doom Report' report which highlights unusual investment opportunities. Dr. Faber is also the author of several books, including 'TOMORROW'S GOLD – Asia's Age of Discovery' which was first published in 2002 and highlights future investment opportunities around the world.


View the original article here


Tuesday, November 6, 2012

Stocks better than bonds: Marc Faber


Equities are a much better investment than bonds despite the rally in the debt of some emerging markets, according to Marc Faber, the bearish investor and author of The Doom, Gloom and Boom Report. Investors have been snapping up sovereign bonds issued by emerging and frontier countries as they search for yield after quantitative easing – massive money printing – in the US, Japan and Europe.


“I would not own sovereign bonds. Maybe in some Asian countries, as they have been more prudent with their fiscal situation,” Faber told Emerging Markets in an interview. “People are chasing yields but I think there is a risk in sovereign bonds. I don’t care what other people do, that’s what I do,” he added.


Stocks rise more in times of inflation, which is already happening in parts of the world, and therefore “between now and the eventual outcome [of the crisis that started in 2007], which will be a disaster, you’re better off in equities than in bonds,” Faber said. He has long argued that quantitative easing measures, taken in order to counteract the deflationary effects of the financial crisis and of the eurozone debt crisis, will lead to high inflation and said prices were already on the rise.


“The costs of living have increased for most people and are higher than the official figures,” he said.


“Some economists say that there is little consumer price inflation. But there is, because the money-printing has lifted asset prices like those for luxury property, art, equities or bonds. There is inflation in the system but it’s not obvious.”


IMF chief economist Olivier Blanchard also said that stocks “look quite good” but not necessarily because of inflation fears but because the interest rate investors get on US Treasury bills is zero.


“I’m not surprised that stock markets are doing relatively well,” Blanchard told Emerging Markets. Strong stock prices at present come from a “cold, hard look at the facts,” Blanchard said. “You are probably better off in stocks than in T-bills at this point.”


Faber said he found stocks in the debt-ridden eurozone countries “rather attractive” as “a lot of bad news” was discounted in these markets. Faber said he bought stocks in Greece, Portugal, Italy and Spain when they were low and was looking to buy more if markets fall again.


“I own some real estate in Asia, some equities, cash and gold,” he added.


Faber said he was pessimistic about the outlook for the world economy and the recent rounds of quantitative easing were adding to the problem.


“To intervene with monetary measures is negative to start with, and right now the same goes for fiscal measures because large fiscal deficits are undesirable,” Faber said. “What is the cause of the crisis? We have too much debt. To create more debt is not solving the problem.”


View the original article here


Global Markets could correct 20 percent

According to Dr Doom, the Markets could drop 20 percent from current levels.

“I believe globally we are faced with slowing economies and disappointing corporate profits, and I will not be surprised to see the Dow Jones, the S&P, the major indices, down from the recent highs by say, 20 percent,”


Monday, November 5, 2012

Markets could fall down 20 percent

“I believe globally we are faced with slowing economies and disappointing corporate profits, and I will not be surprised to see the Dow Jones, the S&P, the major indices, down from the recent highs by say, 20 percent,”

“That is not a big decline. If you can’t take a 20 percent decline, don’t get out of your bed in the morning,” he added.

Tuesday, October 16, 2012

Marc Faber: Global Markets Poised For a Sharp Downward, Expect Stocks to ... - Wall Street Pit

Global markets have been deteriorating technically and are setting up for serious setback, ultra-bear Marc Faber said Tuesday on CNBC’s “Fast Money”.

Faber stood by his call that within the next six to nine months stocks would fall 20%.

“Basically, I think QE3, which I think is unlimited, and bond purchases by the ECB bailout of countries have been largely discounted by the market, and the markets have been weakening technically, so I believe that we may have here quite a serious setback,” he said.

Last week, Faber told CNBC he was preparing for a full correction for the market, which has been up-trending since early June.

Full Faber clip

View the original article here

Sunday, October 7, 2012

Profit taking correction

Mr. Marc Faber warns of profit taking in some of the most popular assets on the market. Faber feels that a recession is coming and thinks profit taking will lead to a correction.

Tuesday, October 2, 2012

Financial guru Faber knocks Thai pledging scheme

Chiang Mai October 1, 2012 1:00 am "I think that, to be quite honest. I as an investor, it concerns me that, for instance, the government appoints principally people connected to Mr Thaksin for, say, Thai [Airways] International," he said.

"As an investor, to me it sounds very strange that people who run large companies are appointed by the government and that the government then favours people that are supportive of them. There is |still a lot of so-called cronyism. |In other words, I have political power and you're a businessman or you are someone who was at the party before and I give you a good job and the position of power," he said.

The Swiss investor and publisher of the "Gloom Boom & Doom Report" newsletter was speaking at his home in Chiang Mai in an exclusive interview with The Nation Group. Faber also criticised the Yingluck Shinawatra administration's multibillion-baht rice-pledging scheme, saying any price-support mechanism could basically distort the free market and lead to unintended consequences.

"Rice is not endemic to Thailand. Rice is a commodity traded all over the world. If the price should be fixed, it should be fixed all over the world," he said.

Nonetheless, Faber said he was "reasonably positive" about the future of Thailand, where he has resided since 2000 and has invested in some properties and Thai stocks.

"Thailand is unlikely to be a dynamic economy. It's not going to be like South Korea or Taiwan. In the long run, it could easily grow at 4-5 [per cent] per annum for the next 10-20 years unless the whole global economy collapses.

"It's like in the US ... tension between the Democrats and the Republicans are very high ... they just can't agree on anything. In Thailand, I don't know ... the red shirts, the yellow shirts ... both have probably some good and bad points. There is still too much corruption," he said.

Regarding his view on the global economy, Faber said he believed the Chinese economy was currently growing at a maximum of 4 per cent annually and the world economy overall was decelerating dramatically.

Nonetheless, Faber said the stock, gold, bond, currency and real-estate markets were different stories from the official economic figures since central banks would keep printing out money. This money has largely flowed to rich people while the lower middle class and poor have suffered from a higher cost of living.

Faber suggested that the average investor split his or her portfolio equally among stocks, property, gold, and corporate bonds.

"The purchasing power of money has depreciated a lot, and maybe the gold is still cheap. I will never sell my gold," he said.

Faber said the entire financial sector was vulnerable to a setback and a "systemic failure" would occur sooner or later.

"Now I happen to believe if you have money on deposit in Thai banks, it's much safer than if you have deposits with Citigroup, UBS, Royal Bank of Scotland and so on, because Thai banks don't have huge derivative portfolios. JPMorgan, they have trillions of dollars in derivatives. Nobody knows how to value this 'garbage'."

Faber said Thai property was still reasonably priced when compared with real estate in other parts of the world. He said he had invested in some Thai stocks including Bumrungrad International Hospital, Bangkok Dusit Medical Services, CP All, Charoen Pokphand Food, and some companies related to telecommunications and real estate.

View the original article here


After the Fed announced unlimited QE3, Faber appeared on Bloomberg TV saying that Fed policy will destroy the world.

Faber on more Federal Reserve stimulus:

“It is difficult to tell what will happen. I happen to believe that eventually we will have a systemic crisis and everything will collapse. But the question is really between here and then. Will everything collapse with Dow Jones 20,000 or 50,000 or 10 million? Mr. Bernanke is a money printer and, believe me, if Mr. Romney wins the election the next Fed chairman will also be a money printer. And so it will go on. The Europeans will print money. The Chinese will print money. Everybody will print money and the purchasing power of paper money will go down. And I don't like bonds. I don't particularly like equities, but I think equities are a better space to be in than bonds.”

On what he will do with his portfolio in reaction to yesterday’s move:

“I own corporate bonds and I recently, as I wrote, I pulled some bonds from Kazakhstan because Kazakhstan economically is a much sounder country than the United States or any European country. But it is in small doses. I wouldn't put all of my money in corporate bonds. They have an equity character. I also own equities still in Asia and as I pointed out already four months ago for the first time in my life I bought equities in Portugal, Spain, Italy and France because they were unbelievably distressed. I think what people overlook today is they look at markets but they don't look at what happens within the market. In the last 12 to 18 months the U.S. has massively outperformed European markets, Asian markets with a few exceptions and now some markets are relatively depressed. I could argue the Chinese stock market is now relatively depressed. So the asset allocators may move some money in Chinese stocks and then they can rally 10 percent to 20 percent.”

“The fallacy of monetary policy in the U.S. is to believe this money will go to the man on the street. It won't. It goes to the Mayfair economy of the well-to-do people and boosts asset prices of Warhols…Very happy. Very good for the Fed. Congratulations, Mr. Bernanke. I’m happy. My asset values go up but as a responsible citizen I have to say the monetary policies of the U.S. will destroy the world.”

On whether there’s any credibility in the Federal Reserve trying to bring down the unemployment rate and improve the housing market:

“I think there is a huge misconception and fallacy that money printing can actually improve the rate of employment because the money flows down into the system. It goes first into the banking system and into financial institutions, into the pockets of well-to-do people. If you drop money into my pockets and you have at the same time increased government involvement in the economy and we have the government growing with its regulation and legislation that stifles economic development. I don't want to build a new business. But what I may do is look around the world, where are the distressed assets. So I will go and buy existing assets, takeovers. But takeovers don't add to employment. They destroy employment. Secondly, I would just like to mention one thing. This money printing business, they have been saying that for the last 15 years that bailing out LTCM were necessary. Then they say the NASDAQ collapsed after March of 2000. We need to create another bubble, print money. They created a gigantic credit bubble and the misery that we have today.”

On where gold prices are headed:

“I think that the trend for gold prices will be steady, but the trend for the dollar and other currencies will be down. In other words, in dollar terms the price of gold will trend higher. How high it will go, you have to call Mr. Bernanke. And at the Fed there are other people actually that make Mr. Bernanke look like a hawk. So they are going to print money. And they have done it for ages already and where has it led? To record high unemployment essentially since the Great Depression and structural unemployment. Unemployment goes among low paying jobs, not high paying jobs. So, you ought to own some gold, but don’t store it in the U.S. because the Fed will take it away from you one day.”

On whether he would buy property in the United States:

“Yes. Property prices in the south of the U.S. are very inexpensive compared to property prices around the world. The tragedy is that the people that were evicted from these homes have no access to credit. They have no money. They can’t buy them. So, with easy money by the Fed well-to-do people can buy these properties and then rent them out to the people that were kicked out of these homes. What a great achievement of the Fed. First they create the property bubble and destroy the wealth of poor people, then the poor people have to rent and the rents have been up over the last 12 months. What a great achievement. Thank you, Mr. Bernanke.”

View the original article here

Commodities Will Continue To Fail near term

China looks like it is entering a slow down and this could affect Commodities and industrial metals such as copper, steel, aluminum, and others. They have struggled as of late given the shaky economic indicators from around the world. Marc Faber thinks that industrial commodities will remain under pressure due to the fact that the Chinese economy is slowing down considerably. If China were to cut its demand prospects from something like copper or steel, it could have devastating impacts on the commodities themselves, according to Faber's theory. Below, we outline several options to make a play on Faber's prediction.

Monday, October 1, 2012

MARC FABER: I'm Bearish On Stocks, Gold And Everything Else - Business Insider

Marc Faber is still convinced that there's a 100 percent chance of a global recession and that stocks are due for a big sell-off.

While Faber favors gold, he thinks that it too is due for a correction after staging a huge rally. It has a huge rally from around – the low was at $1,522 last December and we are now over $1,700 and I think we need a correction here. In fact, I am now bearish about practically all assets near term I think we’re entering a correction time where there will be some disappointments, where stock markets, from the recent times can easily drop 20%.

However, Faber's bearish stance isn't so bearish that he has dumped everything. I’m not 100% in cash, for the simple reason that I could be wrong, but in general I think that people that have a heavy exposure to assets being that equities, or gold, or other commodities. I think they will face some profit taking here.

View the original article here

US Economy has 100% Chance of Entering Another Recession – Marc Faber - Wall Street Pit

Gloom Boom & Doom Report publisher Marc Faber spoke to FOX Business Network (FBN) about his concerns regarding investing in the United States. Faber states that he is “bearish about practically all assets near term” and that “we’re entering a correction time.” Faber further states that equities, gold, and other commodities “will face some profit taking.” Excerpts from the interview are below, courtesy of Fox Business Network.

On Gold in today’s economy:

“It has a huge rally from around – the low was a 1522 last December and we are now over 1700 and I think we need a correction here. In fact, I am now bearish about practically all assets near term I think we’re entering a correction time where there will be some disappointments, where stock markets, from the recent times can easily drop 20%.”

On being bearish on almost all assets in “the near term”:

“I’m not 100% in cash, for the simple reason that I could be wrong, but in general I think that people that have a heavy exposure to assets being that equities, or gold, or other commodities. I think they will face some profit taking here.”

On whether or not the U.S. will enter a recession:

“I think some people in the US, actually the ECRI already say that the US is in a recession. But of course we have to consider the following, an economy is a very large vessel, there are different sectors. And some sectors are improving like housing in the U.S. is improving. The problem with improvement in housing is that stocks have already gone up very substantially, they more than tripled from their low. And so we are ahead of ourselves. The Greek stock markets from its low is up more than 60%, so a 20% correction is nothing unusual.”

View the original article here

Tuesday, August 14, 2012

MARC FABER: If I Had To Vote For Obama Or Romney, I'd Shoot Myself - Business Insider

Marc Faber, the famous investor and strategist, says that neither candidate in the upcoming U.S. Presidential election is worth voting for, at least if the goal is fixing the economy. In fact, says Faber, the Thailand-based author of the Gloom, Boom & Doom Report, if you put a gun to his head and told him to pick a candidate to vote for, he'd say, "shoot."

Why is Faber so negative on the two candidates?

Because he thinks neither Barack Obama nor Mitt Romney will have the balls to do what it takes to get the economy back on track, which, in his opinion, is significantly cut government spending AND modestly raise taxes. Rather, he thinks, both candidates will just focus on remaining popular. Given that America will almost certainly choose one of these two candidates to be its next President, what is Faber's outlook for the U.S. economy? Continued crappy growth.

Faber's outlook for the rest of the world, meanwhile, is even less encouraging. Europe is already in a recession, he says, and Asia's growth has peaked and is starting to decline. Interestingly, Faber is not running away from stocks as a result of this dour view. Rather, he is starting to buy some stocks in Europe, because the valuations have gotten so slammed that he now finds the risk/reward profile attractive. And, with almost every government on earth trying to print its way out from under its huge debt load, Faber still remains a big fan of gold.

View the original article here

Faber sees market rally in Aug, but tough road thereafter -

Faber sees market rally in Aug, but tough road thereafterIn an interview to CNBC-TV18, Marc Faber, editor and publisher of 'The Gloom, Boom & Doom Report', speaks about the world markets swinging wildly between risk-on and risk-off.   .   Share  .  Email  .  Print  .  A+A- In an interview to CNBC-TV18, Marc Faber, editor and publisher of 'The Gloom, Boom & Doom Report', speaks about the world markets swinging wildly between risk-on and risk-off.

Faber believes that equities may continue to rally from the current oversold levels. "The euro-dollar may have seen a bottom at least for the near-term," he said.

Below is an edited transcript of Faber's interview on CNBC-TV18.

Q: The world markets have been swinging wildly between risk-on and risk-off. What do you think is going to be the more dominant theme in the near-term?

A: In the near-term, I believe that markets can still rally somewhat for the simple reason that in every market you have a few strong stocks and they are breaking out on the upside. And then you have a lot of stocks that are down 40-50% and very oversold, so they can also rebound. We have a lot of liquidity in the world that has been created essentially by central bankers.

We have negative real interest rates practically everywhere. So if people keep their money on deposits, they are losing out in terms of purchasing power. The sentiment among investors, at the beginning of June, was very negative when the S&P bottomed out. So I think that we may still rally somewhat into August -- mid-August, end of August and then probably will have a tougher second half. In other words, September-October-November could be somewhat tougher months.

Q: So if you were to just put numbers to this, the S&P closed on Friday at 1390. How much would you give it in the case of an up move?

A: The high was this year on April 4 at 1422. I think it's possible, based on the few stocks that are strong and the rebound candidates, we will exceed that high. That maybe we move to 1450 or even 1500. But the difficulty at the present time is you have ousted expansionary monetary policies, zero interest rates in real terms and you have a slowdown in the global economy.

At the present time in Asia, we have practically no growth. In Europe, we are in recession. In the US, there is very little growth. So you are, on the one hand, faced with a lot of incoming liquidity created by central banks and on the second hand you have essentially a global economy that is slowing down where corporate profits will rather disappoint than exceed expectations.

Q: Would you be a seller in the strength over the next few weeks and do you see the levels of the June lows that you alluded to being broken in the September to November phase?

A: Yes, I think these lows could be exceeded and that it maybe October-November or after the US election we could have essentially a decline of around 20% in the market.

View the original article here

Monday, August 13, 2012

Marc Faber Avoiding Philippines, Indonesian Stocks; Waiting On China ... - Barron's (blog)

Marc Faber, self-described pessimist and regular Barron’s Roundtable participant, shares his take on Asian markets with Bloomberg Radio.

While the Chinese stock market has already discounted a lot of bad news, the “good companies” are not really inexpensive. He prefers to waitto see the results of the stimulus packages (which he thinks will fail).

His take on recently hot Philippines/Indonesian stocks: “I don’t think there is particularly good value at present time. He says the Chinese slowdown and European recession will make it difficult for Asian nations to grow from present levels.

Will the Chinese be able to stimulate consumption? Faber says it depends on consumer confidence, which he does not think is very high.

For the first time in his life, Faber says he has been buying European stocks.

MARC FABER: The S&P 500 Could Soar To 1500...Before Collapsing - Business Insider

In the near term, I believe that markets can still rally somewhat for the simple reason that in every market, you have a few strong stocks, and they are breaking out on the upside. Then, you have a lot of stocks that are down 40 or 50 percent and are very oversold, so they can also rebound…

I think that we may still rally somewhat into August – mid-August, end of August – and then probably we'll have a tougher second half. In other words, September, October, and November could be somewhat tougher months. The high was this year on April 4 at 1422. I think it's possible, based on the few stocks that are strong and the rebound candidates, that we will exceed that high – maybe move to 1450 or even 1500.

However, Faber warned that we're seeing "essentially a global economy that is slowing down, where corporate profits will rather disappoint than exceed expectations," which the stock market will catch on to eventually. When asked where he thought stocks would go during the "tougher second half" he sees this year, Faber replied, "I think these lows could be exceeded and I think it may be October or November – or after the U.S. election – we could essentially have a decline of around 20 percent in the market."

Sunday, July 29, 2012

Faber breaks habit of a lifetime and loads up on European equity -

Marc Faber has made his first foray into beaten-up Portuguese, Greek, Spanish, French and Italian equity markets, the publisher of ‘The Gloom, Boom & Doom’ report told Citywire Global exclusively on Monday.

Having liquidated a large portion of investment in Asian equities in the last few weeks, Faber has put the cash to work in Europe, while still holding 30% cash which he will allocate only when markets fall further, he said.

'For the first time in my life, I have been buying European stocks because I can see the markets of Portugal, Spain, Italy, Greece and France near the March 6th 2009 lows,’ Faber said speaking from his home in Thailand.

‘These markets, compared to the rest of the world are very cheap and some stocks are perfectly fine companies but because these markets were very weak and because there is a threat of a euro break-up, everything has come down to very low valuations.’

Faber said he would currently still rather hold European stocks than US stocks – despite a possibility that the latter will see a rise in the S&P index to highs as seen in April this year.

‘I think that it’s possible that the US stocks may rally as the whole world thinks that the US has natural gas and there is a re-industrialisation in America. But, if I look at all the options I now have, I can see that European stocks are now terribly depressed.’

‘I still keep a lot of cash because if the markets drop another 30% - which I hope they will do – I will then invest in equities.’

In a video interview with Citywire in February this year, Faber said he held 25% in real estate, 25% in (mostly Asian) equities, 25% in corporate bonds and 25% in physical gold.

Speaking today, Faber said he bought telecomms and utilities companies in Europe’s peripheral economies in the last four weeks having reduced his Asian equity exposure. He said he still recommends investors to invest in gold and real estate and holds no bank exposure. 

‘It may be a mistake, but I don’t think it is time to invest in banks because they still need a lot of capital and they will have to increase the equity capital. But maybe they will have a rebound – who knows – it’s possible. I just don’t see enough transparency (to invest)’.

In his portfolio, besides a 30% holding in cash, Faber holds a large proportion in high yield bonds made up of mostly Asian, Russian and European names such as Gazprom and ICICI bank.

‘Most of my bonds are what rating agencies would consider low quality. I don’t consider them as lower quality because they are corporate bonds and I think that a lot of corporations will rather survive than the governments.’

An edited transcript of the interview with Marc Faber including a discussion of the slowdown of the Chinese economy and its effects on commodity markets as well as Faber's outlook on the US economy will be published exclusively here tomorrow.

View the original article here

Monday, July 16, 2012

Beware China but not Commodities: Faber -

According to Marc Faber there are still opportunities for investment in commodities despite recent volatility, following diminishing demand from China, the world’s biggest consumer of commodities like copper and zinc. “The markets are very volatile and it takes a lot of courage to be short,” Faber said.

“I don't want to be short [on] copper because copper can, like other markets, be manipulated because there are not that many players in the copper market, and so we could see a rally in copper prices, we could see a rally in gold prices and so forth and so on.”

Oil, copper and gold rallied on Friday following China’s second-quarter GDP data, which met forecasts of 7.6 percent and on investor hopes that the Chinese government would continue to cut the benchmark interest to stimulate the economy.  This was the first time China’s GDP growth has dipped below 8 percent since 2009. However, Faber and other investors are pessimistic about the wider impact of China’s slowing growth, saying that he believed the Chinese economy was “rather weak” and that Chinese officials had mis-represented the country’s growth figures.

“I think…investors must realize that the impact of a slowdown in the Chinese economy, which in my view is much larger than what the government has been reporting, the government says GDP has been growing at 7.8%”, he said. “In my view, it's much lower.”

Tuesday, July 10, 2012

KWN 'Deep Throat' Catches Gold Cartel In Act Again; Marc Faber Changes ... - ETF Daily News

Dominique de Kevelioc de Bailleul: After months of suggesting that the gold price could move down to the $1,200 level, editor of the Gloom Boom Doom Report, Marc Faber, now believes the gold market has reach the bottom range of its cycle lows.

“I’m not sure that Gold will not make a new high this year, but I think we’ve bottomed out and some gold mining shares have become very very inexpensive compared to the reserves they have,” Faber told Bloomberg Television this week.  “And I think that in the current environment where it is clear that the worse the economy becomes the more the money printers will be at work, that to own a currency whose supply can not be increased at the will of some clowns that occupy the central banks is a desirable investment,” he added.
"Nationalism will emerge. Healthier countries will not see fit to spend their hard earned money to bail out their less responsible neighbors."

In a Jan. 17 interview with Fox Business, Faber was unconvinced the rebound from the steep correction of 20.7 percent to $1,523.90 on Dec. 29 was over. According to him, the spectacular and seasonally unusual summer rally of 2011, which took gold to $1,923.70 on Sept. 6, up 32.4% from the low of $1,452.60 set on May 5 (a 132 percent compounded annual rate), hadn’t flushed out all of the remaining weak hands.

“Well, I like it [gold], yes, but I think the correction is not over yet,” he said.  “I think, we had a big correction from the peak September 6 when gold hit $1,921.  We went down to around $1,522 at the end of December.  Now we’ve rebounded above $1,600.  I think we can have another leg down.”

In the months of April and May, Faber held firm about his fear of another leg down for gold, suggesting that, to be safe, investors should dollar-cost average into building a gold position for the next leg up in the ongoing bull market in precious metals.

Adding trepidation and skepticism to the gold market’s potential for cracking JP Morgan’s widely-publicized target of $2,500 for gold by the close of 2011, currency trading legend John Taylor of FX Concepts told Bloomberg as early as late spring of 2011 that he, too, like Faber, was looking for gold to drop further, giving a low as $1,000 target price for the metal, as a massive run out of gold to shore-up tier one assets would likely result from a collapse of the euro (another prediction) by late spring.  His outside target for the catastrophe in the eurozone was the close of May 2012.

As central banks of the West and some large hedge funds liquidated gold for reasons of liquidity throughout the first half of 2012, the Chinese (and other nations of the East), meanwhile, were buyers at the $1,600 level and at intervals of $10 lower in a reverse pyramid buying scheme, according to King World News anonymous source of London.

“They [Eastern countries] are averaging in at the fixes, as well as during the declines,” Anonymous told KWN on Apr. 5.  “On top of that, there are bids for hundreds of tons of physical gold starting at the $1,610 level and below.”

Immediately following the interview with Anonymous, King World New’s website underwent an unrelenting ‘denial of service’ attack by unknown computer operatives.  Though an earlier incident involving an attack on KWN’s servers following another Anonymous interview could not be traced, speculation was rife that JP Morgan (or someone affiliated with the gold cartel’s kingpin) was responsible for the mischief, as well as recollections of Andrew Maguire’s near-fatal attack by a maniacal automobile driver immediately following Maguire’s visit to the CFTC were aired and written.

And in breaking news on Friday, KWN released another interview by Anonymous, who issued an account of the most recent attack on the gold market by the JP Morgan-led cartel.  This time, the attack took place one hour prior to Fed Chairman Ben Bernanke’s testimony to Congress earlier in the week.  The attack was viscous, monstrous and blatantly obvious, according to him (her).

“What happened yesterday in the gold market was very interesting,” Anonymous told KWN’s Eric King. “One full hour before Bernanke’s testimony, the bullion banks started selling.  Over the next 4 hours, the bullion banks sold the equivalent of 515 metric tons of paper gold.  This was in just 4 hours, and again, the selling started one hour before Bernanke’s testimony.”

Anonymous goes on to say that “Eastern buyers” were waiting with open arms once again to lock in more physical deliveries at lower prices orchestrated by the cartel.

Anonymous added, “The selling went on for another 3 hours after the Fed Chairman began to speak, and as I said, over 515 metric tons of paper gold was sold.  During this entire takedown, there was zero physical gold available for sale in the market. However, this action did create tremendous supply for the Eastern buyers to lock in the spot price of gold.”

Full account of the incident from KWN here.

The attack appeared coordinated and by the usual suspects, according to Anonymous.  That large client, referred to by JP Morgan’s gold market specialist Blythe Masters in a CNBC interview of Apr. 5, most likely is the Fed (or another agent), itself, according to many analysts close to the ongoing story.

“A large wave of selling entered the paper gold market and traders saw the price of gold drop $40 in a matter of minutes,” Anonymous added.  “So the action was orchestrated by the Fed, and Fed-speak was used to assist in the takedown.

“The real question here is, how could an entity begin selling such a massive amount of paper gold when there hadn’t been any news (starting to sell before Bernanke’s testimony)?”

Onlookers to the KWN/Anonymous/JP Morgan saga await the next cyber attack upon KWN’s servers.

Related: SPDR Gold Trust (NYSEARCA:GLD), iShares Silver Trust (NYSEARCA:SLV), ProShares Ultra Silver (NYSEARCA:AGQ), Market Vectors Gold Miners ETF (NYSEARCA:GDX).

View the original article here

Monday, July 9, 2012

Global markets to plunge further in 12 months -

Global market sentiment improved following the deal aimed at easing concerns over the eurozone's debt and banking problems. Given that world markets are in oversold territory, Marc Faber, Editor & Publisher, The Gloom, Boom & Doom Report, Marc Faber Limited is of the view that equities may rally for some time more, however, the global picture has still not changed drastically.

“Don’t forget July is a month of seasonal strength and that we are coming into the election, there maybe some more money printing and fiddling with statistic sense of ours. So the market may actually rally a bit more. But it doesn’t change the global picture, which is essentially for a global economic slowdown, for an increasing number of companies that are reporting disappointing sales for forecast, for earnings.”

In his opinion, “we are still in a high risk environment. Eventually, in the next 12 months, you will be able to buy most markets at a lower level than today.”

Below is an edited transcript of his interview. Watch the accompanying video for more.

Q: What did you read first of the kind of reaction global equities had to the Euro Summit and the notes that came in from there?

A: To start with, I think markets were oversold especially in Europe. When there was moderate good news, there was a lot of European short covering and a lot of stock rebounded by 5-7% in just one day.

Q: Would you say the rally is probably short-lived and saw the best part of it play out by last week itself?

A: This is too early to tell. Basically, we made a low in early June and at 1261 on the S&P and then we rallied and we came down again, but we didn’t test a new low. We may rebounce to around 1400 on the S&P. Don’t forget July is a month of seasonal strength and that we are coming into the election, there maybe some more money printing and fiddling with statistic sense of ours. So the market may actually rally a bit more. But it doesn’t change the global picture, which is essentially for a global economic slowdown, for an increasing number of companies that are reporting disappointing sales for forecast, for earnings.

When there is a minor disappointment that’s what the case on Friday in the case of Nike, the stock then drops very significantly and erases essentially all the gains of the last three or six months. So we are still in a high risk environment. Eventually, I think that in the next 12 months, you will be able to buy most markets at a lower level than today. The only stocks I bought in the last 10 days are from the fresh issues in Portugal, Spain, Italy and France. 

Q: How heartened were you by the comments that were made at the Euro Summit though, either in terms of working towards a banking union, the vague indication of looking at euro bonds as an option, do you think some significant ground has been covered or was it a mission statement that would probably not hold true for very long, at least in terms of solving the euro crisis?

A: I think the details will have to be worked out and that will take a long time. So it’s not a solution that immediately will be applied and successful.

Q: You track the euro-dollar in great detail as well. Would you say things or dynamics have changed for both those currencies and the second half may yield more weakness for the dollar or do you think any strength on the euro is short-lived and should be approached with a shorting stance?

A: In my view, the euro is not a very desirable currency, but the US dollar is not much better. I think if you look at the action of central banks around the world, it is very difficult to find any paper currency with which you can be particularly happy. If the Chinese economy slows down more as I expect it will then you will also have easing in China and capital flight and maybe the Chinese RMB will weaken.

Among the context of who is the least ugly currency I would say probably the US dollar for the time being, but that doesn’t change the fact that the US dollar was overbought recently and sentiment surrounding both European stocks and the euro was extremely negative. So I think a rebound in the euro may continue very well and then will have renewed weakness in my view.

Q: Just to step away from this recent news flow for a second though, it’s been a five year bear trend almost for markets. How would you call the second half of this year? Do you see anything that marks an end for the bear rally or a troughing out of markets or do you think we are in for a longer haul here?

A: We have to be very specific. The total return of equity if you include dividends since 2007 hasn’t been a disaster. It hasn’t been particularly good, but it hasn’t been a disaster and the return from bonds have been very good and for commodities depending which ones you owned was also reasonable. So I think for investors, the situation was not all that bad. But I concede that a lot of people lost a lot of money because they were badly positioned, either overweight, stocks that went down a lot or they were in the case of the US heavily geared into the property market that tumbled and reversed. So I agree that it hasn’t been a particularly happy time for investors.

View the original article here

Prefer Indian companies to US Treasuries from 10 year perspective: Mark Faber - Economic Times

CHANG MAI, THAILAND: Recommending portfolio diversification, investment guru Mark Faber told ET Now that it is the right time to own a mix of equities, cash, gold and real estate. "Asset allocation will need to be rebalanced from time to time," Faber said.

Faber is bullish on gold as an asset class. With gold expected to head lower, he advised to accumulate it. He prefers gold to paper currency. "Central banks around the world will continue to print paper currency which will decrease the currency's purchasing power," he said. ithin real estate, he feels that 'weekend destination properties' will be desirable over the next 10-15 years in India.

Faber is of the opinion that it is difficult to be bullish on the US economy, but given the current scenario, dollar is a relatively safe currency. Faber feels that huge capital gains from asset classes over the coming years are unlikely and that in the next five years capital preservation will be of utmost importance. He even said that globally a period of asset deflation may be witnessed.

Asked about the Asian economies, Faber said that he does not see significant growth in Asia and that is reflected in the equity prices. He expects corporate profits to fall in the coming years.

Faber was extremely bearish on the US Treasuries and government bonds from a 10 year perspective. The notion that US Treasuries are a safe investment is misplaced, Faber opined.

He also said that between Indian equities and US Treasuries, he would prefer to invest in companies in India from a 10 year viewpoint. "Even though the macroeconomic signals are not favourable, Indian companies are better run than their Chinese counterparts," he added.

View the original article here

If I Were Germany, I Would Have Abandoned Eurozone Last Week – Faber - Wall Street Pit

Marc Faber, publisher of the Gloom, Boom and Doom Report, spoke with Bloomberg Television’s Betty Liu this morning and said that, “If I were running Germany, I would have abandoned the eurozone last week.”

Faber went on to say, “In the case of Greece, one should have kicked out Greece three years ago. It would have been much cheaper.”

Excerpts from the interview can be found below, courtesy of Bloomberg Television.

Faber on the eurozone crisis:

“If you put one or 100 sick banks in a union, it does not change the fact that they’re sick. In my view the markets are rallying because they were grossly oversold. When markets are grossly oversold, especially markets of Portugal, Spain, Italy, France, then any news that is not disastrous news propels stocks higher. I think that combined with seasonal strength in July, the rally has carried on somewhat. But it is another cosmetic fix, a quick fix that does not solve the long-term fundamental problem of over investment in the euro zone. And what it does, basically, it forces Germans to continue to finance people in Spain and Portugal and Greece that are living beyond their means.”

“If I were the Germans, if I were running Germany, I would have abandoned the eurozone last week…It is a costly decision, but losses are there and somewhere, somehow, the losses have to be taken. The first loss is the banks. In the case of Greece, one should have kicked out Greece three years ago. It would have been much cheaper.”

On whether he’s picking up European equities:

“Yes. In Portugal, Spain, Italy, and France, the markets are either at the lows of March 2009, or lower. Along with bad companies and the banks, there are also reasonably good companies. Stellar companies, but they have been dragged down. I see value in equities, regardless of whether the eurozone stays or is abandoned.”

“[I’m buying] anything that has a high yield, or what I perceive to have a relatively safe dividend. In other words, I do not expect the dividends to be slashed by 90%…I am not buying banks, but maybe they could rally. I am just not buying them because I think there will be a lot of equity dilution and recapitalization. I’m not that keen on banks.”

On whether he’s going long on the euro:

“No, I’m not going long on the euro because I’ve always maintained a diversified currency portfolio. I have U.S. dollars, euros, Singapore dollars, some Canadian dollars, and even some Australian dollars. And I have a lot of Asian currencies, Malaysia, Thai baht and so forth.”

View the original article here

Sunday, July 8, 2012

MARC FABER: Europe Is Just In An Oversold Bounce, And The EU Summit Won ... - Business Insider

European markets took off after European leaders adopted a host of measures intended to alleviate interbank funding pressures and lower borrowing costs for Italy and Spain at last week's EU summit.

But Marc Faber, publisher of the Gloom, Boom and Doom Report, told Bloomberg TV that markets have been oversold sparking a rally, and that the developments in Europe are nothing more than another 'cosmetic fix':

"If you put one or 100 sick banks in a union, it does not change the fact that they're sick. In my view the markets are rallying because they were grossly oversold. And when markets are grossly oversold, especially markets of Portugal, Spain, Italy, France, then any news that is not disastrous news propels stocks higher.

And so I think that combined with seasonal strength in July, the rally has carried on somewhat. But it is another cosmetic fix, a quick fix that does not solve the long-term fundamental problem of over investment in the euro zone. And what it does, basically, it forces Germans savers to bailout and to  continue to finance people in Spain and Portugal and Greece and so forth that are living beyond their means."

Faber said he is buying European stocks in Portugal, Spain, Italy and France, and is buying "anything that has a high yield, or what I perceive to have a relatively safe dividend. In other words, I do not expect the dividends to be slashed by 90%." Faber is however avoiding the banks.

View the original article here

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