Tuesday, June 12, 2012

Marc Faber: There's No More Downside For Gold - Business Insider


marc faberGold which was trading near one-month highs yesterday, is off 0.47 percent today,and at $1,626.20, is well off its 52-week high of $1,922.


Marc Faber, author of the Gloom, Boom and Doom report was on Bloomberg TV saying gold has bottomed out:


"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.


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." Faber also said he thinks the Singapore dollar, the Thai baht, and the Malaysian ringitt are relatively stable currencies.

View the original article here

Shock! Faber, Siegel Agree: Buy Stocks Instead of Bonds - CNBC.com

The author of the Gloom Boom & Doom report, and Siegel, the bullish Wharton School professor, believe that with negative real bond yields prevailing there's little choice but to pick stocks.

"Everything looks bad at the present time and people are relatively bearish. At the same time, you have the 10-year note at less than 1.5 percent and you have stocks like Johnson & Johnson yielding almost 4 percent," "I'm not saying Johnson & Johnson won't go down with the rest of the market, but if you have a time horizon of 10 years, I believe you're going to make more money in Johnson & Johnson than you will in U.S. government bonds," he said.

Siegel has been making the same point for some time now, telling hedge fund managers at May's Skybridge Alternatives, or SALT, conference in Las Vegas that investors don't even need the market to go up to make money in the stock market.

Dividend gains alone are reason enough to turn from government bonds and towards equities, he said during a live segment with Faber. "This is the first time in 60 years that dividend yields on the market exceed long-term interest rates. It's the first time in 60 years when you don't need gains in stocks, that you don't need higher returns than gains in bonds," Siegel said. "You don't have to worry so much about the day-to-day volatility if the corporation, if the firm has good coverage on its dividend, because it's going to continue to pay."

Falling commodity prices, particularly in oil, add a "side benefit" for consumers and investors, Siegel said.

"Slow growth, no recession, earnings flat but dividends well-covered — I think it's still a very, very good story for stocks," he said.

Monday, June 11, 2012

MARC FABER: The Best Outcome For Greece Would Still Be Absolutely Horrible For ... - Business Insider

marc faberMarc Faber, author of the Gloom Boom & Doom Report, has bad news for Greece.


In the new issue of Barron's he explains, "There is no resolution to the problem in Europe because no one wants to accept austerity."


Having said that, he explains what the best outcome would look like for Greece:


The best outcome for Greece probably would be to exit the euro zone. But the new Greek drachma would depreciate by 50% to 70% against the euro. The Greeks don't want their pensions paid in a depreciating currency. Nor do they want austerity, as their pensions and government salaries would be cut by 50%.


Given the unpleasant nature of that outcome, it's no surprise that Europe's debt crisis continues to drag on.  According to Barron's, Faber think we won't see a "breaking point" for three to five years.


Given all this, it's no surprise that Faber is a fan of gold:


I am also warming to gold shares. Gold corrected to $1,522 last December from $1,921 in September. It rebounded to $1,795 in February and is back down around $1,600. The correction could last longer, but given that governments will print more money, gold is relatively effective as a currency. My preference is physical gold, but I would also own some gold shares, which have been decimated.


View the original article here

Bond Bubble Dismissed as Low Yields Echo Pimco's New Normal - BusinessWeek

Mohamed El-Erian knows why bond markets from the U.S. to Germany to Brazil, where yields have dropped to record lows even though debt has ballooned to more than $40 trillion worldwide, aren’t a bubble waiting to burst.

“We may be in a synchronized slowdown” in global economic growth, El-Erian, who as chief executive officer of Pacific Investment Management Co. oversees $1.77 trillion, said in a June 6 telephone interview. “We could stay here for a while.”

The average yield on bonds issued by the Group of Seven nations has fallen to 1.120 percent from 3 percent in 2007, Bank of America Merrill Lynch index data show. Germany’s two-year note yield fell below zero for the first time on June 1, while Switzerland’s has been negative since April 24, meaning investors are paying for the right to lend the nation money.

Those rates suggest that bondholders don’t expect growth to exceed 3 percent, said John Lonski, chief economist at Moody’s Capital Markets Group in New York. The rate had represented the dividing line between growth and recession as recently as 2009, according to the International Monetary Fund, and compares with an average of 4.7 percent in the five years before the financial crisis took root in 2008.

Yields on government securities in the U.S., Germany, the U.K., Austria, the Netherlands, Finland and Australia tumbled to all-time lows this month as Europe’s debt crisis intensified, manufacturing worldwide slowed and unemployment in the U.S. unexpectedly rose. Even in emerging markets, such as Brazil and India, engines of growth in recent years, yields signal a slowdown and less inflation.

Spain became the fourth euro member to seek a bailout since the start of the region’s debt crisis more than two years ago with a request two days ago for as much as 100 billion euros ($126 billion) in loans to rescue its banking system.

“As far as developed economies are concerned, the credit market is coming to the conclusion that real economic growth will be slower than what we’ve become accustomed to since the Second World War,” Lonski said in a June 5 telephone interview.

Treasury 10-year yields closed at 1.64 percent on June 8. German bunds of similar maturity finished at 1.33 percent and Japan finished at 0.85 percent. All are below the 3 percent rise in consumer prices worldwide forecast for this year by the investment banking unit of London-based Barclays Plc.

“You’re not talking about a bubble because a bubble is about greed,” Jeffrey Rosenberg, chief investment strategist for fixed income at BlackRock Inc. in New York, which has $3.68 trillion under management, said in a June 6 telephone interview. “That’s not a reflection of ‘I expect prices to go higher and I have to jump in,’ that’s a reflection of ‘I want to preserve my principal.’ Negative yields reflect fear.”

Government bonds have returned about 2.5 percent since mid- March, including reinvested interest, according to the Bank of America Merrill Lynch Global Sovereign Broad Market Plus Index. At the same time the MSCI All-Country World Index (MXWD) of stocks lost 9.3 percent with dividends, while the Standard & Poor’s GSCI Total Return Index of metals, fuels and agricultural products fell 16 percent.

After shooting to as high as 2.4 percent on March 20, yields on 10-year Treasuries fell as low as 1.44 percent on June 1, when the U.S. Labor Department said the unemployment rate rose to 8.2 percent in May from 8.1 percent in April. Today, the yield on the benchmark 1.75 percent note due May 2022 rose eight basis points, or 0.08 percentage point, following an 18 basis point increase last week.

Policy makers are taking action amid the steepest slowdown since the recession ended in 2009. Australia’s central bank cut interest rates on June 5, and two days later China made its first reduction in more than three years.

European Central Bank President Mario Draghi left the door open for a rate cut at a June 6 press conference, while highlighting the limitations of the ECB’s tools in countering the region’s financial turmoil. Federal Reserve Chairman Ben S. Bernanke told a Congressional committee last week that policy makers will discuss whether to do more to spur growth after flooding the financial system with $2.3 trillion by purchasing bonds, though he said the steps they could take may have “diminishing returns.”

The slowdown matches the prediction by El-Erian of Pimco in 2009 for a “new normal” in global economies characterized by a slower pace of expansion, higher unemployment and a greater role for governments in private markets following the worst financial crisis since the Great Depression.

Pimco officials point to Japan, which has been in and out of recession since the mid-1990s, as what the new normal would look like. Even though it has the world’s largest debt load at more than $11 trillion, Japan has some of the world’s lowest bond yields because of years of below-average growth.

Japanese 10-year yields fell to 2 percent in late 1997 from about 5.7 percent eight years earlier when the country’s stock and real estate markets collapsed. They haven’t closed at or above 2 percent since 2006. The U.S. 10-year yield tumbled below that level about four years after rising to 5.29 percent in June 2007.

Global “bond markets are turning Japanese,” Bill Gross, who manages the world’s biggest bond fund (PTTRX) as co-chief investment officer with El-Erian at Newport Beach, California-based Pimco, said in a June 4 Twitter posting.

“In many ways, we are replicating the Japanese experience,” George Magnus, senior economic adviser in London at UBS AG, said in a June 5 telephone interview. “Banks and households have become overextended, and now we know governments have also become overextended. The problem is that the deleveraging means people are saving more. There is no sufficient spending and lending to boost the economy.”

Investors from Leon Cooperman, founder of equity hedge fund Omega Advisors Inc., to Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc., have said that investors should avoid bonds. Most bears say the easy money policies of central banks combined with the rising amount of debt will eventually spark a rapid acceleration in inflation.

“The government bond bubble will burst,” Marc Faber, author of the Gloom, Boom & Doom report, told Sara Eisen on Bloomberg Television’s “Inside Track” on June 7. “I don’t know whether it’s going to be tomorrow or in three months. But I suspect that it will happen sooner rather than later because the consensus now is to buy U.S. Treasuries.”

The supply of bonds has swelled as governments borrowed to stimulate their economies. The Bank of America Merrill Lynch Global Broad Market Index tracks debt issues with a face value of $40 trillion, up from $24 trillion in June 2007 and $15 trillion a decade ago.

Central banks, including the Fed, ECB and Bank of Japan (8301), have helped soak up the extra supply as policy makers injected money into their economies by purchasing government securities. The balance sheets of the world’s six biggest central banks have more than doubled since 2006 to $13.2 trillion, according to Chicago-based Bianco Research LLC.

“A lot of people from Warren Buffett on down would say the bond market has no value, be careful of bonds, when rates go up you’ll lose a lot of money,” James Bianco, president of the firm, said in a June 7 telephone interview. “And they’re right, but the buyer of bonds doesn’t care about value right now. The buyer of bonds is the central bank of Japan, the central bank of China.”

Financial institutions are also contributing to demand, buying from a shrinking supply of the highest quality debt to meet capital requirements set by the Basel, Switzerland-based Bank for International Settlements. The Basel III rules will “increase the price of safety” embedded in assets deemed a reliable store of value, the IMF wrote in an April 18 report.

Investors have bid $3.19 for each dollar of the $903 billion of notes and bonds auctioned by the U.S. Treasury Department this year, above the record $3.04 in all of 2011, data compiled by Bloomberg show.

Yields that are negative after accounting for inflation may be a sign that investors expect the pace of consumer price gains to slow, or fall like the deflation in Japan. Copper has declined 18 percent in the past 12 months, aluminum has tumbled 23 percent, cotton plunged 47 percent and oil has dropped about 14 percent.

A measure of investor expectations for inflation used by the Fed to set policy, the five-year, five-year forward break- even rate, which gauges the average increase in prices between 2017 and 2022, dropped to 2.56 percent on June 4, from a 2012 high of 2.78 percent on March 19.

Emerging market sovereign yields fell to 5.33 percent last month, within two basis points of the record low reached in November 2010, according to the JPMorgan Emerging Bond Index Global Sovereign Yield.

Brazil will expand 2.72 percent this year, according to a central bank survey of analysts published on June 4. That would follow growth of 2.73 percent in 2011, the second-worst performance in eight years.

Two-year bond yields in Brazil fell to a record low of 8.4 percent on May 18, from about 12.6 percent a year earlier, as the central bank cut its benchmark rate seven times since August to bolster the economy. A bond market measure that reflects investors’ expectations for inflation plunged to a three-year low of 4.7 percentage points last week.

In India, where 10-year yields fell for the sixth-straight week, the longest run of declines since December, interest-rate swaps show the central bank will cut borrowing costs for a second time this year. Asia’s third-largest economy grew 5.3 percent in the first quarter from a year earlier, a nine-year low, the government said May 31.

“Yields are extremely low for a very good reason, and that’s fear,” Stuart Thomson, a money manager at Ignis Asset Management in Glasgow, which oversees about $115 billion, said in an interview on June 1. “I don’t see us heading into a bear market.”

To contact the reporters on this story: Daniel Kruger in New York at dkruger1@bloomberg.net; Anchalee Worrachate in London at aworrachate@bloomberg.net

To contact the editors responsible for this story: Dave Liedtka at dliedtka@bloomberg.net; Daniel Tilles at dtilles@bloomberg.net


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Sunday, June 10, 2012

KWN 'Deep Throat' Catches Gold Cartel In Act Again; Marc Faber Changes Outlook ... - 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 toldBloomberg 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)?”



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