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Marc Faber 2010 Outlook: Go For Gold, Oil & Agriculture, But Watch Out For PIIGS & U.S. Equities
By Economic Forecasts & Opinions
Here is the summary and my thoughts on a trio of Dr. Marc Faber's latest interview where he discussed his 2010 outlook on China bubble, sovereign default risk, stocks and commodities.
Faber is most famous for advising his clients to get out of the stock market one week before the October 1987 crash. News just broke that Faber, a famed contrarian investor often known as Dr. Doom, has joined Sprott Inc. SII-T as director and member of the money management firm's audit committee.
Euro Death By PIIGS
Faber believes the countries most likely to blow up are the "PIIGS": Portugal, Ireland, Italy, Greece, and Spain. One or more of them will likely default in the next couple of years, which could mean the death of Euro.
Interest Costs to Triple
According to Faber, the U.S. annual interest costs, currently around 12% of the government's tax revenue, will soar to 35% of tax revenue within five years. This will force the government to cut spending (an unlikely scenario), and/or frantically print more money
U.S. & Japan - Default in 5 to 10 Years
Excessive money printing and debasing of the Dollar would most likely result in the United States defaulting on its debt within 5 -10 years Japan could face the same fate as well. (See more U.S. debt crisis charts from Faber here.)
Note: Jim Rogers sees U.K as in danger of an implosion as well.
U.S. Stocks - Correction Coming
After noting in his January 2010 newsletter that he was bullish on U.S. stocks, Faber changed his mind after participating in Barron's round-table discussion. Faber says the overly bullish consensus worries him.
He now believes a correction in U.S. stocks could come much sooner than most expect as momentum players could "pull the trigger relatively quickly." Faber is now looking at a 5%-10% rate of return for global investors.
Bonds
Bonds could be in for a rebound near term, but longer term, investors should look for exit opportunities in Treasuries.
Note: Jim Rogers also sees the U.S. government bond is overpriced and "in a bubble".
Asia
Asia
Asia is likely to have longer term favorable growth. Faber favors India and Japan. In a December 2009 interview with Economic Times, Faber liked Japan as a contrarian play for 2010.
China Bubble
Faber indicated it is difficult to pinpoint a day when China will implode. But he does not think it will happen right away. However, when it does happen, investors can expect a hit on commodities and emerging markets.
Gold
Gold is going through a correction phase and probably will test the lows of $1,050 or $1,100 levels, but is still a long term buy through exploration companies and physical gold holdings.
Crude Oil
Prices may come off somewhat. Marginal cost of finding oil is around $70. Longer term, prices are expected to continue rising as demand increases from the developing world.
Agriculture Commodities
In the short term, Faber likes wheat as it is "very, very cheap". But he advises against buying the wheat ETFs because they're "very expensive" due to the rollover costs. Instead, he suggests play it through companies with farm land and plantations or potash companies.
China Bubble? Views from Rogers & Mobius
"China Bubble" has been in the media headline a lot lately; whereas in fact, the liquidity bubble created by the central banks' loose money policy could easily trump China as the biggest bubble in the world likely to burst first.
Investment guru Jim Rogers, while acknowledging Shanghai and Hong Kong property is in bubble during a Bloomberg interview today, debunked James Chanos yesterday, as quoted by China Daily, saying:
"China Bubble" has been in the media headline a lot lately; whereas in fact, the liquidity bubble created by the central banks' loose money policy could easily trump China as the biggest bubble in the world likely to burst first.
Investment guru Jim Rogers, while acknowledging Shanghai and Hong Kong property is in bubble during a Bloomberg interview today, debunked James Chanos yesterday, as quoted by China Daily, saying:
"It is absurd to say China is in a bubble when the stock market is 50 to 60 percent below its all-time high....After 300 years of decline everything is coming together for China in the 21st century"
Meanwhile, Dr. Mark Mobius, who oversees $34 billion of developing-nation assets at Templeton Asset Management Ltd., said Jan. 7 the bubble in China’s property market isn’t about to burst, and that
“The Chinese will act rationally and they’re not going to kill the market...There’s still a lot of savings in China. Prices are high but I don’t see a crash.”
"Overinvestment and overbuilding is sometimes a prerequisite of an anticipated mass urban migration such as the one China is destined to experience."
Beijing is taking measures to prevent a bubble-burst predicament ahead of the U.S. and most of the industrialized countries. Unlike Dubai or Enron, the country is in a better position, with tremendous resource at its disposal that could power through a bubble or two.
Moreover, whether there is a bubble in China, as cited here, is still a matter of great debate among market pundits.
My Thoughts on U.S. Equities
The CBOE Volatility Index (VIX) of S&P 500 options fear gauge has crashed more than 63% over the last 12 months and down 18% this month alone, retreating to pre-Lehman levels. Though the VIX index roared 6.14% to 18.66 today, it has trended consistently lower since late 2008. This is causing a great deal of consternation among some investors that the higher investor complacency level is a signal that equity prices are peaking.
The equity market, particularly tech and financials, is quite vulnerable as the current valuation suggests a high earnings expectation, which will most likely disappoint this year in the context of a still hazy global recovery picture, and weak consumer spending. The earnings release and outlook from Citigroup, Inc. (C) & JP Morgan Chase (JPM) and IBM Corp. (IBM), etc. this week do not seem to suggest otherwise.
So, it is quite sufficient to say when complacency and speculation has returned en masse, commodities and emerging markets will likely to be better bets than U.S. stocks and bonds.
And as the famous Wall Street adage goes, “VIX low, time to go”.
Video Source: Yahoo TechTicker
By Economic Forecasts & Opinions
Moreover, whether there is a bubble in China, as cited here, is still a matter of great debate among market pundits.
My Thoughts on U.S. Equities
The CBOE Volatility Index (VIX) of S&P 500 options fear gauge has crashed more than 63% over the last 12 months and down 18% this month alone, retreating to pre-Lehman levels. Though the VIX index roared 6.14% to 18.66 today, it has trended consistently lower since late 2008. This is causing a great deal of consternation among some investors that the higher investor complacency level is a signal that equity prices are peaking.
The equity market, particularly tech and financials, is quite vulnerable as the current valuation suggests a high earnings expectation, which will most likely disappoint this year in the context of a still hazy global recovery picture, and weak consumer spending. The earnings release and outlook from Citigroup, Inc. (C) & JP Morgan Chase (JPM) and IBM Corp. (IBM), etc. this week do not seem to suggest otherwise.
So, it is quite sufficient to say when complacency and speculation has returned en masse, commodities and emerging markets will likely to be better bets than U.S. stocks and bonds.
And as the famous Wall Street adage goes, “VIX low, time to go”.
Video Source: Yahoo TechTicker
By Economic Forecasts & Opinions
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M Faber likes to caress controversial themes.
In Hong Kong he likened the fate of the island,as a future Venisa.
Interesting considerations at the fringe of the herd,and anticipations requiring centuries before proved wrong.
As regards the death of the euro let us see first the cost benefits for the laggards. As far I see any financially weak countries leaving the euro is a strength for the euro.
So what currency do I want to be in?
Dollar, the defualt of euro country, then swith to euros.
chinese currency?
Ireland may not have much gold, but we do produce a massive amount of food, and given the fact that it's always raining, we are ok on the water side of things.
As Marc Faber is often quoted, the price of everthing is messed up. Food production is Ireland's great natural resource and in the medium/longer term, this will afford us a greater amount of protection than all the gold in the world.
Sell everything!
A+ FnA right. maybe quicker?
Moses deliverer of Egypt slaves;
Jesus liberator from bondage of Roman oppression;
The third iteration (invocation) presumes a people in chains.
Black,
White,
Red. Reborn in absolute strength and power to enact judgement. A newborn hebrew of great virtue found among the reeds.
Seraphim Falls. Eloi Arises.
Money, a symbol of power. A symbol of ability.
Representation of attributes of creation.
What is wealth?
Prepare ye, prepare ye...
Proverbs 26:11 -
As a dog returns to its vomit, so a fool repeats his folly
March 27, 1992 by 20th Century Fox -
White men can't jump.
More from WB Yeats ...
TURNING and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
Surely some revelation is at hand;
Surely the Second Coming is at hand.
The Second Coming! Hardly are those words out
When a vast image out of Spiritus Mundi
Troubles my sight: somewhere in sands of the desert
A shape with lion body and the head of a man,
A gaze blank and pitiless as the sun,
Is moving its slow thighs, while all about it
Reel shadows of the indignant desert birds.
The darkness drops again; but now I know
That twenty centuries of stony sleep
Were vexed to nightmare by a rocking cradle,
And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?
WB Yeats was in Love with the Woman who appeared on Irish State Banknotes , alas it was unrequited
www.coinlink.com/Articles/author/peter-symes/
Do not discount deep, proven, age-old wisdom,
The kind that can really move mountain,
That makes man quake in his soul,
That puts fear in the vulgar, and unproved.
Knowledge, power, and above all virtue.
When all men, regardless of personal purity, can see
that touching a garment of an absolute and pure being,
cuts them to the quick. Pierces them with pure judgement.
The reason to exist. When violent nature has consumed
the prideful gem, the well-spun fabric, the unrusted metal.
Virtue, the uncollectable commodity. Untradeable, and
beyond acquistion of evil. It defies gathering, defies
reduction, defies material stockpile.
It is, or is not. And lowly appraised, is the greatest
of ALL.
He that is servant unto the least of these, shall be
Master of all. Everything else vanishes, the only and
most enduring is VIRTUE. WILL AND PLEASURE OF THE CREATOR.
Hmm... One day I wake up and think US market will go up 2010, next day I wake up because I hear all the smart people agreening with me and I change my mind. US market go down 2010. Whatever floats your boat man.
Just keep the calendar of Treasury auctions pinned to the wall and remember, when it is time for them to float some bonds, the world is collapsing, and deflation is guaranteed, then once the bonds have gone, the risk trade is back on. What is amazing is how the markets just get bounced around exactly as they want.
Taking the road less travelled...
I still find it funny that greece has the most gold of the pigs and is under the most 'stress'. Ireland should change it's national anthem to "I can't believe the rest of europe can't stop fucking me over".
Of the PIIGS, Greece only has more gold than Ireland. Here are the gold reserves in millions of troy ounces:
Portugal = 12.298
Italy = 78.829
Ireland = 0.176
Greece = 3.614
Spain = 9.054
The biggest gold holders in Europe:
Germany = 109.531
Italy = 78.829
France = 78.301
Russia = 19.733
Netherlands = 19.691
Portugal = 12.298
UK = 9.975