Tuesday, December 20, 2016

China could be in trouble even without Donald Trump

We have a credit bubble in China, like, by the way, everywhere else in the world. It's just bigger in China and that, in my view, will have to be deflated.

Donald Trump criticizes China

Mr. Trump is not particularly keen on China. There may be some trade war escalation or trade restrictions with China... The U.S. is still its largest export destination as a country.

Tuesday, November 8, 2016

Platinum vs Silver vs Gold

In a bull market, silver will tend to outperform gold. In a bear market, gold tends to outperform silver. Gold, platinum, silver and palladium move in general in the same direction, and sometimes one will move faster than the others. 

The fundamentals of the platinum market are the most attractive at
the present time

Tuesday, November 1, 2016

India's Raghuram Rajan was one of few Central Bankers to call out the US Fed

I was an admirer of former Reserve Bank of India governor, Raghuram Rajan. He understands the problems of money printing. He was one of the very few central bankers to criticize the US Fed policies though most of the other central bankers did not. That he left, is a negative for India. Although I understand that Urjit Patel is a reasonably hawkish central banker as well.

In emerging economies, politics plays a significant role, because on the margin the markets are driven by foreign buyers. So if you get more foreign money in, the markets are likely to go up. And foreign investors do pay attention to political developments. In case of India, they will watch the reform process of the Narendra Modi-led government very closely.

Tuesday, October 25, 2016

Some Republicans conspiring with Hillary Clinton

I am afraid that there are so many Republicans and neocons of the Republican Party that supports Hillary that a deal between Hilary Clinton and neocons is already done. That the neocons will basically take over foreign policy and Hillary Clinton can print money in the US and distribute the money to minorities and god knows what. And that this deal can lead to international tensions, that then are not conducive to equities and bond prices.

Tuesday, October 18, 2016

Central banks have no option but to continue Money Printing

I was not a fan, for now several years of U.S. equities. But I always said that emerging markets over the last 12 months have become relatively attractive. And so this year, we had the Philippines, Thailand, Indonesia, Vietnam all up in the order of 15 to 25 percent. So I think we have to look at the world...there’s plenty of money floating around the world. One day it goes into commodities and then another day it goes into equities and then it goes into some currencies and then it goes into bonds and so forth. So we can’t be overly diplomatic. 

And number two, I really believe the Fed and other central banks have no option but to print money. The whole system collapses if they stop printing money. And so they will keep on printing money. Now over the last 18 years, the balance sheets of major central banks have gone up 16 times. I think they can go up by another 20 times or maybe 30 times or 100 times. You know if you can print money, you really can print money. The impact on the economy is of course not very good, but you can do it.

Thursday, October 13, 2016

World will move to a sound financial system over time

The crisis in 2007-08 occurred because we had excessive credit growth and because banks in Europe and of course in the U.S. changed their nature – from being essentially institutions that accept deposits and then make loans to people, into big institutions that gamble with clients’ money. And so the first problem occurred with Bear Stearns and then Lehman Brothers in the U.S. and then AIG, and that was then bailed out. But the bailout did not lead to cleaning-up of the system. The banks were allowed to continue to gamble with their capital. 

And now with zero interest rates and with more leverage than in 2007 in the banking system and in total debt as a percentage of GDP, now there is a problem with Deutsche Bank. And I suppose the bank is basically bankrupt. But the government will not let it go bankrupt. They will engineer some kind of a bailout. Either the government can ask the private sector to help Deutsche Bank or the government can help Deutsche Bank. But it is not that the bank will disappear. But I think what will happen over the time is that these banks like Deutsche Bank, Credit Suisse, UBS , JPMorgan, Citi  and so forth will not be allowed to gamble in all kinds of speculative markets - whether it’s equities, swaps, currencies. So I think that in general we’ll move over time to sound the financial system. But it is not going to happen overnight, it will take a lot of time.

Tuesday, October 11, 2016

Wednesday, October 5, 2016

October 2016 Monthly Market Commentary

87 years old Jack Bogle founded the Vanguard Company in 1974. Today, Vanguard is one of the most respected and successful companies in the investment world. According to Bogle, we shouldn’t expect “a revisitation of the ’80s or ’90s, when stocks returned 18% a year…. Those planning on a comfy retirement or putting a kid through college will have to save more, work to keep costs low, and - above all - stick to the plan.”

The Wall Street Journal explains that “Mr. Bogle relies on a forecasting model he published 25 years ago, which tells him that investors over the next decade, thanks largely to a reversion to the mean in valuations, will be lucky to clear 2% annually after costs. Yuck.

Then why invest at all? Maybe it would be better to sell and stick the cash in a bank or a mattress. ‘I know of no better way to guarantee you’ll have nothing at the end of the trail,’ he responds. ‘So we know we have to invest. And there’s no better way to invest than a diversified list of stocks and bonds at very low cost.’”

Normally, I would not spend much time discussing Indexing. The point I want to make is that for the average investor (by definition a relatively small investor) “there’s no better way to invest” than Bogle’s strategy of investing “in a diversified list of stocks and bonds at very low cost.”

However, I am referring here to the average investor and not to the savvy financier who knows how to select one of the few active managers who actually outperforms an index over time, or an investor who has sufficient analytical skills and discipline to select companies that beat the index over time.

In a recent article for the Financial Times, William White observed that

“The monetary stimulus provided repeatedly over the past eight years has failed […] Debt levels have risen […] Consumers have had to save more, not less, to ensure adequate income in retirement. At the same time, easy money threatens two sets of undesirable side effects. First, current policies foster financial instability… and many asset prices bid up to dangerously high levels. Second, current policies threaten future growth. Resources misallocated before the crisis have been locked in through zombie banks supporting zombie companies. On the demand side, accumulating debt creates headwinds, leading to more monetary expansion and more debt […] On the supply side, misallocations slow growth, which again leads to monetary easing, more misallocation and still less growth.”

I have a high respect for Bill White as an economist because he identified the problems correctly. Unfortunately, I cannot agree with his view that “Only government action can resolve a global solvency crisis.”

Therefore, I expect more of the same: larger fiscal deficits, larger governments that will own not only their public debts but increasingly also equities through their respective central banks, which will happily continue to print money.

In this context my readers should remember the words of Paul Volcker:

“It is a sobering fact that the prominence of central banks in this century has coincided with a general tendency towards more inflation, not less. [I]f the overriding objective is price stability, we did better with the nineteenth-century gold standard and passive central banks, with currency boards, or even with ‘free banking.’ The truly unique power of a central bank, after all, is the power to create money, and ultimately the power to create is the power to destroy.”

Friday, September 30, 2016

Capital preservation vs Risk Rewards

I think holding all your assets in cash is very dangerous. I want to be diversified; I hold some cash, bonds, equities, some real estate, and some precious metals. 

The moment you diversify, your returns are suboptimal, but it’s likely to preserve your capital.

Tuesday, September 20, 2016

Central bankers are NOT smart people

I don’t have control over the manipulation of central banks. Haruhiko Kuroda of the Bank of Japan expressed the view that there is no limit to monetary inflation. That they can keep on buying assets and they can keep on buying equities and real estate.

Janet Yellen

They could essentially monetize everything, and then you have state ownership. And through the central banking system, you introduce socialism and communism, which is state ownership of production and consumption. You would have that, yes, that they can do.

The BoJ owns more than 50 percent of Japanese ETFs (exchange traded funds), which own large parts of the underlying companies. So indirectly they may own 20 percent of the Japanese companies, and they can go up to a higher level.

So the madness in the present time may go on. In a manipulated market, it won’t end well, but you don’t know when it will not end well, and how far the manipulation can last.

I don’t think the central bankers are intelligent and smart enough to understand the consequences of their monetary policies at present. They focus on inflation but in my view they shouldn’t do anything. They don’t focus enough on what it does to the average standard of living of the people, to the average household income.

Tuesday, September 13, 2016

No economic growth in US, Europe and Japan

Today, Britain is completely irrelevant for the world economy. It contributes less than 4% of the global GDP and is a very small manufacturer. What is relevant for the world are growth rates in China and India. 

We don't have any growth in Europe and Japan. If we were to measure the GDP correctly in the US, there would be no growth. And we are talking about a demographically attractive population. 

Tuesday, September 6, 2016

Control your emotions during trying times to improve your investment returns

My regular readers know very well by now that I consistently recommend investors to hold a diversified portfolio of different assets consisting of equities, bonds and cash, real estate and precious metals. The purpose of this diversification is to reduce the risk of heavy capital losses. Since nowadays, most assets are grossly inflated I am not so sure that this diversification is full proof anymore, but what I am sure of is that the strategy of owning different assets is the best option for the average investor. It is nonetheless pretty clear to me that if becoming ultra-rich is the objective, diversification is simply not an option.

A friend of ours, Charlie Bilello who is the Director of Research at Pension Partners, LLC, an investment advisor that manages mutual funds and separate accounts and who is the co-author of four award-winning research papers on market anomalies and investing was kind enough to share with us a paper entitled, Big Winners and Big Drawdowns. The paper is very interesting because it shows that people like Steve Jobs, Bill Gates, Jeff Bezos, Eric Schmidt, and Larry Page became incredibly wealthy by having almost all their wealth in just one business, which however, experienced repeatedly huge drawdowns.  

Bilello rightly says that, “All big winners have big drawdowns. Accepting this fact can go a long way toward controlling your emotions during periods of adversity and becoming a better investor.”  

I fully agree with Bilello that controlling one’s emotions during periods of adversity can go a long way toward becoming a better investor. The successful investor should also be aware that the mind-boggling long term performance of stocks such as Apple, Amazon, Microsoft and Alphabet are the exception and that they are not at all representative of the returns investors should expect from their portfolios. More so, as I explained above, diversification – well-understood disciplined diversification – can help investors to better control their emotions.  

There is a point that is important: We investors will not only experience higher volatility and lower returns on our assets in the next few years. We shall also have to endure vicious interventions by governments and central banks, which are nothing else but an increase in taxes on private property or, as I believe, a form of hidden expropriation. The right choice of the custody and geographical location of your assets will be increasingly important. Concerning the custody of your assets beware of massive fraud everywhere – see following link:  

Following last month’s discussion of Mrs. Stutzman I received quite a few comments. The majority of the comments condemned the behaviour of Mrs. Stutzman, which I actually support.          

With kind regards
Yours sincerely
Marc Faber 

Wednesday, August 24, 2016

Many more QEs will be coming and could create more volatility

The Fed and ECB and the Bank of England, the Bank of Japan, basically they talk to each other every day. They are the Mafia, the chief manipulators, and we don’t know exactly what is being said. That’s why it creates a lot of uncertainty in the markets, and in my view, undue volatility.

But one thing I’m sure of, before the whole system collapses, the governments and the agents, which are the treasury departments and the central banks, will do everything – everything – to protect the system from collapsing, and in my view, this will involve much more QEs around the world.

Thursday, August 18, 2016

Blame China for our current slowdown

One reason I am negative about the world is that much of the growth in recent years was driven by rapid expansion in China. The Chinese growth will slow down. Indian economy can easily grow, maybe not at 7 per cent per annum, but at 4-6 per cent per annum. Some people say it is very pessimistic. But if you compare 4 per cent growth to 0 per cent growth in Europe and 1 per cent growth in the US, it is actually a very good economic performance. Since early 2016 many emerging markets have grossly outperformed the US.

The valuations in emerging economies are much more attractive than in the US. If you take a horizon of 10 years, you will make more money in emerging economies than in the US. The same would apply to India. The problem in emerging economies including India is that quality companies are very expensive. But in India and other emerging economies there are also lots of companies that have a reasonable valuation. Provided the world doesn't collapse and holds together, emerging economies will do okay.

Tuesday, August 16, 2016

India would benefit from a stronger Rupee currency

In principle, I have advocated that high interest rates are good for India because it implies that the currency is stable, which benefits most Indians. 

A weak currency benefits shareholders, property owners because share values go up. But this is a minority. There are more than 1.2 billion Indians. Probably not even 5 million own shares. The impact of rising share market on the economic activity is very limited. If the new governor is a money printer like Yellen and Bernanke, then the currency will go down a lot. So in local currency the stock market might go up, not necessarily in dollar terms. But for the next 10 years, I would probably rather invest in India than in the US

Thursday, August 11, 2016

I own a diversified portfolio of assets

Click here if the above video does not play

Tuesday, August 9, 2016

Capitalism can be unfair and cruel but are the alternatives better ?

Capitalism and free markets are not fair (in fact, capitalism is a cruel system in numerous ways), but it is a far fairer system (not crony capitalism) than all the other forms of organizing economic and social life, and in particular vastly superior to socialism, communism, and the arbitrary command economy.

Western democracies had (like socialism and communism) the noble idea of creating a fair society [Albert Camus: “The welfare of the people has always been the alibi of tyrants”], but it is now ending up with system that is characterized by far more injustices and abuses by bureaucrats, powerful corporations and government officials.

Tuesday, August 2, 2016

Central Banks manipulate the markets like the Mafia

Let’s say the ECB buy bonds, also the Bank of England or the bank of Japan, and so forth. That’s why said, the Fed and ECB and the Bank of England, the Bank of Japan, basically they talk to each other every day. They are the Mafia, the chief manipulators, and we don’t know exactly what is being said. That’s why it creates a lot of uncertainty in the markets, and in my view, undue volatility.

But one thing I’m sure of, before the whole system collapses, the governments and the agents, which are the treasury departments and the central banks, will do everything – everything – to protect the system from collapsing, and in my view, this will involve much more QE's around the world.

Tuesday, July 26, 2016

For Politicans Brexit is a blessing in disguise

Three years ago, I met Fernando del Pino Y Calvo-Sotelo at a CLSA conference for a drink. Following our meeting, del Pino and I stayed in touch. In early January of this year he sent me an essay entitled The Five Experiments, which I think my readers, and their families and friends should study because most people take some social, political, and economic conditions for granted, and as if they were the ultimate Truth when in fact they are just experiments, and untested in the history of mankind.

Brexit is a blessing in disguise for the ruling political elite, central banks, their cronies in the financial sector, and for the multinationals, which benefit from complex laws and regulations. From now on, the elite can blame Brexit for all the world’s problems when in fact financial and economic cracks appeared much earlier.

Brexit is also a welcome event for the Federal Reserve, the ECB, the BOJ and other central banks around the world: now they have the perfect excuse to launch further quantitative easing measures in order to save the system.

I am enclosing two reports. Shawn Hackett of Hackett Financial Advisors, Inc. warns in a special update that, grain markets are in the early stages of a massive bull market that will complete by the summer/Fall of 2017 into a full blown food crisis.

The second report is entitled False Precision by Charlie Bilello, (Director of Research at Pension Partners, LLC). According to Bilello, his most recent research paper (“Leverage for the Long Run”) delves into moving averages and leverage. He shows that using moving averages can help manage risk over time and enable investors to systematically employ leverage to enhance returns.

I wish my readers a wonderful holiday season. Remember that, “Travel - its very motion - ought to suggest hope. Despair is the armchair; it is indifference and glazed, incurious eyes. I think travelers are essentially optimists, or else they would never go anywhere” (Paul Theroux, The Tao of Travel).

With kind regards
Yours sincerely
Marc Faber 

Friday, July 8, 2016

Tuesday, June 21, 2016

I own a mix of cash, real estate, precious metals and stocks

I have quite a lot of exposure to U.S. dollars, but I also have exposure, maybe 30% of the cash, in Euros, and in Euro bonds, denominated in Euros. I also own Russian assets and I have Singapore dollars, and I have some Hong-Kong dollars. But, in general, I don't think that cash will be a very good investment - in the sense that, hey, you have no interest at the present time, you have risks with the banks, because the bank can fail, and you have also a higher risk of wealth expropriation through taxes - in other words, in Europe. So, cash is not the most desirable. 

But, equally, if you buy shares, okay, Russian shares are inexpensive, and in many other emerging economies they are also relatively inexpensive. But, in the United States, the stock market is at a very high valuation, price to earnings, price to sales, and so forth. So, I  don't think that stocks will perform well.

Tuesday, June 14, 2016

Brusells is a slave country owned by US says Marc Faber

We never really came out of the 2007-2008 recession. We had massive fiscal stimulus, we had massive monetary stimulus. In other words - if you just throw money at the system, then spending goes up, but there are, still, huge imbalances, and in my view, the world is facing very-very low growth going forward, very-very low growth. There are structural reasons for that. 

We have a horrible, I repeat, horrible bureaucracy in Brussels, in the EU, that basically is slave of the U.S. - the U.S. dictates a lot of policies in Europe, including that they've also blackmailed Mrs. Merkel to be hostile against Russia. Russia and Germany, Russia and Europe were historically very close to each other, but this has now changed.

Tuesday, May 31, 2016

Gold is an easy scapegoat for Governments

The establishment, the central banks, the governments and so forth once faced with complete failure of their new keynsian economic interventions with fiscal measures, monetary measures that have allowed global debts to still expand by 56 trillion dollars since 2007.. once faced with these failing policies, they will blame these people who hoard gold and they will maybe expopriate Gold. That is my concern.

Friday, May 27, 2016

Marc Faber latest news | May 2016

If the video from above does not play click here to play the Marc Faber video.

Tuesday, May 24, 2016

Donald Trump is a better choice to Hillary Clinton

Whether he will be a good president? I don’t know but given the other options, I’d rather take Trump, who is not the most honest person but in my view, more honest than Ms. Clinton. 

Tuesday, May 17, 2016

Rick Rule is right on Gold shares

I tend to agree with Rick Rule that gold shares, okay, they’re down 80%, and they are cheap, compared to the physical price of gold and compared to Facebook and Google and all these Netflix type of stocks. That I agree entirely.

Tuesday, May 10, 2016

Modi has impressed in India although he could have done more

Even if India grows at 6 per cent per year, it would see huge interest among investors. India has not seen much flows as global investors are underweight towards India. This is because between 2007 and 2013 India disappointed and it saw a weak currency. 

It’s not an easy task to evaluate the performance of a government because of the system Prime Minister Modi is operating in, which is highly bureaucratic and surrounded by red tape. I think he could have done some more reforms. In my view, elimination of subsidies is good and the Rural Employment Act should altogether be scrapped. Modi is not negative for the economy but it seems he is operating under some constraint. However, so far his performance has been good.

Tuesday, May 3, 2016

Until recently it was inconceivable that a Western country could go bankrupt

The Swiss fought for independence for the last 800 years and now suddenly they accept everything! They have no fighting spirit anymore!

But let´s assume some countries are ready to leave the euro zone. In the case of Greece this would go along with a major haircut or an outright default...

Yes, but a haircut and the default will occur regardless. I mean, even the IMF accepts the fact that the Greek debt has to be reduced somewhat. What they have done lately is the EU lends money to Greece and Greece then can pay the ECB and the IMF. 

It is a complete joke! It is like if you borrowed money from me, a thousand dollars, after one year you say, Marc look I can´t repay you and I can´t pay the interest, but if you lend me another thousand, then I can pay you the interest on the first thousand. But then you owe me two thousand!

And after the third year you come back and say Marc I´m very sorry, I can´t pay you the two thousand maybe you will lend me another thousand so I can at least pay you the interest on the two thousand! And so the game goes on. When you look at Greece objectively, private investors would never have lent all together 300 billion dollars to Greece, never! But governments are the peoples´ money you understand?

The ECB and the ESM and so forth are other peoples´ money, they don’t care.

It would have huge implications, after all over the last 40-50 years it was inconceivable that a Western country would actually go bankrupt.

Tuesday, April 26, 2016

South East Asia starting to look attractive for investing again

Singapore has a well-diversified economy and on its stock market you are getting a yield of 4%. Compared to cash that´s an attractive alternative. The market could go down, but we could also see potential for it to rise.’

‘Since their high in 2013, valuations have come back down again. The stocks are not so cheap as in 2009 for example but given other investment opportunities, they look attractive.

Tuesday, April 19, 2016

A crisis to Central Banks would threaten the entire system

I'd like to make this observation; say, today, the bonds of Deutsche Bank rally strongly and the stock is up something like 12%. Deutsche Bank announced that they will buy back some bonds. 

Now when you think it through, with whose money? They have a capital shortage, that's why the stock has collapsed by more than 80% since the financial crisis in 2007. 

The reason they can buy back bonds is that someone is lending the money. But why would anyone lend them the money to buy bonds that essentially that have collapsed this year by something like 20, 30%? Who is lending them the money? The central bank of Europe, the ECB, or the Federal Reserve, or someone innocent. What will eventually happen is a crisis that brings down central banks. But I don't know when, but it's going to happen.

Tuesday, April 12, 2016

Rapid growth in Asia in the last few decades specially in China

It's very clear that Asia, with more than 50% of the world's population, has been growing very rapidly in the last 30 to 50 years. China, in particular, over the last 20 years. China, with 1.3 billion people and India, with 1.2 billion people are very important countries, economically. And if you look at the standards of living of people in the west, in other words western Europe, the U.S., and I include Japan, are no longer rising but going down for most people. Whereas in the east, I can say that since I arrived in Asia in 1973, just about everybody enjoys a better standard of living. Just look at, say, Chinese. Until the mid 80's they couldn't travel and then in the early 1990's, there were about 3 to 5 million Chinese travelers overseas. In 2000, there were 10 million Chinese travelers overseas and now there's a little bit less than 120 million Chinese traveling around the world.

So there has been a huge improvement and there has been an increase in their economic power. The Chinese, for some reason, believe in gold. My sense is that the Chinese would like to eventually have the world's dominant currency, in other words, replace the dollar as the reserve currency of the world. Whether they manage it this time, I'm not sure, because right now, China has also some of its own problems. But I'd like to tell you, if I have to choose between the problems of western Europe and the U.S. and China, I'd take the problems of China any time.

Friday, April 8, 2016

Gary Shilling makes a good case for owning US Treasuries

My friend the economist Gary Shilling makes the case for still owning US Treasuries. I tend to agree with him about holding some money in Treasuries (Treasuries and cash: 25% of assets), but I am far more concerned about the value of the US dollar given my negative view about the US economy.

Tuesday, March 15, 2016

There is not many alternatives to invest in for small investors

Given the alternatives of negative interest rates on so many government bonds, stocks are relatively attractive.

Thursday, March 10, 2016

Rising asset prices hurts the Average person and helping the Rich

If the Fed and other central banks believe they can push up asset prices forever they are dreaming.

Most people, they have no assets, they have no money so what does it do to them if the price of Picasso painting goes up or down, they do not own a Picasso painting. They do not own high end properties in London, Singapore, Hong Kong, Mumbai, Manhattan and so forth. It does not touch their lives.

The notion of asset prices going up being good is kind of a brainwashing economics theory that benefits people that already have substantial assets, ordinary people they do not benefit from rising asset prices, in fact they are being hurt.

Look, when I started to work on Wall Street I could buy the Dow Jones at less than 800, it had a dividend yield of 6%, bonds were yielding 6%, so the compounding impact was huge and real estate was inexpensive.

Now a young guy, he starts working, please explain to me how he is going to save, he has to rent apartments at very high rents, if he wants to buy one he has to pay a very high price. Deposit in Europe, there are $8 trillion worth of bonds that have a negative yield so you deposit your money, you give it to the government and the government gives you back less, how are you going to save.

Tuesday, March 8, 2016

Central banks are a disgrace to a democratic society says Marc Faber

I have always maintained derivatives will not exist forever. Eventually, there will be no derivatives and we'll start a new system, which is based on, say, gold or another currency that cannot be multiplied by some academics at the central bank. I mean, when you think about it philosophically, now we have 5,000 years of human history from the old days in Babylon up to today that has been recorded. Never, ever before have interest rates been this low. Never, ever before have we had negative interest rates. This has all been created by some mad academics that populate the halls of glass buildings called central banks. 

This is now really a disgrace to humanity that in democracies in particular, we give so much power to these people that basically rule the world to a large extent.

Thursday, March 3, 2016

I would own some Gold - Gold is inexpensive

Stocks in some countries have more upside than others. The stock market in Vietnam, due to the improving economic fundamentals, has better potential than Hong Kong and China, where the fundamentals are worsening.

I also believe precious metals are inexpensive, though they may stay inexpensive for a bit longer because sentiment is now very negative.

Again, if you said, "Marc, here is $1 million, but you have to put everything in either gold or in the Dow Jones," then I would say I'd take gold.

Everything is distorted, and it's a relative game. Looking at the fundamentals of the world, including the quantity of money, the magnitude of debt as a percent of GDP, the low economic potential and the mad frame of mind of central bankers and their intellectual dishonesty, I would own gold.

Tuesday, February 23, 2016

Everyone is getting rich except.......

The Davos World Economic Forum crowd are symptomatic of the unholy dynamics between big government, big business, and big media. As someone said, “They all benefit by the billions of dollars from this partnership, and it’s in all of their interests to protect one another. It’s one for all and all for one. It’s a heck of a filthy relationship that makes everyone filthy rich — everyone except the American people.”

Naturally, I agree with the above observations about the filthy relationship between big government, big business, and big media. I would add to this triumvirate “big academics,” Ivy League type of educational institutions, and central banks around the world. “In Davos the croupiers break bread with Authority.”

Nietzsche had a point when he wrote, “There are horrible people who, instead of solving a problem, tangle it up and make it harder to solve for anyone who wants to deal with it. Whoever does not know how to hit the nail on the head [including central bankers – ed. note] should be asked not to hit it at all.”

I hope my readers had a better start in 2016 than stock markets around the world

Tuesday, February 16, 2016

Wait for a spring rally before selling short

The market near term is very oversold. I think a rebound is overdue. We could get a spring rally, new new highs. I would wait for a rebound before selling or selling short.

I believe that the global economy is in a recession already. And I believe the political background in the U.S. is also going to create a lot of uncertainty because the two leading candidates are outsiders of the political establishment- Bernie Sanders and Donald Trump- and that may create further tensions within the financial service industry.

Tuesday, February 9, 2016

The Davos establishment are misinformed

Don’t listen to the people in Davos. This is the establishment. They all lie, they are all misinformed, they all pursue an agenda. So don’t even listen to them. These are the same people that two years ago told the world that China was growing rapidly and expanding and so on. So their credibility is undermined.

Tuesday, January 26, 2016

Tuesday, January 19, 2016

Gloom Boom Doom January 2016 update

Technology changes nowadays at breakneck speed. Just remember that 90% of Americans had landlines 10 years ago. Now, only half do.
RCA was between the 1920s and the 1960s a huge success story and this was also reflected in its stock price performance between 1925 and 1929. In the 1960s it began to fade away.

I do not wish to discuss here the merits of Apple as an investment. However, given the history of RCA (between the peak in 1929 and the low in 1932 the stock declined by more than 90%), and the stock price history of subsequent technology leaders, I would rather avoid the stock than be a shareholder.

Actually, Apple and also the FANG stocks (Facebook, Amazon, Netflix, Google), not only reminds me of RCA, but also of the nifty fifty stocks in the early 1970s about which I have written before. In the 1973/74 bear market, Polaroid, Eastman Kodak, Avon and Xerox cratered by between 70% and 90% (Polaroid and Eastman Kodak went bankrupt in recent years).

As Oded Galor and Omer Moave explained in the Quarterly Journal of Economics in 2002, “It is not the strongest who survive, nor the most intelligent, but the most responsive to change.” Facebook, Amazon, Netflix, Google and Apple are all great companies, however, investors should remember that for every big winner there are lots of companies which vanish or there are companies whose stocks perform poorly despite being successful (Yahoo, Yelp, Twitter are examples).

I read in Barron’s that none of Wall Street’s top strategists thought that the market could fall in 2016. According to Barron’s, based on these strategists’ mean forecast, the Standard & Poor’s 500 index will end next year at 2220. [The same strategists predicted that the S&P would close in December 2015 at between 2,200 and 2,350.]

I find this optimism quite remarkable for a number of reasons. Whereas the S&P 500 is basically flat for the year the average stock in the US - as represented by the Value Line Arithmetic Index - has performed poorly since early 2014 and it is down by 11% since the April 2015 high.

Fascinating is also the fact that the shares of some of the financial institutions these optimistic forecasters and cheerleaders work for have performed miserably Franklin Templeton (BEN) reached a high of $58 in December 2014. It is down 37% since then and the stock is no higher than it was in early 2011.

The bullishness among fund managers and strategists does not surprise me though. I know personally several strategists who were maximum bullish as the financial institutions they worked for went bankrupt or had to be bailed out. Moreover, most forecasters believe in the omnipotence of Miss Yellen and her great skills as an economist and forecaster (good luck to them). It is therefore natural that they will always be optimistic.

I am enclosing an essay by my friend Kenny Schachter about Vito Schnabel’s new gallery in St. Moritz, and a brief summary on “Austrian Investing” by my friends at Incrementum AG.

Most investors will think that 2015 was a waste of time because no asset class really worked well (actually most investments lost money). However, as August Rodin wrote, “Nothing is a waste of time if you use the experience wisely.”

Finally, as people wish you a Happy New Year remember that “people forget years and remember moments” (Ann Beattie) and that as La Rochefoucauld wrote, “A true friend is the most precious of all possessions and the one we take the least thought about acquiring” – sadly so, I might add.

I wish you all, my readers, incredible moments in 2016 with your families and friends, and I thank you for your continuous support and friendship. 

Tuesday, January 12, 2016

Stocks can drop 40% from here

For the last 12 months all asset classes have performed poorly with the exception of Bitcoins.

I think most stocks will drop between 20 to 40 percent and that would seem to me conservative.

Tuesday, January 5, 2016

Marc Faber buys US treasuries

Look at the yields of European bonds compared with U.S. bonds. I see France yielding 0.97% on the 10-year, Germany yielding 0.63%, Italy yielding 1.68% and the U.S. 10-year yielding 2.26%. 

What would you rather own? A 10-year U.S. Treasury or Italian bonds?

The central banks have distorted any price mechanism. But in this environment of distorted prices, you can say something is relatively inexpensive and something is relatively expensive. U.S. bonds look relatively inexpensive, so I bought some 10-year Treasury's.