Tuesday, August 25, 2015

US markets will get cheaper coming ahead

The bank credit analysts said there will be a bloodbath in emerging economies -- we already had one to a large extent. If you adjust the poor market performance and the currency weakness, probably more to come but I don’t believe the U.S. will not be affected at all and I would look at valuations. 

Valuations are not exactly cheap in emerging markets but they are becoming reasonable… I think the U.S. will be the last to unfold.

Thursday, August 20, 2015

Why the US Fed will not raise rates next month

The world is run by central bankers and when investors see that central bankers are essentially engaged in some kind of money printing exercise, which currency devaluation is, then obviously it affects other currencies as well and because of the size and the importance of the Chinese economy, it puts further pressure on other emerging market currencies.

Having said that, the US dollar is relatively high against emerging market currencies and also against the Euro and this strength in the US dollar is obviously damaging the US to some extent. Therefore, I do not believe that the Fed will increase rates in September. 

The bond market in the US has been very strong, it has rallied in the last two weeks, which suggests that the economy is weak not strong.

Tuesday, August 18, 2015

Money printing is politicians easy way out specially in the Western world

In the Western world money printing is the politically right thing to do according to Marc Faber who was interviewed on Bloomberg News.

Monday, August 10, 2015

Could see 50 percent correction in Chinese stocks

I think that a year ago in June/July 2014, Chinese stocks were very inexpensive compared to other markets in the world. They had been going down relative to the S&P since 2006 and compared to other Asian markets like the Philippines, Indonesia, Thailand... they had performed very poorly.

So a year ago my view was that a) because of the crackdown on visitors to Macau and more importantly because the property market in China was beginning to show cracks, prices were no longer going up and many markets were over supplied so my sense was that domestic money would shift out of the property market or de-emphasise property investments and go into equities, at the same time international investors were grossly underweight Chinese stocks and my sense was that as an international investor you look around the world and see all of these markets, the S&P is up at an all-time high last year already and then you see a market like Japan that two years ago was very depressed compared to other markets, so money went into there.

A year ago what was very depressed relative to everything else was the Chinese stock market. So money flowed also internationally into Chinese stocks and the market in China is relatively illiquid. You have to see. Because most blocks of shares are owned by the government or by large Chinese groups so what is available for trading is not that large.

Then the money flowed into Chinese stocks and they went up by more than 100% within a year and the whole thing became very speculative because in China people borrow a lot of money against what they buy whether it is properties or stocks and so the margin accounts increased dramatically and the margin debt reached almost 4% of GDP whereas in the US it is around 2% of GDP and it is at its highest level ever. So 4% was a very big figure. I think the government´s measure to support the market will largely fail and that eventually there will be more selling pressure and stocks will retreat somewhat more.

Do they go back to the levels of a year ago, to the 2014 lows? I don’t think so. I think this may be the beginning of a new bull market in China, but after a 100% rise we could have, like, from peak to trough a 40% correction. Or even 50%.

Thursday, August 6, 2015

Sectors in a bubble

We have a bubble in everything — from stocks to bonds, real estate, high-end real estate and even art.

Tuesday, August 4, 2015

Investing in China real estate via HK or Singapore

Everybody is so negative about the banks [in China]. Yes, I think the banks [in China] have some problems, but equally, it’s a sector that has been neglected. Also, I wrote in my report about Macau gaming stocks. I don’t think there is a rush to buy them, but after having declined by up to 50%, Macau gaming stocks are probably in a bearish range.

I’m sure there will be some good value in Chinese property companies. I prefer to play the Chinese property market through Hong Kong or Singapore companies that have developments in China.