Tuesday, December 31, 2013

Some European countries worse tax situation than USA

I oppose higher taxes under any circumstances because higher taxes allow the government to expand and, in the process of expanding, to retard economic growth and curtail individual freedom. We are all aware of how dysfunctional and wasteful the US government is. 

In some European countries, the situation is not much better or is even worse. Does anyone really want to give the government more money with which to wage additional senseless and extremely costly wars, and to distribute even more food stamps, and to allow even more people to receive disability benefits?

Monday, December 30, 2013

Hong Kong, Singapore income inequality explained

The high wealth and income inequality in Hong Kong and Singapore is undesirable but needs to be understood in the following context. 

Because of their low taxes and high degree of freedom, both cities have attracted wealthy people from all over the world, which explains the high number of millionaires in these cities.

Friday, December 27, 2013

Selling US stocks on rallies

Go into Cash, not everyone owns Facebook, Twitter stocks: Interview on CNBC

Thursday, December 26, 2013

Sell Facebook, Twitter stocks

Bold predictions made in an interview on CNBC TV. Click play to watch the video.

Tuesday, December 24, 2013

African & East European Immigrants are likely to change Nordic countries

I would always be in favor of lower taxes and lower government spending. However, I have sympathy with the economic and social system in Nordic countries, where people contribute to the government a large portion of their income but also get in return first- class schools, healthcare facilities, and other social benefits.

What may work in terms of state involvement in small societies such as the Nordic countries, which are in nature more like country clubs where the members share a common interest and pride themselves on maintaining the club in perfect condition, is unlikely to work in population-rich countries where different interest groups are eager to benefit at the expense of someone else. 

I should add that these “Country Club Nordic Societies” are likely to change in the years ahead as immigrants from Eastern Europe and Africa settle there in order to take advantage of the generous social benefits and high educational standards.

Monday, December 23, 2013

Year 2014 we could see a correction of more than 20 percent

Watch the Faber interview with Jackie of CNBC. In this video, Dr Faber admits he was wrong to predict a 20 percent correction in year 2013. However he believes that for year 2014, the markets will go up until its over and then we could have a correction of more than 20 percent.

Friday, December 20, 2013

Opportunities in individual smaller cap stocks in India

We are down in India from the early 2008 high by 40 percent in US dollar terms, in other words adjusted for the currency movements. We are not down 40 percent in rupee terms, but in dollar terms. I think that people pay too much attention to GDP growth figure etc and should rather focus more on individual companies. 

The problem in Emerging economies is that a lot of money has flowed in and it has boosted the valuation of essentially very liquid stocks or big market cap stocks whereas smaller cap stocks are reasonably priced. 

So I think there is an opportunity in India, whether the index will go up a lot or not that I do not know, but for the active investor that does not buy the index, I see an opportunity.

Thursday, December 19, 2013

American income tax, Healthcare website

If every American had only to pay income taxes and the government collected no revenues from indirect taxes, which are less visible to people, there would likely be a revolution. 

Because Americans would suddenly realise how much tax they were paying (my guess is around 25% of their income) for a government that is incapable of achieving any meaningful military successes abroad, that is failing to successfully implement a healthcare website for which it has already paid US$600 million, and which cannot provide a school system to which people are happy to entrust their children’s education.

Wednesday, December 18, 2013

Money flowing from Indonesia, Philippines, Thailand into India stocks

We had an under-performance of India compared to other emerging economies until recently. 

And we have this pool of international liquidity that is driven by asset allocators, so they look at India - they see a relative poor performance and they see some marginal improvement in the macroeconomic environment of India. 

So money is flowing out of countries like Indonesia, Philippines, Thailand into India.

Tuesday, December 17, 2013

A Must Watch interview Faber on Kings World

Click on the above play to listen to the full interview.

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Monday, December 16, 2013

Bill Gross vs Marc Faber on Taxation

The November 2013 Investment Outlook published by PIMCO caught my attention with an essay by Bill Gross. Gross wrote remorsefully,
“Having benefited enormously via the leveraging of capital since the beginning of my career and having shared a decreasing percentage of my income thanks to Presidents Reagan and Bush 43 via lower government taxes, I now find my intellectual leanings shifting to the plight of labor........... .... ... .. .”
I suppose that, by “the plight of labor”, Gross is referring both to the decline of median household income in real terms over the last ten years or so, and to the collapse of labor’s share of US national income since 2000. Personally, I am also concerned about the slump in the labor force participation rate.

Having written about rising wealth and income inequality for the last ten years or so, I have a lot of sympathy with Bill Gross’s views. However, I am far from certain that the inequality was caused by lower tax rates on carried interest and capital gains.

As an example, it is not only the “1%” who have increased their share of national income considerably over the last 30 years, but also the top 10% of income recipients. Moreover even if capital gains are excluded, the top income recipients have increased their share of national income meaningfully. I simply cannot believe that the top decile of income earners would all have benefited from low taxes on carried interest. (This may be different for the “0.01%”.)

Therefore, other — possibly more important — factors than favorable taxes on carried interest and on capital gains may have led to the growing income inequality, such as education (rising cost), outsourcing of production to low labor-cost countries, low interest rates (substitution of labor with machines), rising debts, increasing entitlements, immigration of low-skilled workers, etc. I shall return to Gross’s essay further below. However, I should first like to address some of the problems associated with taxation.

Therefore, other — possibly more important — factors than favorable taxes on carried interest and on capital gains may have led to the growing income inequality, such as education (rising cost), outsourcing of production to low labor-cost countries, low interest rates (substitution of labor with machines), rising debts, increasing entitlements, immigration of low-skilled workers, etc. I shall return to Gross’s essay further below. However, I should first like to address some of the problems associated with taxation.

Everyone will agree that taxes should be fair, but what is fair is hard to determine. Your friend inherits a high income-producing property that allows him a lifestyle of leisure and pleasure, whereas you earn your living on the factory floor through hard work. Assuming your incomes are equal, is it fair that your fortunate friend’s tax rate is the same as yours, or should it be higher or lower?

On the surface, someone could argue that, since you work for your income, you should be taxed at a lower rate than your friend, who does not work for his income. Someone else might argue that, on the contrary, your friend should be taxed at a lower rate since his parents have already paid taxes on the income that allowed them to purchase the property. (This question also relates to taxes on dividends.)

In my humble opinion, the probably fairest tax is a flat tax on incomes (no deductibles such as the interest payments on debts, children allowances, or investment tax credits, and no subsidies for any interest groups) which is levied on all income earners and corporations, churches, missions, charities, pension funds, government officials (and governmental organisations), etc. at a maximum rate of between 10% and 15% per annum (no exceptions).

Naturally, the approximately 49% of taxpayers who pay no federal income tax, as well as the entire industry of lawyers, accountants, and auditors who make a living from a complex tax regime, would object to a flat tax. In terms of indirect taxes, the fairest tax is a value added tax levied on all transactions at a maximum rate of 5%. Regarding property and capital gain taxes, the fairest taxes are most likely no taxes.

I am aware that some readers will consider such a system of taxation to be radical. But I can assure them that, while not perfect, this system would be far fairer and more equitable than the tax system we currently have in most Western democracies, which is so complex and incomprehensible for ordinary people that it requires an army of costly and time-consuming lawyers, accountants, and auditors to calculate the taxes that are owed.

This simplified tax system would also eliminate more than 90% of the IRS’s more than 100,000 employees who have the power to arbitrarily harass people and small business owners, since most of these agents themselves do not have a full understanding of all the tax laws and regulations. Complex tax laws also hurt small business owners far more than large corporations.

It is easy to see that the more tax laws there are, the more corruption there will be.

Friday, December 13, 2013

Market has adjusted to Taper

The market has already adjusted, because they introduced QE3, QE4 in the summer of 2012. At the time the 10-year Treasury note yield was 1.43 percent. We are now at 2.8 percent on the 10-year. 

In other words, they have both assets at the end of November over a trillion dollars already this year and yet interest rates have gone up; in other words it seems that the Federal Reserve has lost control of the bond market. They can keep short-term rates indefinitely at essentially very low rate, but there will be of course some economic damages arising from zero interest rate policies.

Thursday, December 12, 2013

Cosmetic taper is possible

Now there has been talk about tapering for the last 6-8 months, but in my view if they taper, it will be a very cosmetic gesture and on any sign of further economic weakness, or if asset markets decline again like the stock market drops 10-20 percent they will actually increase the asset purchases. 

My sense is that the Federal Reserve will continue to buy assets in order to try to support the asset markets. 

Wednesday, December 11, 2013

People hate to hold cash right now

I think what people hate today is essentially to hold cash and my sense is that the return from equities will be very muted in the next few years. 

Maybe you will make something like 5-10 percent per annum, but even that would be a very high return considering that in the western world - in eurozone, in America and in Japan you have essentially zero interest rates. 

So if equity investors make 5 percent per annum, it is actually a very higher return.

Tuesday, December 10, 2013

Too late to buy US Stocks, too early to buy Emerging markets

Now we have a very large valuation discrepancy between the US and the emerging markets. So what you buy today - Do you continue to buy the US that may still rise or do you gradually move to emerging economies? 

I think it is too late to buy the US and it is probably too early to make a major commitment into emerging economy stock markets, because the growth in emerging economies will be slower in the next 3 to 5 years than it has been in the past 3 to 5 years, so I think that there will be still be some disappointment.

Monday, December 9, 2013

Central Banks will destroy & bankrupt the world- Video Interview

World Central Banks to destroy the world - Watch the video interview above by clicking on Play.

Friday, December 6, 2013

No idea what Bitcoin is worth

I have no idea whether a bitcoin is worth $10,000, a million dollars, or $50. Its a symptom of excess liquidity goes into bitcoins, it can go into paintings, farmland, diamonds, all at different times.

It shows that there is a lot of liquidity that just flushes into one speculative sector of the market to another one.

Farmland is up 10 times over the last 10 years. And Bitcoins are up now and who knows what next will go up.

Thursday, December 5, 2013

After excesses what follows is a financial crisis

As a distant but interested observer of history and investment markets I am fascinated how major events that arose from longer-term trends are often explained by short-term causes. The First World War is explained as a consequence of the assassination of Archduke Franz Ferdinand, heir to the Austrian-Hungarian throne; the Depression in the 1930s as a result of the tight monetary policies of the Fed; the Second World War as having been caused by Hitler; and the Vietnam War as a result of the communist threat.

Similarly, the disinflation that followed after 1980 is attributed to Paul Volcker’s tight monetary policies. The 1987 stock market crash is blamed on portfolio insurance. And the Asian Crisis and the stock market crash of 1997 are attributed to foreigners attacking the Thai Baht (Thailand’s currency). A closer analysis of all these events, however, shows that their causes were far more complex and that there was always some “inevitability” at play.

Simply put, a financial crisis doesn’t happen accidentally, but follows after a prolonged period of excesses…

Wednesday, December 4, 2013

Marc Faber warns of gigantic asset bubbles and more

Watch above video of Marc Faber interview on CNBC where he talks about Massive asset bubbles, market rally, Asian markets, Expected returns in equities and that he is not short any stocks yet.

Monday, December 2, 2013

December 2013 Market Commentary

Many investment professionals complain that the investment environment has become extremely difficult. However, I am showing that with a disciplined approach and integrity, and by avoiding chasing short-term performance through speculative investments in momentum stocks, a successful fund management business can be built. In particular, I am focusing on Selling Disciplines. If there is great value in buying distressed assets, there must be value in selling highly priced assets as well.

According to Mark Hulbert, “The current Shiller P/E is 24.4, which puts the [US] market in the 9th decile. On the assumption that the future is like the past, the market’s expected real return over the next decade is just 0.9% annualized.” Hulbert then explains that the stock market bulls argue that the “alternatives” such as bonds are hardly any better because it would take only a small increase in interest rates to produce losses in real terms over the next decade. But, according to Hulbert, “this argument doesn’t really support the conclusion the bulls draw. Just because the alternatives are awful doesn’t mean the stock market is a good place in which to invest your money. T-Bills are not an unattractive option...”

High valuations, excessive debts, and extremely bullish sentiment do not necessary imply that a US stock market collapse is imminent. This especially not in an environment of unlimited money printing but if we believe in Selling Disciplines then the combination of high valuations and extremely positive sentiment strongly argues for reducing one’s exposure to US equities. As Tennessee Williams said, “there is a time for departure even when there’s no certain place to go.”

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Friday, November 29, 2013

Real Estate, Stocks are better than Cash

I would imagine that real estate is relatively safe because it’s widely owned by a large portion of the population. It may go down in value and it may be taxed away but it’s feasibly safe. 

If you look at Germany in 1928, the large and the more stable companies from Siemens to whatever it is, say, BASF, they survived. And so you were better off in stocks in the long run to wars and hyperinflation than in cash and bonds. 

Article via www.marcfabersblog.com

Wednesday, November 27, 2013

New oil is costly to produce

In China over the last fifteen years, oil imports, they have risen three times. China consumes now almost ten million barrels of oil a day. So the demand is there, if they slow down somewhat, long-term it’s there. Every oil well eventually runs dry. It cannot produce forever. 

New oil is very costly to produce. In other words you have to go and drill and you have to then extract the oil and there’s a lot of safety regulations and very costly, probably around eighty Dollars a barrel. 

Article brought from http://www.marcfabersblog.com

Tuesday, November 26, 2013

Credit percent rising fast

If we take total credit as a percentage of the most advanced economies, then total credit of the economies is now 30 percent higher than in 2007 when the last crisis occurred. 

Similarly in China credit as a percentage of the economy has been growing the last few years by 50 percent. This is unprecedented. It is a gigantic credit bubble. I admit it may go on but it will end badly.

Monday, November 25, 2013

The Fed can buy the whole stock market

Even if the market drops by 20 percent it is not cheap. The Fed could go into the market and buy the whole S&P500. They would have to borrow money or issue money but basically they can do it. It has happened before. In Hong Kong in 1997, the government came in and bought the stock market but at that time it was cheap. 

Thursday, November 21, 2013

Faber likes Newmont, Freeport, Platinum

I stick to physical Gold largely, and I have some holdings in shares like Newmont, Freeport McMoran.

I think commodities, precious metals, will all move in the same direction. Some may move faster than others. Some say Silver is better than Gold, some say Platinum is the best. I tend to agree that maybe platinum is the best precious metal. 

Wednesday, November 20, 2013

Credit growth in Asia exploding

Over the last Five years, everywhere in Asia, the household debt as a percentage of the economy has exploded higher, in other words a lot of growth was driven by unsustainable credit growth. 

The household debt levels are relatively high, the asset prices are high, the affordability of buying homes has diminished and many countries have had currency weaknesses and their currency account surplus has turned to deficits. Some countries like India, Indonesia had to push up interest rates to support their currencies. 

I'm not overly negative in the Asian regions but if a bubble bursts in China it would have a devastating impact on the surrounding countries.

Tuesday, November 19, 2013

I wish they would audit the Federal Reserve

I dont value gold, I just weight it every year to see if its the same weight. I wish they would do that with the Federal Reserve, because nobody has audited these governments who claim they have that much gold. Maybe they dont have it, maybe they have lent it already. 

Monday, November 18, 2013

Marc Faber on Libya Civil war

Libya is already in civil war. Partly due to countries intervening such as North America, Qatar. It is very clear that money going to Rebels ends up in the hands of Al Queda units. We are in a crazy world. 

Thursday, November 14, 2013

Faber says Karl Marx maybe right

Karl Marx might prove to have been right in his contention that crises become more and more destructive as the capitalistic system matures and that the ultimate breakdown will occur in a final crisis that will be so disastrous as to set fire to the framework of our capitalistic society.

Wednesday, November 13, 2013

Marc Faber says Paul Volcker is a man of integrity

It is certainly not my intention to criticize Paul Volcker or to question his achievements at the Fed, since I think that, in addition to being a man of impeccable personal and intellectual integrity, he was the best and most courageous Fed chairman ever.

However the investment community to this day perceives Volcker’s tight monetary policies at the time as having been responsible for choking off inflation in 1981, when, in fact, the rate of inflation would have declined anyway in the 1980's for the reasons:

One could argue that without any tight monetary policies in the early 1980's, disinflation would have been even more pronounced. Why? The energy investment boom and conservation efforts would probably have lasted somewhat longer and may have led to even more over capacities and to further reduction in demand. This eventually would have driven energy prices even lower.

I may also remind our readers that the Kondratieff long price wave, which had turned up in the 1940's, was due to turn down sometime in the late 1970's.

Tuesday, November 12, 2013

Real Economy vs Financial economy

In a financial economy or “monetary-driven economy,” the capital market is far larger than GDP and channels savings not only into investments, but also continuously into colossal speculative bubbles. 

This isn't to say that bubbles don’t occur in the real economy, but they are infrequent and are usually small compared with the size of the economy. So when these bubbles burst, they tend to inflict only limited damage on the economy. The bubbles tend to be contained by the availability of savings and credit, whereas in the financial economy, the unlimited availability of credit leads to speculative bubbles, which get totally out of hand.

Monday, November 11, 2013

After every boom, a BUST follows

The energy boom of the late 1970's led to the application of new oil extracting and drilling technologies and to more efficient methods of energy usage, as well as to energy conservation, which, after 1980, drove down the price of oil in real terms to around the level of the early 1970's. 

Even the silly real estate bubbles we experienced in Asia in the 1990's had their benefits. Huge overbuilding led to a collapse in real estate prices, which, after 1998, led to very affordable residential and commercial property prices.

[A highway in China]

So my view is that capital spending booms, which inevitably lead to minor or major investment manias, are a necessary and integral part of the capitalistic system. They drive progress and development, lower production costs and increase productivity, even if there is inevitably some pain in the bust that follows every boom.

Thursday, November 7, 2013

Dont think many life vests are left

Marc Faber talks on Thai Property Funds, Thai Food companies, Thailand, Global Economy, asset diversification and Inflation.

Faber further compares the stock market to the Titanic, and that we are going to hit the iceberg and that there may not be enough life vests left.

Wednesday, November 6, 2013

Continued... Faber Market Commentary - Part 2

Following Monday's post on the latest Market Commentary I will expand on Doctor Dooms report today. The report suggests that Faber thinks emerging economies to outperform the US stock market over the next few years. In addition he suggests that he likes to buy Gold and Silver mining shares rather than industrial commodity shares. Action Plan: Buy Emerging Markets, Gold & Silver miners

"Jeremy Grantham of GMO expects emerging markets to significantly outperform the S&P 500 over the next seven years. This supports Bannister’s view that investors should now overweight “commodity stocks” (commodities closely correlate with the performance of emerging markets). For reasons I shall explain, rather than to buy industrial commodity stocks, I currently prefer to own gold and silver mining stocks."

Subscribe to the full report from GloomBoomDoom.com

Monday, November 4, 2013

November 2013 Market Commentary

The latest monthly Market Commentary is fresh off the press. In the November 2013 issue Dr Marc Faber says,
"My friend Barry Bannister believes that although “the Secular Bull Market of 1999 to 2011 for commodities has ended, a push-back in which commodities beat the S&P 500 appears to us in store for half (or all) of calendar 2014.”

This seems to imply that Dr Faber shares the opinion that commodities are a Buy and are likely to Outperform for next year 2014.

For the full report subscribe to GloomBoomDoom.com

Thursday, October 31, 2013

Words of wisdom - Jealousy, Envy

According to Lucy Kellaway
"There is benign envy, which motivates you to be better than the person you envy. And there is malicious envy that makes you want to take them outside and do something unspeakable to them."
There are several reasons why I am bringing up the envy and jealousy issues here:

First of all, if you are strongly inclined to these emotions you will suffer all your life working in organizations, which are a breeding ground for jealousy and envy. You will lead a much happier life working on your own or managing your own business.

Secondly, what is frequently overlooked is that envy also arises because of a sense of fairness, justice, and impropriety. In a society, envy also comes up if some people benefit greatly from some economic policies, but at the cost and the detriment of the majority.

Therefore, once again, I am touching on increasing wealth and income inequality and its impact on the economy and on society.

As Will Durant explained,

“In progressive societies the concentration [of wealth] may reach a point where the strength of number in many poor rivals the strength of ability in the few rich; then the unstable equilibrium generates a critical situation, which history has diversely met by legislation redistributing wealth or by revolution distributing poverty”

Wednesday, October 30, 2013

Government does not care about the people

"We have today governments in Brussels and also in Germany and in Switzerland, basically everywhere, where they do not represent the will of the people. In other words they don’t care about the people. They care about themselves."  

Read more at: http://www.marcfabersblog.com

Tuesday, October 29, 2013

We need monetary stability, not instability by governments

Recently, there was a professor in Germany who argued that the problem are the well-to-do people and that they should be taxed, very heavily penalized and that part of their assets should be taken away. I don’t think that the well-to-do people per se are the problem. I think the money trading by central banks is the problem and the expected debt growth, credit growth by governments and also on the household sector level and the unfunded liability. So, essentially, one of the solutions to the problem – and there is not going to be a solution that is not very painful – there will be pain and people will have to cut back on their consumption and also review their future benefits from pension funds and from social security, health care and so forth and so on.

We've lived beyond our means in most countries and to solve that problem is not going to be without significant pain. But effecting the right direction would be to take the depression away from central bankers to increase and cut the money supply and to intervene into the free market essentially with monetary measures. 

I think that would be the first step in the right direction because if you look at what has happened in the economy, one of the safest goals of central banks is price stability. Well where has there been price stability over the last 15 years? 

Monday, October 28, 2013

A good time to buy Gold

Gold is a commodity that drives sentiments to the extreme and personally I think Marc Faber has been spot on specially over the last decade in buying Gold. He recently said in an interview about why he thinks gold is still cheap.

"Well, the problem with zero interest rate policies and money printing is that it distorts all evaluation models, it’s very difficult to value something. I could say, okay, this house in Mayfair or on Park Avenue or Madison Avenue in New York is expensive if I compare it to, say a quantity of money that’s been floating around the world, but maybe it isn’t. Is a Warhol painting expensive or cheap? Well it’s up, say 12 times over the last ten years, so it’s gone up a lot but the quantity of money has also gone up a lot and the number of billionaires around the world has also expanded and so forth and so on. So I can say, maybe gold relative to a Warhol painting or relative to the U.S. stock market is not that expensive or relative to Hampton property. Obviously those are up from 250 Dollars in 1999 to now over 1.300, so, expensive or cheap is a very difficult concept in the present environment."

Via - http://www.marcfabersblog.com/2013/10/gold-is-cheap-says-marc-faber.html

Thursday, October 24, 2013

Chinese tourists in Thailand up 100 percent

We all know China is a growing economy and market for almost everything. Well this now also includes the tourism export industry as the Chinese people are now travelling to international destinations more frequently due to ease of getting a passport and their own increasing wealth. Here Dr Marc Faber talks about what he observed while he was in Macao and other parts of Asia.

"The Chinese tourist group is the largest group in the world. 90 million Chinese travel overseas every year. They first go to Macao to casinos. Gradually they are moving to other countries in South East Asia, by the way also US and Europe. For instance in Thailand arrivals from China was up 90 percent. In some months they were up 100 percent.

-via marcfabersblog.com

Wednesday, October 23, 2013

Weakening consumer confidence

Marc Faber clearly is still feeling rather bearish on the stock markets and specially on the US stock market. He comments on the consumer confidence.

"With what is going on consumer confidence is going to worsen further. Any common sense man, he looks at congress sees a dysfunctional government, is not going to rush and buy out goods. Secondly, according to the Feds own statistics the money that was printed by the Fed has gone to 5 percent of the population. Maximum 50 percent of the population household wealth is still down more than 40 percent from 2007 peak."

Tuesday, October 22, 2013

Faber Interview: Inflation leads to deflation

Earnings in 5 years to moderate

"We are coming into the earnings season. The earnings are likely to dissapoint. The markets are not cheap according to many valuations. The returns over the next 5 to 10 years will be very moderate."

source: Faber Blog

Monday, October 21, 2013

Apple stock could crash

"I'm not saying it will go bust," but "it could go bust eventually" - source article

Thursday, October 17, 2013

Wealthy people benefited more from money printing

In an ideal world money printing from the Fed would flow evenly into all sectors. The fed probably do believe that their money printing program is working just fine. Others like Marc Faber are skeptical.

"The problem is that the money doesn't flow evenly into the system but it flows into some sectors at different times and it creates booms in some sectors of the economy."

Monday, October 14, 2013

Financial system may not heal

Most of us people are optimists and we would like to believe in a better world and a better future for all. However sometimes we have to be realistic. Marc Faber gives a wake up call to us dreamers. He said in a recent interview.

"Well I think we have unprecedented government interventions with fiscal and monetary policies. For me it’s not really a question, it won’t work but miracles do happen, and maybe based on the bailouts and huge monetary inflation that the central bankers have created, maybe it is possible that the financial system heals and that the global economy resumes a, say, trend line growth such that we had in the 90’s and the early parts in 2000 and 2005. But I very much doubt that."

Source Article

Friday, October 11, 2013

Fed will lose control of stock market

The US Federal reserve along with other central banks pumping money as fast as they can is in itself a dangerous experiment. There is no such historical precedent. We can only pray and hope it ends well for all of us and not lead to the breakdown of the financial world. Marc Faber thinks the markets are extended and the Fed is showing signs of losing control.

"The markets are overbought and the fed has already lost control of the bond market. The question is when will it lose control of the stock market."

Marc Faber is an world famous contrarian investor known for his accurate predictions of the stock markets around the world.

Wednesday, October 9, 2013

Monetary inflation creates a huge pool of liquidity

For the last four years, the US Fed Fund Rate has been essentially zero, and we have a massive money-printing, monetary inflation that creates a huge pool of liquidity.

Basically, what we have seen in the world are the consequences of the crisis the US and world faced in 2008-09 caused by excessive debts brought about by artificially low interest rates.

Marc Faber is an world famous contrarian investor known for his accurate predictions of the stock markets around the world.

Tuesday, October 8, 2013

Responsible people should own gold

Gold has been a controversial relic for many investors. Some love them and others hate them. Mr Faber is on the side who love them although I dont think he is a Gold bug. He is simply a realist.

"I always buy gold and I own gold, I dont even value it. I regard it as an insurance policy. I think responsible citizens should own gold period. Eventually it Gold prices will go up."

Marc Faber is an world famous contrarian investor known for his accurate predictions of the stock markets around the world.

Monday, October 7, 2013

Money Printing end game is a total collapse

The end game is a total collapse but from a higher diving board. The fed will continue to print. If the stock market goes down ten percent they will print even more. They don't know what else to do. They boxed themselves in a corner where they are kind of desperate.

Marc Faber is an world famous contrarian investor known for his accurate predictions of the stock markets around the world.

Sunday, October 6, 2013

Friday, October 4, 2013

Few american's own shares

The majority of people do not own stocks. Only eleven percent of Americans own directly shares.

Thursday, October 3, 2013

Fed has lost control of interest rate direction

The [US Federal Reserve's] goal is to lower long-term interest rates via the massive asset-purchase programmes called quantitative easing [QE], but it seems it has lost control of the interest-rate direction.

Wednesday, October 2, 2013

Marc Faber video interview with Thai TV

We are in QE Unlimited

We are in QE unlimited. The people at the fed are professors, academics, they never worked in a single life of business of ordinary people. They don't understand that if you print money, it benefits basically a handful of people, not even 5 percent of the population, 3 percent of the population. 

Tuesday, October 1, 2013

Possibly invest in emerging markets

Many emerging markets are down 50 percent from their highs post recovery 2009. Where do you invest ? The case can be made to should one want to invest in equities he will choose the depressed markets.

Monday, September 30, 2013

Stocks are in tail end of bull market

We are in a bull market that is in the tail-end instead of the beginning but that does not mean prices will collapse. I don't think that stocks are the greatest bargain anymore, but it's not that expensive either.


Sunday, September 29, 2013

Balanced approach to investing

Between now and then [Chinese bubble burst], there will be opportunity in various asset classes.

I recommend the investors to take a balanced approach to invest in equity, corporate bond, real-estate and gold.

Friday, September 27, 2013

China inflation is higher than seems

The inflation in China is much higher than it seems. Credit growth in China will slow down. It is very much depends on whether they're going into hard landing or soft landing, but this will inevitably lead to economic slowdown in emerging markets.

Thursday, September 26, 2013

Malaysia Stocks, economy is stable

Marc Faber comments on Malaysia and its stock markets:
Malaysia may not be seen as an exciting market and the stock market is certainly not cheap, but this is a well-balanced economy and stable enough to let you sleep soundly at night

Malaysian equities are not exciting. However, they are relatively stable, supported by a well-balanced economy coupled with no major downward risks

Opinion on their Banks:
Unlike US banks, Malaysia's are solid and they do not involve in derivatives or gamble.

Malaysia's Banks are solid.

Wednesday, September 25, 2013

Marc Faber says Janet Yellen to beat Bernanke

She[Janet Yellen] will make Mr Bernanke look like a hawk. In 2010 she said if she could vote for negative interest rate, in other words you have a deposit with the bank at $100,000 at the beginning of the year and in the end you would only get $95,000 back, that she would be voting for that.

Basically her view will be to keep interest rates in real terms, in other words in inflation adjusted, and don't believe a minute the inflation figures published by the Bureau of Labor Statistics.

The consequences of these monetary policies and artificial low interest rates is that government gets bigger and bigger and you have less freedom. That is the consequence.

Tuesday, September 24, 2013

Fed is failing to lower interest rates

On September 14, 2012 when the Fed announced QE 3 that was then extended to QE4 and then now to QE unlimited. The bond market has peaked out a year ago at 1.43% at the 10 year treasury note. Mr Bernanke said at that time at a press conference the objective of the fed is to lower interest rate. Since then they have doubled.

Monday, September 23, 2013

US economy is weakening

I believe the US economy is weakening, and if it gets worse they will have to even increase the purchases, maybe even to $150 billion a month.

Sunday, September 22, 2013

Faber on buying govt bonds

I have to confess longer term I am of course negative government bonds, and that I think yields will go up and eventually there will be sovereign defaults. But in the last few days when yields went to 2.9 and 3% for the first time in years I bought treasuries because I have the view that they overshot and they could ease down to 2.5 percent to 2 percent because the economy is lot weaker than people think.

Nothing is safe anymore

In terms of investment, there is nothing safe any more. The US money-printing has distorted all asset prices while cash in the bank has not given you any return when inflation is adjusted. Inflation in Thailand is running at 10 per cent per annum. I don't look at the government's statistics. All governments around the world lie.

Friday, September 20, 2013

My investment strategy at the moment is Diversification

My investment strategy during this time is that you have to diversify and minimize your risks from economic, political, geopolitical and other factors. Your portfolio should include properties, stocks and equities, corporate bonds, gold and silver, plus cash. It should be 25 per cent of each, or 125 per cent - just to mimic the US accounting standard where things now do not add up.

Thursday, September 19, 2013

Marc Faber makes case to invest in emerging markets

Many emerging markets are down 50% from their highs post recovery 2009. Where do you invest ? The case can be made to should one want to invest in equities he will choose the depressed markets.

Thai stocks topping

Thai stocks are now not cheap, but the economic cycle has seen expansion topping four years. I own a lot of Thai shares but I don't think Thai stocks will go up much [from the current SET Index of around 1,400]. Good stocks like Kiatnakin Bank and CP Food have fallen by more than 50 per cent.

On properties, we have seen tremendous speculation on Thai real estate as prices have gone up significantly in Chiang Mai, or areas bordering Laos, Cambodia and other countries, but if you look at Hong Kong, Singapore, London, or New York's Manhattan, they are extremely expensive compared to Bangkok's high-end condos, which are now not cheap either by local standards.

Wednesday, September 18, 2013

I like bonds from Russia, Kazakhstan, India with yields of 5-6 per cent

On corporate bonds, I like issues from Russia, Kazakhstan and India with yields of 5-6 per cent, but they are not 100 per cent safe unless they are triple-A. Corporate bonds have an equity character. They don't move much when stock markets crash. When things go bad, government bonds on the other hand tend to go up in value because of flight to safe havens.

Tuesday, September 17, 2013

Own physical gold, not gold papers.

On gold and silver, I think people should have 20 per cent of their money in physical gold, not gold papers. I would put the gold bars into deposit boxes at banks. Don't speculate but buy regularly and keep them safe. We live in a volatile period. Gold is not like other commodities, it's the only honest currency when paper currencies are not.

Monday, September 16, 2013

India could outperform S&P 500

I would rather buy Indian equities than the S&P 500. However, I do not think Indian equities will rally substantially in the near future.

We may still go lower in sync with other markets in the world because India is not an isolated market. If the S&P drops 100 or 200 points, India is not likely to rally. It may outperform the S&P, but it is not likely to go up when S&P goes down.

FOMC will taper 5 to 20 billion dollars

Dr Marc Faber on the Fed Taper this week:

I think maybe they will taper 5 or 10 or 20 billion dollars off the current $85-billion monthly purchase of assets, and they would say they will reassess the situation depending on economic and market conditions.

Thursday, September 12, 2013

India currency weakness

India has pursued poor economic policies and one cannot really accuse the Reserve Bank of India. The entire political elite has mismanaged the Indian economy for the last 50 years. You cannot solve a crisis that is borne as a symptom of mismanagement in just five minutes or in a week. It will involve significant sacrifices and pain and I doubt that in India there is the political will to face the music.

When I went to India for the first time in 1973, one US dollar was about Rs 7 and now it is close to 70. The oil price increase has happened in the world, but of course it is magnified in India by the currency weakness.

Tuesday, September 10, 2013

Gold has made a major low

The impact[geopolitical risks] will be more severe on financial assets. The price of gold has recovered sharply from $1180 to around $1400. On further hostilities, we will have some profit taking in gold, but we have made a major low at $1180.

India poor economic policies

India has pursued poor economic policies. Political system has mismanaged Indian economy for 50 years. I doubt India has the political will to face the music.

Monday, September 9, 2013

Indian stocks are coming into buying range

In my view, there has been a huge correction in Indonesia and Thailand from the recent highs. The market is down by around 30-35% from the April-May high, but following a rebound, we will see further weakness.

Indian stocks, because of the currency weakness, have already experienced a very substantial bear market. It may last a little longer, but we surely are coming into a buying range.

Marc Faber: There will be No tapering of bond buying

The US economy is still weak, otherwise McDonalds and Walmart would have reported much favourable results. Given the weakness in the economy and employment, and given the frame of mind of Fed members, most of them are extremely dovish. I think there will be no tapering of bond-buying program. And I won't be surprised if in a year's time the Fed increases asset purchases.

Friday, September 6, 2013

There are some very good companies in India

I have very substantial positioning in India. There are some very good companies in India, though the macro economic conditions are not very favourable. A very desirable and attractive sector is the consumption sector. The largest weight of India Capital Fund is in banks and financials, as they are very cheap and inexpensive; however, they are likely to remain inexpensive for quite some time.

Thursday, September 5, 2013

Asset purchase program has been a complete disaster.

I think capital flows have moved out of emerging economies because the US equity markets have started performing well over the last one year. Investors must realize that the yield on US 10-year treasury notes bottomed in July 2012 at 1.43%, and after that it moved to 2.88%. In my view, the asset purchase program of the Fed has been a complete disaster.

Wednesday, September 4, 2013

India is in a bear market

The rupee is down nearly 50% in the last three years. Stock markets are down only 12% to 15% from their peak in rupee terms. Thus, in dollar terms, India is in a bear market as it has fallen nearly 60%. But I don't think the Indian stock markets will fall to that extent in rupee terms.

Monday, September 2, 2013

I am negative about the rupee

The falling [Indian] currency is not the problem; it is the symptom of the problem. It is like fever, which is just a symptom of a disease and not the disease itself. The currency depreciation is the symptom of poor balance budget and excessive consumption, which is reflected in the trade and current account deficit. If there is an increase in the short-term interest rates, where there is real return of rupee deposits, then the rupee will bottom out in the near term. However, over the long term, I am negative about the rupee.

Friday, August 30, 2013

Cure for Indian Rupee

The Indian government has created a huge problem, as it has under-reported the rate of increase in the cost-of-living or inflation. And by not measuring inflation properly, the government has kept interest rates negative in real terms. What the government can do or should do is, though it can be painful, it should increase rates substantially, stabilize the rupee. To increase rates would imply lot of pain in the economy temporarily, but in the long term, it would be desirable.

Thursday, August 29, 2013

Dr Faber not optimistic about India

I am not very optimistic about India on the macroeconomic front, and it has to do with the government policies. The economic policies of the government are by and large a disaster; the government could have done more. The government in India, through its incredible bureaucracy, has retarded economic growth in the last 20-30 years by at least 3% per annum in real terms. It's a miracle that the Indian economy has performed well, considering the quality of its government.

Wednesday, August 28, 2013

So-called Keynesian policies

One of the goals of so-called Keynesian policies would be to stabilize economic activity. In other words, you don’t have huge business cycle fluctuations and you have relative price stability. But please, tell me, where is economic stability nowadays, and where is price stability? Oil prices move up and down like crazy, home prices move up and down like crazy, and the stock market does the same. There’s far less stability than there ever was before, complementary of the Federal Reserve and essentially of the US Treasuries fiscal policies.

Tuesday, August 27, 2013

Unrealistic expectations about returns from the Indian markets

Over the past few years, investors have built exaggerated, unrealistic expectations about returns from the Indian markets. If you look at India's macro economy, it has not done well compared to China. But on the corporate level, many Indian companies have done well and have rewarded shareholders. If you ask me,

India as an investment destination, there are still opportunities. I have maintained my outlook that in 2013 the markets will not perform well because they had a strong rebound from the 2008 lows to hit the 2011 peak. After that, economic conditions began to disappoint investors, but it has not disappointed me because I expected it to worsen.

Monday, August 26, 2013

Serious discussion

I don’t think they will come to their senses for the simple reason that insane people don’t realize that they are insane. They think they’re doing a great job. I talk to these people from time to time, and I know some of them. If you have a serious discussion with them, they lean towards the view, “Had we not implemented the QE programs, we would be in the greatest depression ever, so we’ve done a fantastic job.” The view is also, “If anything, we need to do more, not less.”

Friday, August 23, 2013

Every inflation leads to delfation

At some stage, every inflation leads to deflation in that particular sector, whether it’s housing, the NASDAQ, the NIKKEI, or whatever it is. I believe one day, paper money and financial assets will be destroyed, but I’m not saying tomorrow. Maybe it happens from a market capitalization that is much higher.

Someone said to me, “The DOW Jones will go to 100,000.” Yeah, it’s possible. If you print money, everything is possible.

Thursday, August 22, 2013

Dont know the end game

 I don’t know what the end game will be, and whether we’ll still be alive or whether we’ll be in wars or in revolutions as the worst. That’s why I want to hold some physical gold. There’s no point to hold physical gold somewhere in the sky. I would hold some physical gold in my proximity. In other words, I own some in Thailand and some in Hong Kong. I still have too much in Europe, but over time, I will move it to Asia.

Wednesday, August 21, 2013

Gold correction was deeper than expected

To tell you the truth, I was expecting gold to be in a correcting mode after 2011, but I didn’t expect the price to come down this much because had I expected it to happen and had I been sure about it happening, I probably would have sold my gold and bought it back more recently. Equally, I have an asset allocation and I don’t feel comfortable holding cash with banks. I don’t feel comfortable with any paper currencies, so at all times, I want to have some of my money in metals.

Whether it will go lower or not, that I don’t know. Actually, my physical gold, I don’t even value. I know that I have it, and whether it goes up or not, it doesn’t change the fact of my decision to own it or to sell it. My decision is to at all times hold gold.

Tuesday, August 20, 2013

Convinced it will end badly one day

I’m convinced. It will end very badly. It doesn’t mean it has to be tomorrow, you understand. I’m a car mechanic and I tell you, “Look, your car has several problems.” In a week’s time, you’re telling me, “Look, I’ve been driving and it still works perfectly fine.” The car may still work for another year, or two years, or three years, and one day, you have a crash. And then, you will think back, “Maybe back then I should have repaired my car.”

The problem is the car mechanic. He’s not completely stupid like a central banker. He knows how to repair a car, but the central bankers don’t know how to repair the complex financial system we have today.

Monday, August 19, 2013

Money printing created financial wealth, impoverished the working class

For investors, Bernanke comes out very well as the man who saved the financial system. Why did we have a financial crisis in the first place? Because the central bankers, mostly the Fed in the US but also the Bank of England and incidentally, also in Canada and Australia, they paid no attention to excessive credit growth, and so you end up with an over-leveraged system and with boundless speculation in financial assets.

Then the crisis happens and they print money, and everybody applauds. Of course, they applaud the funds manager because the water level in the bathtub has increased by money printing. The asset values of portfolios go up and the fees fund managers earn also go up. So they’re all very happy.

But the man on the street, he’s a little bit less happy because his wage is going up less than the cost of living increases. In real terms, he’s losing out. That’s why, if you look at, say, corporate profits, they are extremely elevated in the United States as a percent of the economy.

On the other hand, wages and salaries as a percent of the economy are at record lows. So you have, essentially, through money printing, created financial wealth and impoverished the working class, like you and me.

Sunday, August 18, 2013

How gold can be confiscated ?

They won’t confiscate it and not pay anything. That would be, I guess, completely against the law. But say the price today, say around $1,200-something, then what they can do is they could essentially say, “Okay. We collect all the gold and pay $800.” More likely is that they would first try to depress it to $800 and then do it, then they’ll pay $800. Once they collect all the gold, like in 1933, they reevaluate to say, $10,000.

Friday, August 16, 2013

A financial collapse of dimensions

 Like the aristocracy in Europe in the 18th Century, they didn’t give up just the power. They kept that power, same as the aristocracy in Russia in the 19th Century. They didn’t give up the power. Eventually, they were slaughtered. I believe what will eventually happen is that you have a financial collapse of dimensions so bankers can’t do anything.

Thursday, August 15, 2013

Marc Faber comments on Eric Sprott and Gold

In the Western world, the central banks and the academics hate gold because they personally never owned it. Especially since 1999, despite the recent setback, gold has significantly outperformed equities. The central bankers and the academics at universities that are neo-Keynesian, in other words, the idea of more and more government intervention and more and more expansionary fiscal and monetary measures, these people hate gold. If they have the opportunity to take it away, especially if, as Eric Sprott maintains, that the gold is not even there, they would have an incentive to buy the gold at the low level, once they collect all the gold, reevaluate by ten times.

Wednesday, August 14, 2013

I dont trust any government

I don’t trust any government, period. The debts are too burdensome for the system, and then it leads to all kinds of symptoms. In other words, if you can’t pay your debts, you may print money, or you default, or you increase taxation, or you take things away from the well-to-do people, the evil people that make so much money. Well, the Federal Reserve enables them to make so much money. That is a key difference. They didn’t abuse the system; they just took advantage of a situation of money printing so their wealth increased more than the wealth of the middle class and the lower classes.

In the Western world, they’ll go after these well-to-do people and people that own gold. In Asia, I’m not so sure this will happen because Asia is increasingly coming under the umbrella, our own umbrella of China. The Chinese government has actually encouraged people to accumulate gold, and themselves, they are accumulating gold.

Tuesday, August 13, 2013

Worst case scenario and gold confiscation

Let’s take the worst-case scenario. We have either a social unrest, a revolution, or war. Governments decide, “Oh, the price of gold is going up substantially, let’s take it away from people.” In other words, you expropriate it. I think it will, at that stage, not matter very much where you hold your gold, except it may matter where you hold your gold in terms of sovereign state.

My sense is that the Asian countries are less likely to take the gold away than Western countries.

Monday, August 12, 2013

One possible reason for price manipulation

One of the reasons I would be inclined to believe in some manipulation would be, let’s say you’re a central bank, like the Fed. You don’t have the gold that you declared and you know that you have to buy it back at some point. Then, you may wish to manipulate the price down until you can cover your short position in gold at a reasonable cost. There will still be losses, but you can cover them at a reasonable cost. That is really the only reason I could see why a central bank would want to depress the price of gold.

Friday, August 9, 2013

Marc Faber aware of Eric Sprott

I’m aware of some people, including Eric Sprott, that believe that there is manipulation in the system. Where I tend to agree with him is that maybe central banks don’t have all the gold they claim they have, because something must be funny.

The Germans have asked for the gold to be returned to Germany. Why would it take eight years to do that? There’s no reason. You can do it in three months.

Thursday, August 8, 2013

Dont believe the governments

Worldwide, you shouldn’t believe governments, period. I think you should believe market action. When markets go up, they give you a message, and when the markets go down, they give you a message.

The only problem nowadays is that the messages from markets have been distorted by very significant government intervention into the free market, so you can’t rely on the information provided by the market participants any longer.

Wednesday, August 7, 2013

Holding on to my gold

By the way, I would say maybe in the fall of 2011, when gold prices reached $1,921 an ounce in September 2011, I should have issued a sell recommendation and said, “Get out of gold and get into cash or the SNP.”

In general, I think that we are still in massive money printing and the worse the economy becomes, the more money printing there will be. I’m holding onto my gold. As I explained before, I bought some gold at $1,300 an ounce and I bought some more gold at $1,200 an ounce.

The Rejection of Personal Responsibility leads to the Submission to the Authority of the States

Much of public policy these days seems designed to eliminate personal responsibility. The widespread acceptance by intellectuals of the belief that government should play a larger role in economic and private affairs; [is] the triumph … of the philosophy of the welfare state.

Friedman opined that “today, governmental measures constitute the major impediments to economic growth in the United States … What we urgently need, for both economic stability and growth is a reduction of government intervention not an increase…"

source: gloomboomdoom.com

Tuesday, August 6, 2013

Read between lines of China statistics

If you read between the lines of the hard-core statistics in China, in my view, they don’t match with the public statistics about GDP growth. The economy is growing at say, maximum 4 percent per annum, not 7.5 percent or 7.7 or 7.6 percent.

Monday, August 5, 2013

Fed statements are vague

When you read their[Fed] statements, they[the Fed] are completely confused and very vague. In other words, all is data-driven. If the stock market dropped ten, 20 percent, for sure there would be more QE programs.

On the other hand, if the economy is very strong, they may taper off somewhat. You get the picture. The worse the situation is in the US, whether regarding asset markets or the economy, the more QE there will be. The Fed doesn’t know anything else.

Friday, August 2, 2013

Think the fed is scratching their heads

Having printed this much money, and we are essentially in QE4 and QE unlimited, the results have been very dismal. I think the Fed is scratching their head at the present time and can’t believe that when their objective was actually to lower interest rates from July 25 of last year, the ten year Treasury note yield has gone up from roughly 1.4% to, a few days ago, 2.7%.

We have an almost doubling of the interest rate because of their QE programs. I think that really makes them scratch their heads and wonder, “What did we do wrong? What do we need to do? Do we taper, or do we have to increase asset purchases?”

Thursday, August 1, 2013

The Fed is clueless

I think that the Fed is completely clueless. It is composed by a group of academics. Most of them, or I would say 95 percent, have never worked in a regular job in their lives. They all went to universities and then they went to the Fed or other financial institutions. They have no clue what makes an economy move.

Wednesday, July 31, 2013

Numerous problems in China

 I think that for now, the US is still the dominant financial market and the dominant financial power. I think we have numerous problems in China, and I personally pay more attention to what is happening in China and in other emerging economies than to what Mr. Bernanke is saying.

Tuesday, July 30, 2013

Money printing will end when system breaks down

Marc Faber asked if money printing would end and when:

Yes, until the system breaks down. My view would be that there will be money printing, and the problem with money printing is always that you don’t control where it goes to. Ideally, it would go into higher incomes of the middle class and of the working class, but this hasn’t really happened. The real wait is for the typical household or the medium household, they are going down. What is going up is basically selected asset markets, like the real estate market has recovered. In some areas, we’ve hit new highs. The stock market has gone up. But as you know, only very few people own stocks in the United States, so it doesn’t impact the wealth of the majority of people.

Monday, July 29, 2013

No end to QE even post Bernanke

 I don’t think they[Fed] will end QE. I rather think they will have to increase it because as you print money or as you purchase assets, from a central banking point of view, it loses its impact over time. In order to keep the impact going, you have to essentially increase it. I believe that the Dovish members of the Fed will print more money. Especially after the resignation of Mr. Bernanke early next year, when he will be replaced, there will be even more Dovish members.

Friday, July 26, 2013

Wealth, income inequality in America

The problem in America is that real wages, real compensation has been down since the 1970's. But at the same time, asset prices, equities, real estate and so forth have gone up dramatically, and that favors people who have these assets.

And so the ratio expanded and you have now a record wealth, inequality, and income inequality. 

Tuesday, July 23, 2013

QE unlimited has been discounted by markets

In my view the global economy isn't growing much, as is evident from the sales report of McDonald's, Caterpillar," he said. "The market is a discounting mechanism. It has already discounted QE unlimited. The impact of continuous monetary easing is diminishing

Monday, July 22, 2013

Current corporate earnings are extremely elevated by historic standards

In general corporate earnings will disappoint. They may not collapse, but they will not be as good as expected and my sense is they will decline from the current level which is by historic standards extremely elevated. In particularly cyclical companies, the Caterpillars, semi conductors, companies in materials I think will have a tough time to meet expectations of earnings.

Friday, July 19, 2013

Indian Rupees vulnerable

In Asia there are very diverging performances. The markets like the Philippines, Indonesia and Thailand are up 3-4 times from the 2009 lows. These markets are very extended.

The Chinese market, apart from Vietnam and until last October Japan, had been in a declining mode. In some cases very depressed like Japan in October of last year, it had been in a down trend since 1989. So these markets are probably reaching a buying range.

In case of India I am not so sure there is a great hurry to buy anything because the market may not go down equally, but the currency would still seem to be vulnerable.

Thursday, July 18, 2013

Stock market is weak internally

The only game in town in the last 12 to 18 months has been the US. So you have most markets in the world going down and the US going up. It is very likely that the US market has already peaked out at 1687 on May 22nd on the S&P and if the market makes a new high it would be only with a few stocks making new highs. The majority of stocks will not make new highs.

Wednesday, July 17, 2013

There wont be much tapering

Central banks around the world will continue to pursue easy monetary policies and there will be very little tapering. But in the unlikely case, where the US economy were strong and showing strong growth, in half an year or year's time, then they will reduce the purchases of assets.

But in a scenario where the economy stays weak and continues to disappoint, I do not think that they will taper much. In fact, Mr. Bernanke is most likely to retire and some other Fed members will try to make Mr. Bernanke look like a hawk and they have argued for unlimited QEs forever and that is likely to be the case.

Tuesday, July 16, 2013

Stock market risk

I think the stock market in the US has risen from 666 on the S&P to now over 1600. I don't think there is much upside potential, and has a considerable downside risks. It could be that all the money in the world flows into US stocks and avoids emerging markets as in the case it is right now with the money flowing into the US but I wouldn't bet on it.

Monday, July 15, 2013

Keep buying gold in a disciplined approach

I have repeatedly stated that I will buy gold. I expected this correction and I would buy gold at $1300 an ounce and then at $1200 an ounce and then at $1100 an ounce. But I have a disciplined approach to my asset allocation, whereby I would not invest more than 20-25% in gold.

Sunday, July 14, 2013

Gold is approaching a low

We had a huge bull market in gold and silver between 1999 and 2011. In the case of gold (September 2011), the prices reached $1921 and since then, we have been in the correction period as we are down 37%.

Now, the question is -- does the decline in gold prices signal that despite of all the money printing the world will face a more significant deflationary shock, especially in asset prices? We are approaching a low in gold, but it is not yet confirmed.

Friday, July 12, 2013

Faber says India stocks not bottomed yet

We are probably at the beginning of a more significant asset class deflation. If you look back, we had huge increases in asset prices, whether it is real estate, equities, bonds, gold or commodities.

When you print money, prices do not go up evenly and they do not fall all at the same time. So, the money flowed between 1996 and March 2000 into high-tech NASDAQ stocks and also in India. Then this was deflated and post 2000, we had in the US the colossal credit bubble where the money flowed mostly into housing which was deflated after 2007. After that, we had a huge flow of funds into emerging markets and emerging market bonds. I think that will also be deflated as in some cases we have already gone down quite a bit.

In case of India, the Indian ETF is now down 32% from the November 2010 high. It has performed miserably, relatively to the US. So the market will bottom out, but it is too early to buy anything at the present time.

Thursday, July 11, 2013

Chinese economy affects the world economy

It looks as if the Chinese economy growth has de-accelerated very significantly. It also looks like we have a gigantic credit bubble in China. If China grows at 3 percent or 4 percent instead of trend-line growth of 10 percent, it will have a huge demand on industrial commodities.

At the same time it will have a huge impact on the income of countries producing commodities such as Australia, Africa, Central Asia, Middle East. if these countries have less income, they buy less from China, Europe and America. The overall demand declines and you have an earnings contraction.

Marc Faber: China is the most important economy not US

For me the most important economy in the world is China and not the US.

Wednesday, July 10, 2013

Eventually gold prices will be higher

It is possible Gold goes somewhat lower, but having declined from $1921 to $1232, I think gold is now at a reasonable level and I keep buying gold regularly. I have faith that eventually Gold prices will be higher.

Tuesday, July 9, 2013

Markets in Europe have made major lows

For the first time in my life, I bought European shares, and I plan to buy more. I wasn't optimistic for a long time, although I bought some Swiss insurance stocks after the crisis in 2009. Then, last May, I took another look, as sentiment was so negative. The S&P had doubled from its 2009 lows, yet many markets in Europe were at or below their 2009 lows. Something was out of sync.

Markets in Europe have made major lows. But investors don't fully comprehend what happened in Cyprus. In the event of future bailouts, bank depositors will lose a percentage of their money. Money in the bank isn't 100% safe anymore. That's why I own stocks, and corporate bonds, and real estate.

Monday, July 8, 2013

Myanmar is loved

Provided there is peace in Asia, the long-term economic outlook is good. Countries such as Laos, Cambodia, and Myanmar are opening up, and Vietnam is reopening. There are 500 million people in this region. Wherever you go, people are talking about Myanmar. They seem to love it as much as they loved Vietnam right near the market's peak in 2006.

Sunday, July 7, 2013

Gold is easier to carry than a lamborghini

Gold is down 30% from its 2011 peak of $1,921, but has far outperformed financial assets since 1999. A correction was overdue. I have about a 25% allocation to gold and buy some every month. I want to have some assets that aren't in the banking system. When the asset bubble bursts, financial assets will be particularly vulnerable.

Gold is easier to carry than a Lamborghini.

Most of my gold is in a safe-deposit box in Switzerland, but I am shifting it to Asia. I also like resource stocks such as Newmont Mining (NEM), Chevron (CVX), and Total (TOT).

Friday, July 5, 2013

Cash in US Dollars is king

I hold lots of cash, in U.S. dollars. Plus, I like some other investments such as the India Capital Fund, which is available to accredited investors. The fundamentals of Kazakhstan are strong, but the country's bonds have rallied. Thus, I prefer shares of Kazkommertsbank, which trade for less than one times book. Finally, the Euphrates Iraq Fund is a way to play an early-stage frontier market that is starting to attract local and foreign capital.

Wednesday, July 3, 2013

Marc Faber: China will not end well

There has been a huge credit bubble in China, and it isn't going to end well. Its economy officially grew 7.7% in the first quarter. In reality, it is growing 4% a year, at best. Figures on Chinese exports to Taiwan, South Korea, Hong Kong, and Singapore don't agree with the import figures of those countries. In each case, reported exports are much larger than reported imports. Singapore publishes relatively honest economic statistics. Its gross domestic product has hardly grown in the past six months. Inflation is about 4% a year. Here in Thailand, growth has slowed despite massive fiscal stimulus. Trade and current-account surpluses have been shrinking in Malaysia, Indonesia, and other countries.

Again, the economy of the rich is booming. There has been huge wealth accumulation in Asia in recent years. But the middle class has experienced diminishing purchasing power. Throughout history, growing wealth inequality has been corrected either peacefully, through taxation and wealth redistribution, or by revolution, as in Russia. I am not sure we will have a revolution in the Western world, but I can see European voters turning against the arrogance of the bureaucracy. There have been so many scandals involving French politicians with Swiss bank accounts, and so forth.

Monday, July 1, 2013

Gloom Boom Doom - Market commentary report July 2013

American economists’ high esteem of consumption as the motor of economic growth has a long tradition dating back to the early 20th century. The continuous drive to boost consumption has led to Affluenza, an All-Consuming Epidemic, which is accompanied by an unprecedented array of escalating imbalances: ever-declining personal savings; a large fiscal and current account deficit; exploding government and consumer debts; and, a protracted shortfall in business fixed investment, employment and available real incomes.

The current mantra of “selling” emerging markets and “buying” the US is likely to disappoint even if the US stock market continues to outperform. After all, the out performance may arise from US equities declining less than emerging stock markets. In this context, I should like to point out that the late May/June sell-off has been extremely benign by historical standards and that far more downside volatility is likely to occur in the months ahead.

I wish my readers a pleasant summer and to remember the words of Roy D. Chapin: "Be ready when opportunity comes...Luck is the time when preparation and opportunity meet."

Vietnam exports strong and people hardworking

There are a lot of bad loans in the banking system, and the stock market has fallen 70% from the highs. But exports are strong, and the people are hard-working. There is a 35-kilometer stretch of beach between Danang and Hoi An that will be a huge resort area in the future. It is only an hour and 10 minutes by plane from Hong Kong, and two hours from Singapore. A Park Hyatt resort in the area has been selling villas and condos, and almost all have been bought by Vietnamese. I visited during a holiday, and 90% of the people on the beach were Vietnamese. One man even brought his Lamborghini.

You can find companies in Vietnam with yields of 5% to 7%. I like Military Commercial Bank, and I'm overweight Vietnam Dairy Products. It is a dominant force in the diary-foods industry and has been growing by about 20% a year for the past 10 years. It could keep growing by 10% to 15% per annum, and the valuation is low. Sooner or later, it will be acquired.

Sunday, June 30, 2013

Japanese stocks long term buy

I figured the Japanese stock market would go ballistic as soon as the government weakened the yen, and that's what happened. Since the Oct. 15 low, the market is up more than 70% in yen terms and 35% in dollars—before the recent correction, that is. I bought brokers such as Nomura, which has more than doubled in price. The Japanese market is correcting now, and the yen might rebound somewhat. But whereas the U.S. is near a long-term top, Japanese stocks made a generational low in 2012 and won't go below that.

Friday, June 28, 2013

25percent of assets in equities

I don't know how the world will look in five years, so I have heeded Ray Dalio's advice to diversify. [Dalio of Bridgewater Associates.] I keep 25% of my assets in equities. I haven't shorted anything yet, although I am tempted to short the S&P or the Russell 2000.

I don't own U.S. stocks, but I hold some Asian shares, including Singapore real-estate investment trusts, which I will discuss momentarily. Markets in the Philippines, Indonesia, and Thailand have quadrupled from their post crisis lows, and aren't attractive any more. But I still hold some shares in these markets with relatively high dividend yields.

Thursday, June 27, 2013

Marc Faber on Black Swan event and global risks

Geopolitical conditions could deteriorate badly in the Middle East and Asia. America's reset toward Asia has alarmed the Chinese, who won't tolerate U.S. interference long term in the region. Then there's the possibility of a Black Swan event.

If the S&P 500 drops 20%, the Fed will print more money, so that's not a huge downside risk. But the bond market could collapse, inflation could accelerate, or the Chinese economy could implode. Or we could have a destabilizing political event, or a pandemic.

Tuesday, June 25, 2013

Rich will be targeted in a big reset

At some point, there will be a big reset. In the democracies of the Western world, large numbers of people will vote against the well-to-do. Throughout history, minorities have been targeted. Now the rich will be targeted through some kind of wealth tax or significantly higher tax rates. Eventually there will be so much antagonism against well-to-do people that it won't be comfortable.

Monday, June 24, 2013

Asian markets

Three other Asian markets—Japan, Vietnam, and China—performed miserably for most of last year. I'm not keen on Chinese equities, but if conditions worsen and China prints money like crazy, the currency will weaken and stocks will rise. I own some issues in Hong Kong, but without great enthusiasm. I own Swire Pacific, Hang Seng Bank, Sun Hung Kai Properties, and Fortune REIT which owns shopping malls. One China play I like is China Mengniu Dairy.

Policy mistakes by Fed

I doubt Keynes [British economist John Keynes] would approve of current policies. Neither would the late economist Milton Friedman, even though Bernanke invoked him to justify his actions.

The neo-Keynesians would argue that if the Fed hadn't flooded the system with money, things would have been much worse. That might be true, but they would have been worse for a shorter period of time.

Friday, June 21, 2013

Asset prices are grossly inflated globally

I am suggesting that in the fourth year of an economic expansion, near-zero interest rates will lead to a further mis-allocation of capital. I thought the U.S. market would have a 20% correction last fall, but it didn't happen. I also said the market might explode to the upside before the correction occurred. We might be in the final acceleration phase now.

The Standard & Poor's 500 is at 1650. It could rally to 1750 or even 2000 in the next month or two before collapsing. People with assets are all doomed, because prices are grossly inflated globally for stocks, bonds, and collectibles.

Thursday, June 20, 2013

Fed mistakes repeated everytime

The government bailed out savings-and-loan depositors during the thrift crisis in the late 1980s. The U.S. Treasury and Federal Reserve bailed out Mexico in the mid-1990s. The biggest policy mistake occurred with the Fed-supervised bailout of the hedge fund Long-Term Capital Management in 1998, because it gave a green light to Wall Street to keep leveraging up.

Another policy mistake was made in 2000, right after the Nasdaq collapsed. The system probably could have handled a recession then, but instead, the Fed engineered a drop in interest rates, eventually to 1%, that encouraged a huge housing bubble. After it burst in September 2008, Bernanke slashed short-term rates to near-zero, where they are still. Meanwhile, the stock market is up 150% from its 2009 lows.

Wednesday, June 19, 2013

Cyprus bailout dilemna

European policymakers believe that in the next round of bank bailouts the depositors will have to pay their part, as was the case in Cyprus. The main question is who pays for what? In Cyprus, accounts up to €100,000 ($129,000) are adjudged to be safe, but accounts above that limit may lose as much as 40-60%.

There is a question of social equity here: why should a depositor with €5M in a Cyprus bank lose, while a depositor with less than €100,000 sits pat?

There is also a technical problem. Say you are a homeowner in Cyprus and you sold your house for US$1M the day before they announced the confiscatory measures. The buyer paid you $1M and you deposited it in the bank. Now, you will now lose 40-60% of your money, but you haven't done anything wrong. You just sold your house. Or what if I own no land, but have stored all of my wealth in bank deposits? The technical and political details involved in making bail outs fair—spreading out the pain—are very difficult. It may not be feasible to sanction depositors.