Bonds
Marc Faber: ‘I Would Be Very Careful Being Overweight Equities’
On Wednesday, The Globe and Mail (Canada) published an interview it conducted with “Doctor Doom” Marc Faber, a Swiss-born investment who publishes the monthly investment newsletter The Gloom Boom & Doom Report. Dr. Faber, who became famous for advising clients to get out of the U.S. stock market one week before the October 1987 crash, has been warning for some time now about another 1987-like correction in the stock market. When I last blogged about “Doctor Doom” back in March 13, he had this to say about the nice run in equities:
I believe it will end badly this year.
The Canadian publication alluded to this and asked what could precede such an event. Dr. Faber warned:
Something could come along, geopolitically or otherwise. I would be very careful being overweight equities. I still have 25 per cent in equities and 25 per cent in corporate bonds.
The article added:
He said he feels “deeply uncomfortable” with that much allocation to equities, but also doesn’t want to shut stocks out entirely given the possibility they could still rise significantly before a correction.
Faber, who also predicted the ongoing bull market in gold, revealed that his maximum allocation to gold at the time of the interview was 25 percent of assets.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)
Source:
“Master of doom Marc Faber is feeling gloomy about Canada.” The Globe and Mail. 8 May 2013. (http://www.theglobeandmail.com/globe-investor/inside-the-market/master-of-doom-marc-faber-is-feeling-gloomy-about-canada/article11788240/). 11 May 2013.
Jeremy Grantham: Thanks To Fed, ‘All Global Assets Are Once Again Becoming Overpriced’
It’s been quite some time since I blogged about Jeremy Grantham, co-founder and chief investment strategist of Grantham, Mayo, Van Otterloo & Co. (GMO). I’ve noted before that the British investor has a special talent for correctly-calling the direction of the markets. For example:
• In 1982, said the U.S. stock market was ripe for a “major rally.” That year was the beginning of the longest bull run ever.
• In 1989, called the top of the Japanese bubble economy
• In 1991, predicted the resurgence of U.S. large cap stocks
• In 2000, correctly called the rallies in U.S. small cap and value stocks
• In January 2000, warned of an impending crash in technology stocks, which took place two months later
• Saw the 2008 global financial crisis coming. In April 2007, said we are now seeing the first worldwide bubble in history covering all asset classes.
Keep in mind that bit about “the first worldwide bubble in history covering all asset classes.”
Grantham pens a quarterly investment letter on the GMO website. And I recently read his latest installment (covering Q4 2012) which was released in February. Entitled “Investing in a Low-Growth World,” Grantham discussed what he called the Federal Reserve’s negative real rates regime, which is:
Designed to badger us into riskier investments in order to push up equity prices and grab a short-term wealth effect (that must be given back one day when least comfortable and least expected), has gone on for a long and, for me, boring time.
And the consequences? The investment manager whose individual clients have included Secretary of State John Kerry and former Vice President Dick Cheney wrote later on in “Investment Implications:”
Courtesy of the above Fed policy, all global assets are once again becoming overpriced. This reminds me of the idea sometimes attributed to Einstein that a workable definition of madness is constantly repeating the same actions but expecting a different outcome! But, as always, asset prices are not uniformly overpriced: emerging markets and, we believe, Japan are only moderately overpriced. European stocks are also only a little expensive, but in today’s world are substantially more risky than normal. The great global franchise companies also seem only moderately overpriced. Forestry and farmland, which is not super-prime Midwestern, is also only moderately overpriced but comes with our nook and cranny sticker attached. But much of everything else is once again brutally overpriced. Notably, U.S. stocks (ex “quality”) now sell at a negative seven-year imputed return on our numbers and most global growth stocks are close to zero expected return. As for fixed income – fugetaboutit! Most of it has negative estimated returns on our data, and longer debt, as always, carries that risk that may be slight in any period, but is horrific if it occurs – accelerating inflation.
When one combines the apparent determination and influence of those who do the bullying with the career risk and short-termism of the bullied and the desire of the general public to believe unbelievable good news, these overpricings can go much further and the Fed can win another round or two. That’s the problem. A clue to timing would be when we begin to hear more passionate new era arguments: profit margins will always be higher; growth will snap back to 3% for the developed world; and new ones I can’t think of … maybe “when the discount rate is this low the Dow should sell at, perhaps, 36,000.” In the meantime, prudent managers should be increasingly careful. Same ole, same ole.
You can read the rest of Grantham’s 4Q 2012 letter on the GMO website here.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)
Peter Schiff: ‘Gold Bears Are Making Much Ado About Nothing’
There’s been quite a bit of talk these past couple of years about the Federal Reserve tightening monetary policy due to an economic recovery finally arriving that I’m going to have to agree with “crash prophet” and Euro Pacific Capital CEO/Chief Global Strategist Peter Schiff on this.
The Fed is bluffing.
Unless Fed officials are now starting to worry that growing their balance sheet is not in their best interest anymore.
Schiff, who correctly-called the 2008 global economic crisis, wrote in the March issue of his Gold Letter that was published Friday:
Testifying before the US Senate this past Tuesday, Fed Chairman Ben Bernanke made an extraordinary claim about its bloated balance sheet: “We could exit without ever selling by letting it run off.” What Bernanke means here is that the Fed could simply hold its Treasuries and agency bonds until they mature, at which point the government would then be forced to pay the Fed back the principal amount. Through this process, the Fed’s unprecedented and inflationary position will be gradually and placidly unwound.
Growing rumors last month of a potential “tightening” of monetary policy – seemingly confirmed by the Fed minutes released on Feb. 20th – have spooked the precious metals markets, leading to a 5.8% correction in gold and 10.2% in silver.
However, these fears are preposterous on two counts…
You can read the entire article (“The Fed’s Tightening Pipe Dream”) on the Euro Pacific Precious Metals website here.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)
Gold Price Forecasts Gone Schitzo
Seeing that gold prices are somewhat schizophrenic these days, I thought I’d surf the Internet to see what some of the “big” financial institutions are predicting concerning the direction the precious metal might take. I found there to be no shortage of gold price forecasts out there. From the MarketWatch blog The Tell on Tuesday:
Goldman slashed its three-month gold-price forecast to $1,615 an ounce from $1,825, its six-month forecast to $1,600 an ounce from $1,805 and its 12-month forecast to $1,550 an ounce from $1,800…
Also on Monday, a BofA Merrill Lynch Global Research report said the larger bull trend for gold remains intact. “From the perspective of contrarian opinion analysis, a bottom and bullish turn in gold is close at hand.”
And Morgan Stanley said gold prices are “nearing the bottom of their trading range of US$1,540/oz to US$1,800/oz.”
At UBS, analyst Julien Garren said a major gold rally is coming in the third quarter.
Last week, though, Citi was talking price hibernation for gold, as news that George Soros and another big hedge fund were backing off gold.
There’s also this from Bloomberg on the Taipei Times (Taiwan) website yesterday:
An inevitable unwinding of gold’s 12-year bull market has begun, Credit Suisse Group AG said on Thursday in a report.
Geez. Even these forecasts are all over the place.
As far as I can tell, the underlying fundamentals behind gold’s generally steady rise are still intact. The world’s central banks have the printing presses going at full speed in what some are calling a new global currency war. And just this Tuesday Federal Reserve Chairman Ben Bernanke reaffirmed his support for the central bank’s $85 billion bond-buying program, or what’s come to be known as QE4.
Yep, the yellow metal still has some glimmer left to it it seems
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)
Sources:
“Gold forecast melee: Goldman joins in, slashes forecast to $1,550.” The Tell. 26 Feb. 2013. (http://blogs.marketwatch.com/thetell/2013/02/26/gold-forecast-melee-goldman-joins-in-slashes-forecast-to-1550/). 27 Feb. 2013.
“Gold’s price cycle likely to have turned: analysts.” Bloomberg. 27 Feb. 2013. (http://www.taipeitimes.com/News/biz/archives/2013/02/27/2003555794). 27 Feb. 2013.
Marc Faber Says Stocks Overbought, Bonds ‘Extremely Oversold’
“Doctor Doom” Marc Faber appeared on CNBC’s Fast Money last Thursday. Dr. Faber, who became famous for advising clients to get out of the U.S. stock market one week before the October 1987 crash, shared his thoughts about another 1987-like correction in the stock market. He told viewers:
I don’t think that’s yet there. But I think we have made an intermediate top. And it could be a longer-term top. I don’t think the market is overbought as it was in ’87 so I don’t expect a crash. But I think for the time being the market has peaked out. And I think that in the meantime bonds, which are extremely oversold, could rebound.
The Swiss-born investment advisor and fund manager added:
But I think that the market has now become quite overbought. And that there is very significant or overextended bullish sentiment. Everybody says, “Sell bonds, buy equities.” And when everybody thinks alike, one has to be careful.
“Marc Faber: ‘Market Has Peaked Out’”
CNBC Video
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)
Jim Rogers: ‘Short Long-Term United States Government Bonds Right Now’
Thursday afternoon, investor, commentator, and author Jim Rogers sat down with CNBC’s Maria Bartiromo at the New York Stock Exchange. Predictably, the discussion focused on his thoughts about the U.S. economy and larger financial system- and where he thinks there are opportunities to make money. Rogers warned viewers:
It’s all artificial what’s going on right now. The Federal Reserve is printing money as fast as they can. But the Bank of Japan said “We’re going to print unlimited money.” And so you know what the Federal Reserve said? “We’ll match you, we’ll print money too!” I mean, this is insane… You think this is a sound economy?
(Editor’s note: Italics added for emphasis)
The Singapore-based investor, who “retired” at age 37 and proceeded to ride a motorcycle around the world- and then write about it- went on to share the following investment-related nuggets on Closing Bell:
• Rogers is shorting government bonds. Not only did he say “Short long-tern United States government bonds right now,” but he also revealed this was his main U.S. investment.
• Owns Japanese stocks
• Investing in Russia- “I’m buying the bonds, the currency, and stocks.”
• Short Apple
• Short JPMorgan calls- “I’ve been short JPMorgan calls. They all expire worthless. I’m still short a few, and they’re not expiring worthless. I may lose money on that.”
• Sees Russia as the single best investment opportunity right now.
• Or North Korea- “The only way to invest is to buy the stamps or the coins. And your viewers are not going to go out and buy North Korean gold and silver coins. But that’s a fabulous, fabulous opportunity.”
• Wouldn’t buy gold at these levels- unless they were North Korean gold coins.
“Jim Rogers: I’m Short US Government Bonds And Investing In Russia – CNBC 2/8/2013″
YouTube Video
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)
Marc Faber: Gold Is A Must-Have Investment
Back in mid-January, I blogged about a piece on the Chicago-based Commodity HQ website that claimed “Doctor Doom” Marc Faber buys gold every single month. Yeah, the publisher of the monthly investment newsletter The Gloom Boom & Doom Report is that sold on the precious metal. And this past Tuesday, the Swiss-born investment advisor and fund manager told attendees at the Mining Indaba forum in Cape Town, South Africa, that holding some investments in gold and other precious metals was extremely important. Paul Garvey reported on The Australian website Wednesday:
Dr Faber repeated his long-held belief that money-printing by governments around the world made gold a must-have investment.
“I would have 25 per cent [of my investment portfolio] in equities, 25 per cent in bonds, 25 per cent real estate, 25 per cent gold, and 25 per cent cash,” he said.
“I know it doesn’t add up, but I have now the accounting standards of US Treasury.”
When I read this part of the article, I actually tabulated those percentages, saw that they added up to 125 percent, shook my head, added up the numbers again, shrugged, then continued on.
Then I saw the next line.
What a knucklehead I am.
And who could have thought someone the financial media has nicknamed “Doctor Doom” could be so funny?
Garvey continued:
Jokes aside, he said holding some investments in gold and other precious metals was vital.
“I would strongly advise you, for your children and so forth, don’t keep your money in cash. I’m not saying rush out the door and buy gold, I’m just saying that over time it’s likely that, as has happened throughout history, paper money has always lost value.”
(Editor’s note: Italics added for emphasis)
Lost value? How about all fiat currencies throughout history have eventually ended up being worthless.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)
Source:
Garvey, Paul. “Don’t bank on China demand, says contrarian Marc Faber.” The Australian. 6 Feb. 2013. (http://www.theaustralian.com.au/business/mining-energy/dont-bank-on-china-demand-says-contrarian-marc-faber/story-e6frg9df-1226571547996). 8 Feb. 2013.
Marc Faber: Higher Stock Market Goes ‘More Likely We Will Have A Nice Crash, A Big Time Crash’
Enough of my local scene. Let’s talk money.
Before the weekend, the economic Pollyannas were letting their hair down and celebrating big time. This was partly due to the Dow Jones Industrial Index crossing 14,000 last week- something that hasn’t happened since October 2007. Enter “Doctor Doom” Marc Faber. The Swiss-born investment advisor and fund manager sat down with Bernie Lo (Bernie’s a hoot- was devastated when my satellite TV provider yanked CNBC World) last Thursday on CNBC Asia’s The Call and warned viewers:
When you print money, the money doesn’t flow evenly in an economy. It flows to some people or to some sectors first, and in this case, it flowed into equities, and until about five months ago, bonds… But I think that the stock market is not that cheap any longer… The stock market is discounting a lot of the good news…
I believe that markets will punish central banks at some stage, through an accident…
Either the bonds market will collapse- bonds have been actually very weak considering the unlimited QE of the Federal Reserve. The other thing is that stocks could go into a bubble stage, but that the economy actually doesn’t respond very much.
(Editor’s note: Italics added for emphasis)
“Marc Faber: Markets Will Punish Central Banks, 30.1.2013.”
YouTube Video
The editor/publisher of the monthly investment newsletter The Gloom Boom & Doom Report had another dire warning for CNBC Asia viewers which didn’t make it into the above video footage. Katie Holliday, a CNBC Asia writer, wrote on the CNBC website last Thursday:
“For the first time in four years, since the lows in March 2009, I love this market because the higher it goes the more likely we will have a nice crash, a big time crash,” he said.
(Editor’s note: Italics added for emphasis)
Dr. Faber made a name for himself in financial/investing circles for reportedly advising clients to get out of the U.S. stock market one week before the October 1987 crash.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
(Editor’s notes: Info added to “Crash Prophets” page; I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein.)
Source:
Holliday, Katie. “Markets Will Punish Central Banks: Marc Faber.” CNBC. 31 Jan. 2013. (http://www.cnbc.com/id/100421977). 5 Feb. 2013.
Illinois’ Total Unfunded Liabilities: $275 Billion
The following bit about Illinois’ total unfunded liabilities from a January 28 Investor’s Business Daily editorial was so depressing to read that I originally planned to blog about it much earlier this morning- but needed to step away. From the IBD website:
A recent release by the Illinois Policy Institute shows this [$96.8 billion unfunded debt to five state pension systems] is only the tip of the iceberg and when you add in other liabilities such as $54 billion in unfunded liabilities for retiree health insurance and $15 billion in pension bonds that Gov. Pat Quinn and his immediate predecessor, former Gov. Rod Blagojevich, issued to avoid pension reform, Illinois’ total unfunded liabilities amount to $275 billion, or $58,000 in debt for each and every household in the state.
(Editor’s note: Italics added for emphasis)
So what’s it going to be, Illinois? Since a booming economy seems unlikely to return anytime soon, will the Democrat-dominated Illinois General Assembly finally enact significant spending cuts? Raise fees and taxes through the roof? Throw public sector retirees “under the bus?”
They’re going to have to do something real quick.
Or watch the whole thing unravel.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Source:
“Obama’s Illinois Downgrade Makes It America’s Greece.” Investor’s Business Daily. 28 Jan. 2013. (http://news.investors.com/ibd-editorials/012813-642237-credit-downgrade-illinois-standard-poors-worst.htm). 31 Jan. 2013.
Illinois Bond Issue Halted Due To Credit Concerns
Today, residents of the state of Illinois saw the repercussions of having $8 billion of unpaid bills, a $96.8 billion pension funding gap, and falling credit ratings. Karen Pierog reported on the Reuters website:
Illinois yanked a $500 million general obligation bond issue slated for Wednesday because of credit concerns that could boost its borrowing costs, in the latest financial blow to the state, which has failed to fix its bloated public pensions.
Investment banks that planned to bid on the debt indicated investors would demand higher yields on the 25-year bonds, said John Sinsheimer, Illinois’ capital markets director.
“We were getting indications of higher spreads than we were anticipating,” said Sinsheimer, who declined to discuss specific spread levels. “We felt it was prudent to pull the deal for the time being.”
(Editor’s notes: Italics added for emphasis)
Pierog pointed out:
Illinois is already faced with the highest spreads – 137 basis points in the latest week – over Municipal Market Data’s benchmark triple-A scale among states and cities tracked by MMD, a unit of Thomson Reuters.
Over the weekend, I noted Standard & Poor’s downgraded the State of Illinois on Friday to an “A-” rating with a negative outlook- last among all 50 states. I added that among other major credit rating agencies, Moody’s also ranks Illinois last of all the U.S. states and Fitch ranks it 49th but on watch for a possible downgrade.
As for Illinois taxpayers? They may have to pay tens of millions of dollars more in interest when the state looks to borrow more money- like what almost happened today.
By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)
Source:
Pierog, Karen. “UPDATE 2-Illinois pulls $500 mln bond sale amid credit concerns.” Reuters. 30 Jan 2013. (http://www.reuters.com/article/2013/01/30/illinois-bonds-idUSL1N0AZ6TQ20130130). 30 Jan. 2013.
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