Bubbles

Peter Schiff Bashes QE, Taper Lite, Gold Bears

“Gold Set for Worst Annual Tumble Since ‘81”

-FOX Business website headline, December 23, 2013

“Gold’s safe-haven role is over: strategist”

-MarketWatch.com headline, December 23, 2013

“I wouldn’t buy gold with my worst enemy’s cash: Strategist”

-CNBC.com headline, December 22, 2013

Not only have I been waiting to hear Euro Pacific Capital CEO Peter Schiff’s take on last week’s “taper” of the Federal Reserve’s quantitative easing program, but also his opinion on the latest bout of gold selling.

Schiff, who correctly called the recent housing crash and 2008 global economic crisis, just uploaded a new entry to The Schiff Report, his YouTube video blog. Schiff told viewers on December 20:

We have never had more stimulus- both monetary and fiscal- than we have right now. This is record-breaking, Keynesian stimulus. And it’s barely working. Yes, it’s inflating a stock market bubble. It’s inflating a real estate bubble. But it’s not creating genuine economic growth. And it never will. It is not raising living standards for the vast majority of Americans. And it isn’t creating productive, high-paying jobs. And it never will. And Ben Bernanke doesn’t understand that.

Like fellow “crash prophet” Marc Faber, Schiff believes the Federal Reserve will eventually pursue more, not less, bond-buying in the future. He explained:

Why did gold sell off? “Because everything is great.” “Because the Fed has done the impossible.” “It’s tapered and it hasn’t hurt anything.” This is what everybody believes. That the Fed has accomplished its goal. It hasn’t done anything. It’s talked about doing a tiny bit. But again, as far as I’m concerned, monetary policy is even easier now than it was before they announced this trivial taper lite. And the rest of the taper is probably never going to happen because the Fed is going to have to buy more bonds, not fewer bonds, to keep this whole house of cards from imploding.

Now, is gold going to continue to fall? I don’t know. My gut is that it’s probably still finding a bottom around 1,200. There is plenty of legitimate support for gold all around the world. Yes, all the speculators who are convinced that everything is great. The same people that thought it was great in 2007. Or it was great in 1999. That crowd, completely clueless about actual economics, is convinced that there is no reason to own gold. And so, they’re going to sell it, they’re going to short it. But there is a larger community around the world, particularly I think a lot of the emerging markets, central banks, China in particular, that see it differently. And they’re using this opportunity to buy as much gold as they can so that when the speculators and the investors figure out how wrong they’ve got it, and they realize that they need to be buying gold not selling it, there won’t be any gold left to buy because they would have already sold it. And the people who bought it from them aren’t going to sell it back. The gold that China bought- they’re never going to sell it. I don’t care how high the price of gold goes. They want that gold as reserves for their currency because they know the dollars that they have in reserve are eventually going to be Monopoly money. It’s going to be confetti. So they need something real to back up their own currency, and they want gold.

And so, I think that we need to be taking advantage of this opportunity. And don’t be worried about all the negativity that’s out there and all the professionals who are writing gold’s obituary. They’ve written it before, they’ll write it again. But I still think that the bull market has a long way to go. Ultimately, we are still heading for a currency crisis.


“Taper Lite: Bernanke Tightens Monetary Policy by Easing it!”
YouTube Video

By Christopher E. Hill
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.)

Tags: , , , , , , , , , , , , , , , , , , ,

2013 Nobel Prize Winner Warns Of Possible Recession Next Year

Time to talk money. How many readers know who Eugene Fama is? Dr. Fama is a finance professor at the nearby University of Chicago. He is widely recognized as the “father of modern finance,” a champion of efficient markets, and the intellectual father of today’s index fund industry.

In October, it was announced that Fama was being awarded the 2013 Sveriges Riksbank Prize in Economic Sciences in memory of Alfred Nobel, along with Lars Peter Hansen and “crash prophet” Robert Shiller.

Anyway, the reason I bring Dr. Fama up is because the distinguished professor is warning of a possible recession in 2014- one that he believes will be global. Ilze Filks and Mia Shanley reported last Saturday on the Reuters website:

One of the three Americans who won this year’s Nobel prize for economics said bloated public deficits on both sides of the Atlantic meant that recession remained a real risk for 2014.

Eugene Fama, who shares this year’s 8 million crown ($1.2 million) prize with Robert Shiller and Lars Peter Hansen, said on Saturday that highly indebted governments in the United States and Europe posed a constant threat to the global economy.

“There may come a point where the financial markets say none of their debt is credible anymore and they can’t finance themselves,” he told Reuters in the snow-covered Swedish capital, where he will receive his prize on Tuesday.

“If there is another recession, it is going to be worldwide.”

(Editor’s note: Italics added for emphasis)

One more thing about “Mr. Efficient Markets.” Shawn Tully of Fortune magazine reported last Friday:

The mere use of the term “bubble” makes Fama see red. He says asset price bubbles simply don’t exist. Fama argues that when stocks crash — as in the dotcom crash or the cataclysm of 2008 — it is caused by a perfectly logical fear that a depression might follow.

Keep the dream alive for Main Street and Wall Street, and the financial house of cards can remain standing longer than most “doomsayers” suspect.

Still, the charade can only be pulled off for so long.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Filks, Ilze and Shanley, Mia. “Nobel economics winner Fama says risk of global recession in 2014.” Reuters. 7 Dec. 2013. (http://www.reuters.com/article/2013/12/07/us-sweden-nobel-idUSBRE9B605C20131207). 12 Dec. 2013.

Tully, Shawn. “What can you learn from Mr. Efficient Markets now?” Fortune. 6 Dec. 2013. (http://money.cnn.com/2013/12/06/investing/eugene-fama-markets.pr.fortune/). 12 Dec. 2013.

Tags: , , , ,

Peter Schiff Predicts Effect On Consumers When Bond, Stock, And Real Estate Bubbles Pop

Anyone catch Euro Pacific Capital’s CEO and Chief Global Strategist Peter Schiff on FOX Business Network’s The Willis Report back on November 27?

I just saw it for the first time the other day. Host Gerri Willis began the segment by talking about recent upbeat economic reports, to which Schiff replied:

You know, Alan Greenspan actually came out today and proclaimed that there was no bubble in the stock market. And he ought to know, right? Because he’s 0 for 2 when it comes to spotting bubbles. I think it’s 3 strikes and he’s out.

Ouch. A close second for my earlier “Quote For The Week” post.

The “crash prophet” added:

Because not only is there a bubble in the stock market. But the Fed has managed to make bubbles in the stock market, the bond market, and the real estate market simultaneously. That’s a lot of bubbles for the Fed to juggle.

Later on in the segment, Schiff, who correctly predicted the recent housing market crash and 2008 economic crisis, told Willis the U.S. dollar “is eventually going to get hit hard.” The host asked:

What will I feel as a consumer?

Schiff answered:

When the Fed is ultimately forced to raise interest rates- yes, we’ll have a big drop in the stock market, a big drop in the real estate market, we’ll be back in a severe recession, and it’s going to be tough. Prices are also going to go up for consumer goods, because a weak dollar means consumer goods are more expensive, But ultimately if the Fed has to protect the weak dollar with rate hikes, then your assets go down in value. But the price of everything you need to buy goes up.

Not a pretty scenario at all for American consumers if Schiff is correct once again.


“Holding the Dollar Could be Riskier Than Stocks”
YouTube Video

By Christopher E. Hill
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.)

Tags: , , , , , , , ,

Robert Shiller: ‘I Am Most Worried About The Boom In The U.S. Stock Market’

I’ve been following Yale economics professor, co-creator of the S&P/Case-Shiller Home Price Indices, and 2013 Nobel Prize winner Robert Shiller for a number of years now.

While his academic and professional achievements are impressive, I like the fact that this “crash prophet” correctly called the late 90s dot-com bubble and housing bubble of a few years ago.

These days, Dr. Shiller is worried about U.S. stocks once more. Madeline Chambers reported on Reuters.com this morning:

An American who won this year’s Nobel Prize for economics believes sharp rises in equity and property prices could lead to a dangerous financial bubble and may end badly, he told a German magazine.

Robert Shiller, who won the esteemed award with two other Americans for research into market prices and asset bubbles, pinpointed the U.S. stock market and Brazilian property market as areas of concern.

“I am not yet sounding the alarm. But in many countries stock exchanges are at a high level and prices have risen sharply in some property markets,” Shiller told Sunday’s Der Spiegel magazine. “That could end badly,” he said.

“I am most worried about the boom in the U.S. stock market. Also because our economy is still weak and vulnerable,” he said, describing the financial and technology sectors as overvalued.

(Editor’s note: Italics added for emphasis)

“Our economy is still weak and vulnerable.”

My thoughts exactly- though I wish it weren’t so.

While Dr. Shiller doesn’t say U.S. stocks are in a bubble, I wonder if he wouldn’t consider them relatively “frothy”?

By Christopher E. Hill
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.)

Source:

Chambers, Madeline. “Nobel Prize economist warns of U.S. stock market bubble.” Reuters. 1 Dec. 2013. (http://www.reuters.com/article/2013/12/01/us-economy-shiller-idUSBRE9B009620131201). 1 Dec. 2013.

Tags: , , , , , ,

Marc Faber: ‘We Are In A Gigantic Speculative Bubble’

Swiss-born investment advisor and fund manager Marc Faber issued another warning about stocks being in a bubble this past Friday. Appearing on CNBC’s Squawk Box, “Doctor Doom” told viewers:

I’ve been quite positive for equities after 2009 when they became very cheap. But recently I have to say that we are once again in a massive financial bubble in bonds, in equities. We are in a bubble in asset prices that have gone up dramatically. Farmland is up ten times over the last ten years. And Bitcoins are up now. And who knows what next will go up. But, we are in a gigantic speculative bubble. And as I have said, I haven’t shorted any stocks yet because they may still move up. But I don’t see any value in stocks any longer, except very few sectors…

So I think that financial assets, if you look at the next five to ten years’ expected returns, but these returns will be very low.

Now can the market go up another twenty percent before it tumbles? Yeah, it can go up even more, if you print money.


“Marc Faber: No value in stocks”
CNBC Video

Dr. Faber, who became famous for advising clients to get out of the U.S. stock market one week before the October 1987 crash, also warned of a bubble in financial assets on CNBC’s Fast Money on November 19. He said:

I see a bubble in everything that relates to the financial sector. We have a bubble in bonds. We have a bubble in low-quality bonds. We have a bubble in equities. If you look at the financial sector as a percentage of the global economy, it’s very large. We have a huge debt bubble, and it’s only getting bigger. It’s not getting any smaller.

So we are the bubble. Everything that is in the financial sector is the bubble, and it’s been pumped up by central banks.

I don’t know about you, but talk about bubbles seems to be growing these days.

By Christopher E. Hill
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:

Navarro, Bruno J., “Superbear Marc Faber sees opportunities.” CNBC. 19 Nov. 2013. (http://www.cnbc.com/id/101212211). 1 Dec. 2013.

Tags: , , , , , ,

Marc Faber Sees Bubbles In Bonds, Stocks, Debt, And High-End Sector

While “crash prophet” Jeremy Grantham sees only a “few signs yet of a traditional bubble” in stocks, “Doctor Doom” Marc Faber thinks otherwise.

In fact, the Swiss-born investment advisor and fund manager sees the whole financial sector as being very bubbly these days.

Faber appeared on CNBC’s Fast Money last Tuesday and warned viewers:

I see a bubble in everything that relates to the financial sector. We have a bubble in bonds. We have a bubble in low-quality bonds. We have a bubble in equities. If you look at the financial sector as a percentage of the global economy, it’s very large. We have a huge debt bubble, and it’s only getting bigger. It’s not getting any smaller.

So we are the bubble. Everything that is in the financial sector is the bubble, and it’s been pumped up by central banks.

Now within the big bubble, I think the high-end sector is probably a huge bubble. You know- pink diamonds, the prestige art, and luxury.


“Uber bear Marc Faber gets a little bullish”
CNBC Video

The editor/publisher of the monthly investment newsletter The Gloom Boom & Doom Report revealed he owned stocks in European telecom companies, utilities, and blue-chip companies in Switzerland.

By Christopher E. Hill
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:

Navarro, Bruno J., “Superbear Marc Faber sees opportunities.” CNBC. 19 Nov. 2013. (http://www.cnbc.com/id/101212211). 25 Nov. 2013.

Tags: , , , , , , , , , , ,

Jeremy Grantham: Next Stock Market Bust ‘Sometime Within Two Or Three Years’

I just finished reading the latest installment (covering Q3 2013) of Jeremy Grantham’s quarterly investment letter. Grantham is the co-founder and chief investment strategist of Grantham, Mayo, Van Otterloo & Co. (GMO), and has a special talent for correctly-calling the direction of the financial markets. In “Ignoble Prizes and Appointments,” Grantham predicted yet another market “bust” shortly. Grantham wrote:

But back to Yellen, who has happily gone along with the failed Fed policy of hoping madly for a different outcome despite repeating exactly the same thing. The past consequences of this strategy have been so dire on two occasions and threaten to be just as bad again sometime within two or three years.

(Editor’s note: Italics added for emphasis)

Unlike fellow “crash prophets” Marc Faber and Peter Schiff, Grantham doesn’t think stocks are in a bubble. Yet. He declared:

In equities there are few signs yet of a traditional bubble.

But added:

I would think that we are probably in the slow build-up to something interesting – a badly overpriced market and bubble conditions. My personal guess is that the U.S. market, especially the non-blue chips, will work its way higher, perhaps by 20% to 30% in the next year or, more likely, two years, with the rest of the world including emerging market equities covering even more ground in at least a partial catch-up. And then we will have the third in the series of serious market busts since 1999 and presumably Greenspan, Bernanke, Yellen, et al. will rest happy, for surely they must expect something like this outcome given their experience. And we the people, of course, will get what we deserve. We acclaimed the original perpetrator of this ill-fated plan – Greenspan – to be the great Maestro, in a general orgy of boot licking. His faithful acolyte, Bernanke, was reappointed by a democratic president and generally lauded for doing (I admit) a perfectly serviceable job of rallying the troops in a crash that absolutely would not have occurred without the dangerous experiments in deregulation and no regulation (of the subprime instruments, for example) of his and his predecessor’s policy. At this rate, one day we will praise Yellen (or a similar successor) for helping out adequately in the wreckage of the next utterly unnecessary financial and asset class failure.

(Editor’s note: Italics added for emphasis)

Due to the Brtish-born investment strategist’s superb track record in calling the stock markets, when he talks, I listen. Attentively.

In the meantime, Grantham- whose individual clients have included Secretary of State John Kerry and former Vice President Dick Cheney- had this to say about U.S. equities:

In the meantime investors should be aware that the U.S. market is already badly overpriced – indeed, we believe it is priced to deliver negative real returns over seven years – and that most foreign markets having moved up rapidly this summer are also overpriced but less so. In our view, prudent investors should already be reducing their equity bets and their risk level in general.

(Editor’s note: Italics added for emphasis)

One of the most insightful investment letters yet from the “crash prophet,” which you can read in its entirety on the GMO website here (.pdf format).

By Christopher E. Hill
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.)

Tags: , , , , , , , , , , , ,

Quote- No, Headlines- For The Week

Something different for readers this week. Instead of a quote, here’s two news headlines which made my eyes roll upon spotting them this weekend…

“Dow 20,000 here we come: It’s different this time”

-MarketWatch.com, November 22, 2013

“It’s different this time.”

I’ve lost count how many times I’ve heard this phrase uttered over the years as some asset bubble was being inflated.

It’s not just me either.

From Michael Kling on the Moneynews website back on May 23, 2013:

Time and again, as stock prices continue rising to unsustainable heights, stock enthusiasts have preached, “This time is different.”

And it’s not just stocks either.

From Charles Hugh Smith on LewRockwell.com this past Halloween:

Defenders of current real estate valuations can draw upon an array of justifications, but they boil down to the same one used to justify valuations in every asset bubble: this time it’s different.

As for my two cents? Like I commented on a Chicago Tribune article last week, it’s my belief that after the economic crisis reared it’s ugly head in the fall of 2008, home prices nose-dived, and the “Great Recession” took hold, Washington and the Fed only managed to paper over the situation and monetary policy was designed to inflate a new asset bubble (or two, what the hell) to “save” the U.S. economy and larger financial system. Subsequently, we find ourselves immersed in QE Infinity and what some of those who correctly-predicted the “Panic of ’08” and housing crash see as new bubbles forming in residential real estate and equities.

I don’t envision this ending well.

Speaking of the Tribune, here’s another headline that made me cackle in disbelief.

“Breakthrough deal curbs Iran’s nuclear activity”

-Chicago Tribune website, November 24, 2013

All I can say about this hopium-infused headline is that I expect one of two scenarios down the road:

1. Downtown Tehran packed to the gills as the Islamic Republic of Iran parades its first nuclear weapon for the entire world to see. Those in the know understand state actors in this region of the world can only salivate over the prospect of having a nuke in their arsenal- Iran included. Realpolitik, people.

2. A mushroom cloud over an Israeli or U.S. city. If the technology/opportunity presents itself, an electromagnetic pulse originating from a nuclear device detonated in the atmosphere over one of these countries (more bang for the buck).

Of course, all bets are off over these two scenarios taking place if some one (the Israelis?) take out Iran’s growing nuclear capabilities with military force.

Question is, is that even possible anymore given the time Iran has had?

Again, there’s others who think the claim that the interim pact reached betwen Iran and China, France, Germany, Great Britain, Russia, and the United States “curbs Iran’s nuclear activity” is one big joke.

Enter Saudi Arabia’s Prince Alwaleed bin Talal, “the world’s foremost value investor” with a net worth of $20 billion as of March 2013 according to Forbes magazine. Here’s what the Saudi royal had to say about a potential deal with Iran. From Jeffrey Goldberg on Bloomberg.com Friday night:

“There’s no confidence in the Obama administration doing the right thing with Iran,” he told me, with a directness that would make Benjamin Netanyahu blush. “We’re really concerned — Israel, Saudi Arabia, the Middle East countries — about this.”

It is quite something for a Saudi royal to state baldly that his country is part of a tacit alliance with Israel, but Saudi leaders, like Israel’s leaders, are frantic with worry that an overeager Obama will accede to Iran’s desire to become a threshold state, one whose nuclear program is so advanced that it would only need several weeks to assemble a deliverable weapon. Alwaleed, like Netanyahu, the Israeli prime minister, believes that Iran, in its ongoing negotiations with the world’s major powers, will pocket whatever sanctions relief it gets without committing to ending its nuclear program. “Why are they offering relief?” he asked. “Keep the pressure on. Sanctions are what brought about the negotiations to begin with! Why not keep the pressure up?”

Obama, Alwaleed says, is a man who is in desperate political straits and needs a victory — any victory — to right his presidency. “Obama is in so much of a rush to have a deal with Iran,” he said. “He wants anything. He’s so wounded. It’s very scary. Look, the 2014 elections are going to begin. Within two stamonths they’re going to start campaigning. Thirty-nine members of his own party in the House have already moved away from him on Obamacare. That’s scary for him.”

(Editor’s note: Italics added for emphasis)

Note Goldberg’s headline for his Bloomberg piece:

“Iran Is Playing Obama, Says Saavy Saudi Prince”

Iran is “playing” Obama and many others, judging by the buzz being reported in the mainstream media this Sunday.

Not me. I just can’t see Dow 20,000 being sustained just yet or Iran’s nuclear aspirations being curbed through diplomacy any time soon.

Sources:

Kling, Michael. “New Yorker: No Stock Bubble- This Time Is Different.” Moneynews.com. 23 May 2013. (http://www.moneynews.com/InvestingAnalysis/stock-market-bubble-different/2013/05/23/id/506002). 24 May 2013.

Smith, Charles Hugh. “What Real Estate Bubble? Oh, You Mean the One That’s Bigger Than the 2007 Bubble?” LewRockwell.com. 31 Oct. 2013. (http://www.lewrockwell.com/2013/10/charles-hugh-smith/what-real-estate-bubble/). 24 Nov. 2013.

Goldberg, Jeffrey. “Iran Is Playing Obama, Says Savvy Saudi Prince.” Bloomberg.com. 22 Nov. 2013. (http://www.bloomberg.com/news/2013-11-22/iran-is-playing-obama-says-savvy-saudi-prince.html). 24 Nov. 2013.

By Christopher E. Hill
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.)

Tags: , , , , , , , , , , , , , , , , , , , , , ,

Peter Schiff: If Fed Starts Tapering, U.S. Will Be Back In Recession

Time to talk money this morning. Only one “crash prophet” had anything notable to say in the past couple of days. The CEO and Chief Global Strategist of Euro Pacific Capital, Peter Schiff, appeared on CNBC’s Closing Bell last Friday. Schiff, who is credited with predicting the U.S. housing bust and economic crisis that reared its ugly head late in 2008, told viewers:

If the Fed begins to taper- which I don’t think it’s going to do- we’ll be back in recession. It’s not going to be good for stocks. The whole rally is based on QE. That’s why the Fed’s going to keep the monetary spigots open. Because they want to keep the phony recovery, and they want to keep inflating these asset bubbles in the stock market and in the real estate market. But the problem for the market is, the more the Fed succeeds in pushing up the market now with QE, the further it’s going to fall once the QE stops. Because it has to end eventually, otherwise the dollar is going to collapse, and it’s not going to matter what your stock portfolio is worth, because you’re not going to be able to buy anything.

When asked about the Fed not planning to start tapering until the economy is fundamentally better, Schiff replied:

It will never get better fundamentally until they stop QE. QE is preventing the economy from fundamentally recovering from the damage. So the Fed is going to keep doing it. Again, it’s like a drug. The QE keeps us high, but if we lose the drug then we go through withdrawal. We’re never going to have a genuine recovery until the Fed lets us have a real recession. So when they take away the QE, then we’re going to go right back into recession. It’s even going to be bigger than the one in ’08 and ’09, because a lot of damage has been done structurally to our economy, because the Fed has interfered with the recovery with all the QE.


“Fed Taper Will Trigger Recession”
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.)

Tags: , , , , , , ,

Marc Faber: ‘We Are In A Gigantic Asset Bubble Around The World’

Time to talk money. Dr. Marc Faber appeared on CNBC’s Squawk Box this morning and touched on financial topics including the Federal Reserve’s Quantitative Easing program and asset bubbles.

On QE, where the Fed currently puchases $85 billion of longer-term Treasury and agency mortgage-backed securities each month, he Swiss-born investment advisor and money manager told viewers:

Every government program that is introduced under urgency and as a temporary measure is always permanent. And, in my view, the Fed has boxed themselves into position where there’s no exit strategy. The question is not tapering. The question is at what point will they increase the asset purchases to say 150, 200, a trillion dollars a month. That is the question.

Shakespeare couldn’t have put it better.

The publisher of the monthly investment newsletter The Gloom Boom & Doom Report also chimed in on asset bubbles. Dr. Faber warned:

You said earlier on there is no inflation. Inflation can be in consumer prices. It can be in commodities. It can be in wages. It can also be in assets. And we are in a gigantic asset bubble around the world…

So I think that one day, this asset inflation will lead to a deflationary collapse, one way or the other. We don’t know yet what will cause it.


“The world is in ‘gigantic asset bubble': Faber”
CNBC Video
ANY CHARACTER 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.)

Tags: , , , , , , , , , , ,

Jeremy Grantham’s Latest Investment Advice

It’s been a while since I’ve blogged about Jeremy Grantham, the co-founder and chief investment strategist of Grantham, Mayo, Van Otterloo & Co. (GMO). To be fair, the British-born investment advisor has been taking a break from his popular quarterly investment letter that’s published on the GMO website. For those of you who aren’t familiar with Mr. Grantham, he’s designated one of this blog’s “crash prophets” along with Marc Faber, Jim Rogers, and Peter Schiff due to his special talent for correctly-calling the direction of the financial markets. He so good that individual clients have included Secretary of State John Kerry and former Vice President Dick Cheney.

Grantham was the subject of a September 20 article in The Wall Street Journal in which Ian Salisbury asked him about investment-related topics, such as the depletion of natural resources on Earth. From the Q and A session:

Q: What are investors supposed to do?
A: The investment implications are, of course, own stock in the ground, own great resources, reserves of phosphorous, potash, oil, copper, tin, zinc—you name it. I’d be less enthusiastic about aluminum and iron ore just because there is so much. And I wouldn’t own coal, and I wouldn’t own tar sands. It’s hugely expensive to build coal utilities, and the plants they have to build for tar sands are massive, and before they get their money back I suspect that the price of solar and wind will have come down so much.

So I wouldn’t use that, but I think oil, the metals and particularly the fertilizers, I would own—and the most important of all is food. The pressures on food are worse than anything else, and therefore, what is the solution? Very good farming, which can be done. The emphasis from an investor’s point of view is on very good farmland. It’s had a big run. You can never afford to ignore price and value, but from time to time you can get good investments in farmland, and if you’re prepared to go abroad, you can do it today. I wouldn’t be too risky. I would stay with distinctly stable countries—Australia, New Zealand, Uruguay, Brazil, Canada, of course, and the U.S. But I would look around, in what I call the nooks and crannies. And forestry is the same. Forestry is not a bad bargain, a little overpriced maybe, but it’s in a world where everything is overpriced today, once again, courtesy of incredibly low interest rates that push people into investing. A wicked plot of the Federal Reserve.

Grantham also shared with Salisbury where he thought stocks were heading. Basically, not only does he think equities can go “a lot higher than this” with Fed backing, but they could even reach bubble territory.

It’s a really good, insightful interview, capped-off with a discussion about unbridled American optimism, which you can read in its entirety here on The Wall Street Journal website.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Salisbury, Ian. “Our Chat With Jeremy Grantham.” The Wall Street Journal. 20 Sep. 2013. (http://online.wsj.com/article/SB10001424127887323665504579032934293143524.html). 24 Sep. 2013.

(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.)

Tags: , , , , , , , , , , , , , , , , , , ,

Over 35 Percent Of Chicago-Area Homeowners With Mortgages Still ‘Underwater’ Last Quarter

Back when the U.S. housing bubble was rapidly-inflating in the early- to mid- 2000s, a number of my “contemporaries” here in the Chicagoland area decided to take the plunge and buy homes.

They just didn’t expect that plunge to also include local housing prices.

Many of these individuals took out mortgages, and as the values of their single-family residences plummeted in the subsequent years, they soon went “underwater,” meaning they owed more on their loans than their properties were worth.

Well, the “Underwater People” (not to be confused with the album by The Samples or local band by the same name who I used to go watch in the 90s) are still here, contributing to a depressed Chicago-area housing market in which single-family home prices were down in June about 28 percent from their peak in September 2006 (S&P/Case-Shiller data), according to ChicagoRealEstateDaily.com on August 27.

This past Sunday, I spotted the following about underwater mortgages in my Chicago Tribune. Mary Ellen Podmolik wrote:

A lack of inventory is frustrating potential Chicago-area homebuyers, and a report last week from Zillow explains why some homeowners might like to sell their properties but can’t. Despite improving home values, 35.4 percent of Chicago-area homeowners with a mortgage were underwater at the end of June, meaning they owed more on their loan than the home was worth, Zillow said. That means those homeowners would have to sell their properties through a bank-approved short sale.

I took a look at the Zillow data this morning, and the picture it painted of the Chicago-area housing market isn’t very pretty as it concerns negative equity. From their August 29 press release for the just-published Second Quarter Zillow Negative Equity Report:

• Percent of homeowners with mortgages in negative equity in Q2 2013= 35.4% (Podmolik already noted)
• “Effective” negative equity rate, including homeowners with 20 percent or less equity in Q2 2013= 50.7%
• Forecasted negative equity rate in Q2 2014= 33.2%

A little improvement being predicted for next year.

One more glimmer of hope for Chicago’s “Underwater People” that I spotted in that press release:

Minimum number of homeowners expected to be freed from negative equity by Q2 2014= 38,268

Of course, these projections assume Fed funny money keeps flowing and blowing up the prices of real estate and paper assets.

You can read that entire press release from Seatlle-based Zillow- which discussed the negative equity rate nationwide- on their website here.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

“Home prices up for 8th straight month.” ChicagoRealEstateDaily.com. 27 Aug. 2013. (http://www.chicagorealestatedaily.com/article/20130827/CRED0701/130829853/home-prices-up-for-8th-straight-month). 4 Sep. 2013.

Podmolik, Mary Ellen. “Problems still rampant in mortgage servicing industry.” Chicago Tribune. 30 Aug. 2013. (http://www.chicagotribune.com/classified/realestate/ct-mre-0901-podmolik-homefront-20130830,0,7902179.column). 4 Sep. 2013.

Tags: , , , , , , , , , , , , , , ,

Jim Rogers Warns Coming Stock Market Downturn ‘Will Be Worse Than 2001 And 2008-2009’

Catching up with the “crash prophets,” on Monday I blogged about what Dr. Marc Faber was up to these days. “Doctor Doom,” as the financial news media likes to call him, issued this warning:

And I believe that one day, this financial bubble will have to adjust on the downside. Either it will adjust on the downside because we have an inflationary burst, or we have a collapse of the system.

Another “prophet” had been making the rounds as well. Along with a similar warning.

In an interview with FutureMoneyTrends.com that was published on YouTube.com on July 20, well-known investor, author, and financial commentator Jim Rogers talked about a number of finance/investing topics, including where the United States was heading (hat tip Trade The Newsroom website). From the exchange:

FMT: Is there a sense that the recovery is sustainable in the United States?
ROGERS: This is the only time in recorded history that we’ve had all the major central banks in the world printing money and debasing their currencies at the same time. So there’s a flood of artificial money floating around. And the people getting that money are having a good time and certainly making a lot of money. But overall, the situation is not improving. In fact, the situation is degenerating because there’s debt piling up everywhere, staggering amounts of printed money out there. This is going to end very, very badly. I’m not the only one who knows it. But at the moment, many people are having a good time.
FMT: Do you feel comfortable buying stocks? Is Bernanke kind of giving us a floor here?
ROGERS: Floor? No, there’s no such things as a floor. Because when it ends, the whole thing is going to collapse. It’s going to be worse than 2008, 2009. But I own some shares. I bought some shares this week, as a matter of fact. Not in the U.S., but I own shares, and I bought more. But again, I’m very worried because I know it’s going to end, and end badly.


“Jim Rogers EXCLUSIVE Interview with Future Money Trends July 2013”
YouTube Video

The former investing partner of George Soros repeated his warning of an unhappy ending for the current bull market in U.S. stocks while attending the fourth annual Innovative Alternative Investment Strategies conference in Denver on July 23. Evan Simonoff wrote on the website of Financial Advisor on July 25:

Speaking of the current bull market in U.S. equities, Rogers told advisors, “Enjoy it, but be prepared. I do know it will end, but not when. We’re getting close to the end.”

The day that happens won’t be a pretty one. “When it ends it will be a big mess,” he continued. “This will be worse than 2001 and 2008-2009.”

(Editor’s note: Italics added for emphasis)

Simonoff added that Rogers, who has a new book out entitled Street Smarts: Adventures on the Road and in the Marketsicon, is starting to invest in Russian stocks, something I blogged about back on February 5.

As for commodities, which the CEO of Rogers Holdings and Beeland Interests, Inc. is most often associated with these days, Simonoff noted:

Water remains a more attractive commodity, though Rogers added a caveat. “Don’t own it,” he warned. “Politicians will hang you in the public square. Find a way to transport, clean it or filtrate it and you will be a hero in the public square.”

The Financial Advisor piece is very revealing as to how Jim Rogers surveys the current investing landscape, which you can read on the publication’s 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.)

Tags: , , , , , , , , , ,

Marc Faber: ‘One Day, This Financial Bubble Will Have To Adjust On The Downside’

I can’t believe it’s been almost an entire month since I last updated Survival And Prosperity’s “Crash Prophets” page.

Actually, I can, it’s been that hectic.

At least the blog’s off-and-running again.

Now, don’t expect too much from “crash prophet” Jeremy Grantham any time soon, as he’s off playing hooky from GMO’s Quarterly Letter, but there will be plenty on the latest investment activities and recommendations from Dr. Marc Faber, Jim Rogers, and Peter Schiff.

Speaking of “Doctor Doom,” as the financial media like to call him (along with Nouriel Roubini and Peter Schiff), Faber was recently interviewed by Hong Kong-based media, research, and consulting group The Prospect Group about the global economy (hat tip Trade The Newsroom website). Like myself, the Swiss-born investment advisor and fund manager has been consistent in his warnings of a coming financial crash. The publisher of the monthly investment newsletter The Gloom Boom & Doom Report warned viewers:

In general, if you look at the world, say compared to the 1950s, 1960s, and even 70s, it’s very clear that financial markets- official and less official- have grown disproportionately compared to the real economy. In other words, you have, say, a global GDP of- I don’t know what it is- $60 trillion or whatever it is. And you have financial markets that turn $60 trillion around in a week or less.

And I believe that one day, this financial bubble will have to adjust on the downside. Either it will adjust on the downside because we have an inflationary burst, or we have a collapse of the system.

We don’t know exactly how the end game will be played.


“Marc Faber on shadow banking, market psychology, & the global impact of American monetary policy”
YouTube Video

“We don’t know exactly how the end game will be played.”

I know one thing for sure.

The unwinding will be real painful.

Especially for those who never saw it coming, or did see it but didn’t do anything to prepare.

By Christopher E. Hill, Editor
Survival And Prosperity (www.survivalandprosperity.com)

Tags: , , ,

Peter Schiff On Gold: ‘Take Advantage Of Other People’s Foolishness’

Peter Schiff, CEO and Chief Global Strategist of Euro Pacific Capital, is a known gold bull. And despite gold’s hammering in recent months, the yellow metal continues to shine in his eyes. Here’s what Schiff, who’s also the CEO of Euro Pacific Precious Metals, had to say about gold’s prospects in a June 27 entry on his YouTube video blog, The Schiff Report:

I think there are more reasons than ever to buy gold. I know I’ve said that before and I’ve said it when gold was higher. Of course I also said it when gold was lower. But, I don’t think people should be worried. I think people should take this opportunity for what it is. If you’ve already purchased all the gold that you can afford, then don’t worry about it- it’s just a bunch of noise. What do you care if some fool decides to sell money at a loss, when they own a commodity that will probably be far more valuable in the future. But if you’ve had a more gradual approach- if you’ve only taken a partial position- you should continue to move into the market. Don’t be distracted by the noise. Don’t be worried about what these naysayers are saying. They don’ understand the fundamentals now. They didn’t understand the fundamentals 10 or 12 years ago. They didn’t understand them 2 years ago. The fact of the matter is, the economy is not recovering. The recovery that Ben Bernanke believes he has created is 100 percent dependent on QE. And, in fact, all he had to do was talk about taking away the punch bowl. He talked about it- he didn’t even commit to it- and the bond market has already collapsed. Mortgage rates have already risen now from under 3.5 percent to 4.5 percent. And that’s just the beginning. I think interest rates are going to keep on going higher. They’re going to deflate the bubbles that Ben Bernanke had been desperately trying to reflate. And the only thing that can save the markets from collapse will be the Fed coming back with more QE. It’s not the right thing to do. It’s the wrong thing to do. But the Fed always does the wrong thing. And the Fed always gets the economy wrong.

So again, all I can is, tune out the noise and take advantage of other people’s foolishness. Take advantage of the speculators. And you know, there’s a lot of people shorting gold right now. And maybe they think they’re making money. But let’s see how much money they’ve made when they cover their shorts. Because it’s easy to sell it. It’s not going to be so easy to buy it back. Because once the momentum turns, and everybody figures out the truth, where are the new sellers going to come from? I know where the sellers are now. They’re the speculators. But who’s going to sell the gold when they have to cover their shorts, and how much more expensive is it going to be? They may be laughing now, but I think the longs are going to have the last laugh. There’s an old poker expression, “Don’t count your chips while you’re still sitting at the table.” Well there’s a lot of shorts that have a stack of chips, and they’re busy counting them. But I think when the game is over, they’re going to be wiped out, and the longs are going to have all the chips in front of them.


“Is Now the Time to Sell Gold?
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.)

Tags: , , , , , , , ,



Christopher E. Hill, Editor
504582 Visits 11/22/10-10/31/14
Please Rate this Blog HERE

Translate (Allow 1 Minute Per Page To Complete)


by Transposh - translation plugin for wordpress
NEW! Advertising Disclosure HERE
ANY CHARACTER HERE
Buy Gold and Silver JM Bullion Reviewed HERE
ANY CHARACTER HERE
MyPatriotSupply.com Reviewed HERE
ANY CHARACTER HERE
Nitro-Pak--The Emergency Preparedness Leader Nitro-Pak Reviewed HERE
ANY CHARACTER HERE
Food Insurance Reviewed HERE
ANY CHARACTER HERE
Survival Titles Save 20% Paladin Press Reviewed HERE
ANY CHARACTER HERE
BullionVault BullionVault.com Reviewed HERE
ANY CHARACTER HERE
CHIEF Supply Reviewed HERE
ANY CHARACTER HERE
bullet proof vests BulletSafe Reviewed HERE
ANY CHARACTER HERE
BUDK Reviewed HERE
ANY CHARACTER HERE
Pyramyd Air is your one-stop shop for everything airgun related. PyramidAir.com Reviewed HERE
ANY CHARACTER HERE
Airsoft Megastore Reviewed HERE
ANY CHARACTER HERE
 

Categories

Archives