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.

Tuesday, June 18, 2013

Marc Faber: I should thank Bernanke

I own equities, and I should thank Mr. Bernanke. The Fed has been flooding the system with money. The problem is the money doesn't flow into the system evenly. It doesn't increase economic activity and asset prices in concert. Instead, it creates dangerous excesses in countries and asset classes. Money-printing fueled the colossal stock-market bubble of 1999-2000, when the Nasdaq more than doubled, becoming disconnected from economic reality. It fueled the housing bubble, which burst in 2008, and the commodities bubble. Now money is flowing into the high-end asset market—things like stocks, bonds, art, wine, jewelry, and luxury real estate. The art-auction houses are seeing record sales. Property prices in the Hamptons rose 35% last year. Sandy Weill [the former head of Citigroup] bought a Manhattan condominium in 2007 for $43.7 million. He sold it last year for $88 million.

Money-printing boosts the economy of the people closest to the money flow. But it doesn't help the worker in Detroit, or the vast majority of the middle class. It leads to a widening wealth gap. The majority loses, and the minority wins. Although I have been a beneficiary of this policy, I can't approve as an economist and social observer.

Monday, June 17, 2013

Europe has too many structural problems

 In my view, the European economy will not suddenly recover. It has too many structural problems. One way that the so-called "banking crisis" could be resolved, though, is to let inflation rates rise. Asset prices would then shoot up, and loan portfolios would be better covered. But I do not really think that inflation is the solution.

Sunday, June 16, 2013

Derivatives are dangerous

The danger is that the whole financial system could blow up due to the huge amount of derivatives still outstanding. Once again, excessive speculation is being fueled by artificially low interest rates, and asset bubbles exist everywhere.

Friday, June 14, 2013

Government handouts

Using handouts, the governments monetized the debt structures of the European Central Bank (ECB) and its subsidiaries in countries like Spain, Italy and Portugal.

Thursday, June 13, 2013

Marc Faber says Nouriel Roubini is outstanding economist but....

I know Nouriel Roubini very well. He is an outstanding economist. [But] I wouldn't use him to giving me advice when to buy or sell shares or gold.

In 2009 when S&P was at 666 he[people like Nouriel] said the S&P would drop to 400. Since then the market is up 140%. You didn't have to fight the fed until now. But in my view the global economy isnt growing much as evidenced by the sales report of Mc. Donalds, Caterpillar. The market has already discounted QE unlimited. Its never going to end. The impact of easing monetary easing is diminishing.

Wednesday, June 12, 2013

Marc Faber buying Vietnam shares

I'm buying Vietnamese shares and I'm thinking of buying at some point Chinese shares. The good companies in China are also expensive, they are not cheap. Last November, I said to buy Japan shares. Since then Japan is up more than 70% and in dollar terms 30%. I want to buy more Japan on a setback.

Tuesday, June 11, 2013

Markets have Corporate bonds fully priced

The corporate bond market in emerging markets is fully priced. The high yield bond market in the last two weeks, has gone down by 6 to 7 percent. The equity markets in the Indonesia, Philippines, Thailand are in the sky. They are already expensive. Good companies they sell at 20 to 25 times earning, I don't think there's great value there.

Monday, June 10, 2013

Marc Faber leaning towards Shorting stocks

A lot of large caps stocks Mc Donald's MCD, Coca Cola KO, Walmart WMT, P&G PG most likely have peaked out. There are still stocks that show strength that could continue to appreciate. That momentum could bring a new high possibly around 1700. I wouldn't bet on it. If someone put a gun on my head and said you have to be long or short, I would take the short side.

Sunday, June 9, 2013

World needs less financial services graduates

Unemployment is high in both Europe and the U.S., particularly for young people. One reason for the high unemployment rate is that it is very difficult to find highly specialized workers for industry. Perhaps that's due to more university students studying non-user-friendly subjects, such as philosophy. The Western world is lacking in well-trained workers who can handle industrial machines that cost $10-20 million ($10-20M). But if I need a clerical assistant for financial services, I can find hundreds and hundreds of applicants.

Thursday, June 6, 2013

Marc Faber on China recession

China is a country twice the population of US and Canada in terms of population. So you can have some sectors and some regions, like the US has California. Occasionally California is in a recession but New England is booming. Same can happen in China, some sectors are contracting, some provinces are growing. 

Wednesday, June 5, 2013

China credit bubble dangerous

In the last 20 years China has made huge progress, huge economic development, but I equally feel post crisis in 2008 there were massive monetary and stimulus that has led to a huge credit bubble. I think that credit bubble is rather dangerous. I do not believe the current Chinese economy is growing at 7 or 8 percent but rather like 4% or even less. The credit bubble will come undue sooner or later.

Tuesday, June 4, 2013

Marc Faber buys Gold mining stock

Last week, I bought for the first time in a long time a gold stock.

Gold and silver mining stocks have the potential to rebound by between 30% and 40%.

Fed has no exit strategy

They [The Fed] will continue to print in my opinion. I don't think they will have an exit strategy, ever. There is no exit. They are so deep into essentially monetizing the U.S. debt. The U.S. Treasury and the U.S. Fed is one and the same. This game will continue for a long time but the impact on the asset markets, that is the question.

Marc Faber: US stocks and market vulnerable

In the US also many stocks have given up their gains. In the near term we are bit oversold and we may rally to around 1660 or 1670. We could make a new high but the new highs would not be confirmed by the majority of shares so I think the market is actually quite vulnerable.

Monday, June 3, 2013

Faber June 2013 Gloom Boom Doom report / Market commentary

Around the world, bond yields have been rising. What this increase in yields means is that the tailwind from declining interest rates, which benefited equities in recent years, has disappeared. Rising bond yields combined with a serious deterioration in numerous technical indicators lead me to believe that stock market around the world have far more downside risk than what is being perceived by the currently ebullient crowd of investors.

Saturday, June 1, 2013

Marc Faber on career prior to relocating to Asia in 1973

At that time[1970's], when you finished ­university in Europe you could really choose any kind of job. There were more job offers than applicants so it was quite easy to find a job, maybe not the best job, but you could find a job. I chose the job that paid the most and they sent me right away to New York for training, an investment bank.