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Marc Faber Warns "Insiders Are Selling Like Crazy... Short US Stocks, Buy Treasuries & Gold"
Beginning by disavowing Mario Gabelli of any belief that rising stock prices help 'most' people ("Fed data suggests half the US population has seen a 40% drop in wealth since 2007"), Marc Faber discusses his increasingly imminent fears of the markets in this recent Barron's interview.
Quoting Hussman as a caveat, "The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak. There's no calling the top," Faber warns there are a lot of questions about the quality of earnings (from buybacks to unfunded pensions) but "statistics show that company insiders are selling their shares like crazy."
His first recommendation - short the Russell 2000, buy 10-year US Treasuries ("there will be no magnificent US recovery"), and miners and adds "own physical gold because the old system will implode. Those who own paper assets are doomed."
Via Barron's,
Faber: This morning, I said most people don't benefit from rising stock prices. This handsome young man on my left said I was incorrect. [Gabelli starts preening.] Yet, here are some statistics from Gallup's annual economy and personal-finance survey on the percentage of U.S. adults invested in the market. The survey, whose results were published in May, asks whether respondents personally or jointly with a spouse have any money invested in the market, either in individual stock accounts, stock mutual funds, self-directed 401(k) retirement accounts, or individual retirement accounts. Only 52% responded positively.
Gabelli: They didn't ask about company-sponsored 401(k)s, so it is a faulty question.
Faber: An analysis of Federal Reserve data suggests that half the U.S. population has seen a 40% decrease in wealth since 2007.
In Reminiscences of a Stock Operator [a fictionalized account of the trader Jesse Livermore that has become a Wall Street classic], Livermore said, "It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight." Here's another thought from John Hussmann of the Hussmann Funds: "The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak. There's no calling the top, and most of the signals that have been most historically useful for that purpose have been blaring red since late 2011."
I am negative about U.S. stocks, and the Russell 2000 in particular. Regarding Abby's energy recommendation, this is one of the few sectors with insider buying. In other sectors, statistics show that company insiders are selling their shares like crazy, and companies are buying like crazy.
Zulauf: These are the same people.
Faber: Precisely. Looking at 10-year annualized returns for U.S. stocks, the Value Line arithmetic index has risen 11% a year. The Standard & Poor's 600 and the Nasdaq 100 have each risen 9.4% a year. In other words, the market hasn't done badly. Sentiment figures are extremely bullish, and valuations are on the high side.
But there are a lot of questions about earnings, both because of stock buybacks and unfunded pension liabilities. How can companies have rising earnings, yet not provision sufficiently for their pension funds?
Good question. Where are you leading us with your musings?
Faber: What I recommend to clients and what I do with my own portfolio aren't always the same. That said, my first recommendation is to short the Russell 2000. You can use the iShares Russell 2000 exchange-traded fund [IWM]. Small stocks have outperformed large stocks significantly in the past few years.
Next, I would buy 10-year Treasury notes, because I don't believe in this magnificent U.S. economic recovery. The U.S. is going to turn down, and bond yields are going to fall. Abby just gave me a good idea. She is long the iShares MSCI Mexico Capped ETF, so I will go short.
...
What are you doing with your own money?
Faber: I have a lot of cash, and I bought Treasury bonds.
...
Faber: I have no faith in paper money, period. Next, insider buying is also high in gold shares. Gold has massively underperformed relative to the S&P 500 and the Russell 2000. Maybe the price will go down some from here, but individual investors and my fellow panelists and Barron's editors ought to own some gold. About 20% of my net worth is in gold. I don't even value it in my portfolio. What goes down, I don't value.
...
Which stocks are you recommending?
Faber: I recommend the Market Vectors Junior Gold Miners ETF [GDXJ], although I don't own it. I own physical gold because the old system will implode. Those who own paper assets are doomed.
Zulauf: Can you put the time frame on the implosion?
Faber: Let's enjoy dinner tonight. Maybe it will happen tomorrow.
...
There is a colossal bubble in assets. When central banks print money, all assets go up. When they pull back, we could see deflation in asset prices but a pickup in consumer prices and the cost of living. Still, you have to own some assets. Hutchison Port Holdings Trust yields about 7%. It owns several ports in Hong Kong and China, which isn't a good business right now. When the economy slows, the dividend might be cut to 5% or so. Many Singapore real-estate investment trusts have corrected meaningfully, and now yield 5% to 6%. They aren't terrific investments because property prices could fall. But if you have a negative view of the world, and you think trade will contract, property prices will fall, and the yield on the 10-year Treasury will drop, a REIT like Hutchison is a relatively attractive investment.
...
Faber: The outlook for property in Asia isn't bad because a lot of Europeans realize they will need to leave Europe for tax reasons. They can live in Singapore and be taxed at a much lower rate. Even if China grows by only 3% or 4%, it is better than Europe. People are moving up the economic ladder in Asia and into the middle class.
Are you bullish on India?
Faber: I am on the board of the oldest India fund [the India Capital fund]. The macroeconomic outlook for India isn't good, but an election is coming, and the market always rallies into elections. The leading candidate is pro-business. He is speaking before huge crowds.
In dollar terms, the Indian market is still down about 40% from the peak, because the currency has weakened. In the 1970s, stock market indexes performed poorly and stock-picking came to the fore. Asia could be like that now. It is a huge region, and you have to invest by company. Some Indian companies will do well, and others poorly. Some people made 40% on their investments in China last year, but the benchmark index did poorly.
I like Vietnam. The economy has had its troubles, and the market has seen a big decline. I want you to visualize Vietnam. [Stands up, walks to a nearby wall, and begins to draw a map of Vietnam with his hands.] Here's Saigon, or Ho Chi Minh City, the border with China, and the Mekong River. And here in the middle, on the coast, is Da Nang.
...
Faber: I recommend shorting the Turkish lira. I had an experience in Turkey that led me to believe that some families are above the law. When I see that in an emerging economy, it makes me careful about investing.
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It is a short term hedge.
"No faith" is an exaggeration. Little faith would have been better used.
Insiders are always selling. All I know is it is dangerous as hell to short stocks with all these buybacks. As soon as the stocks dip the companies start buying. When these companies run out of cash then maybe you could short their stocks, but you have to be a glutton for punishment if you are going to short the stocks of companies flush with cash and formal buyback programs.
Insider selling...is that like when miners and coin dealers sell their production and inventory?
+ 1000 to PowerPlayer: "All I know is it is dangerous as hell to short stocks with all these buybacks."
Honestly... who gives a rats ass what someone who needs attention has to think?... as if his opinion is any better than mine... and if it was ...would he tell me? Attention seeking whores ...all of them
his opinion is thousands of times better than yours; because he's a serious student of the subject, (markets), because he has a lot of experience, and because he's somewhat networked; eg. he hangs with other people who know more than we do.
ok.... follow your own logic.. if you really had an original thought, based on experience, with a certain amount of certitude.... why share with the world? If im right, Im right... why do I give a shit about you or anyone else? unless I'm getting paid to say it or... Im an attention seeking whore.
You may be. He isn't.
he manages money bro
and for the love of Pete, would you learn something already, shit Faber only got magna cum laude at U Zurich, at age 24, knows both Keynes/MMT and REAL ECONOMICS: http://youtu.be/H0sS6a9RW2E
If you get through that, hit up Whalen next, before you jack one of his threads too: http://youtu.be/Rj4aQ_zyXLM
So, do we have Alex Jones up next?
Please clean the corzines out of the Turkey before you stuff it.
Isn't paper gold essentially the same thing as Bitcoin? Real but fake.
So what makes Bitcoin any more or less valuable than Twitter, Facebook etc.? I realize those that got in early are now virtually rich, but don't understand its true value.
It doesn't have any true value. Many, many things have gone up and down in the same time frame that you could have gotten rich on; you just happened to hear about this one; and of course, hindsight is useless.
The value of Bitcoin is the energy it takes to decrypt bitcoins and the infrastructure to do so. Also, the middle man is taken out of the equation (banks). The technology alone could be the value.
Eventually having sufficient computational power to crack PGP could be the value.
YOu'd have to turn every atom on Earth into a processor to even try it & then every time someone adds 1 bit more to a pgp key, you'd double the processing power needed to crack that key.
Seems to me that you are making my point. Not trying to be argumentative, just saying that would be the value of the network, essentially hacking the Internet. Can you disprove the thesis? In what, 30 years, maybe 50 when we can run processes on chlorophyll.
Seems I'm disproving your point. Any platform able to try to crack PGP could be used to run PGP so it would be even faster & keysizes could keep increasing therefore, as to your point, no value would happen from cracking PGP because it would keep evolving faster than cracking platforms & strategies.
yes, sure, production cost with a modifier,
tis value
... or
consumers impart value up the chain of production, if they mark it lower, miners make less, can and will turn losses (get non/hostile consolidated)
The "value" in the middle man = the combined profits of Visa/Mc/Amex
He's perma-right. His timing is just off.
A little excitement goes a long way....
http://www.cnbc.com/id/101370984
Don't know about you lot, but I get leery when Billionaires dispense free advice publicly.
Somehow it reminds me of the Squid (GS) advising their clients to do something, and then betting against them.
"No fate but the one we make" means you gotta think for yourself, not rely on some billionaire to help you "front run" anything.
I don't understand how he says he has no faith in paper money or paper assets while thinking it is a good idea to buy 10 year T-bonds. are those not paper too?
In the long run it may be the case, but Faber doesn't simply invest for the long term. He knows markets have their rallies, and best to take advantage of the rallies in certain assets. He has short term, medium, and long term strategies.
yah, he thinks fiat = Ts (it does)
but NEXT crash means all bid safety in US
then Cbers cross hendry's rubicon, then Rogers and you can short Ts
Agree Mark. This will be the year for precious metals......And the smart $$is dumping stocks to buy it......
Keep stackin......The Great reset is coming. The only way to get out of this Debt is devaluation of currencys not to mention confiscation
of our 401k's and pensions coming.....Bastards....
The way the market is going straight up from a V bottom after a pathetic one and a half day sell off does not seem indicative of massive "insider" selling.
Retail is not buying the shit out of this market, well they are, but they are not the ones really moving it.
Tomorrow when whatever the FED says causes the ES to go up 50 points in under 50 milliseconds what will he say then?
What about next month as we trade through 1900?
In DEC will he be saying the same thing as they are trading 2500?
"So, do we have Alex Jones up next?"
I wish. That would be funny as hell to see Alex Jones totally flipping out and screaming about how the market is going to crash. Then it crashes.
Someone should tell Mr. Faber that "Old Guys Rule!" has been displaced by "Chatham House Rules!"
Altucher 20,000!
I aks L Williams a question once....
I asked 'Pastor...'?
He replied....'No...the Minestrone was quite enough'.
Unfortunately, there are several families in EVERY country that are above the law.
So if paper assets are not the place to be why is he buying 10 year treasuries? Don't quite get that one.
"Faber: The outlook for property in Asia isn't bad because a lot of Europeans realize they will need to leave Europe for tax reasons. They can live in Singapore and be taxed at a much lower rate. Even if China grows by only 3% or 4%, it is better than Europe..."
What a sad little bunch... How about living where you feel good, because you like it there, instead of running from taxes all your life? Money is worthless unless you can enjoy it...
And China is better than Europe for living? LOL!!!!
<-- Money
<-- Quality of life
When you have wealth like Faber, you "reside" where tax laws are favorable and live anywhere you want.
It's stupid to invest in something like Hutchison Port Holdings Trust, or any other company that invests in real estate for that matter; when you can go out and buy some land and own it yourself.
Could You Use italics too! I'm tired from your font-lympics.
"Beginning by (disavowing) disabusing Mario Gabelli of any belief..."
I couldn't figure out what the heck you were talking about, at first.
Faber lastly mentions Vietnam as a favored region to consider for future investment. I've been interested in possibly getting a manufacturing facility going over there. China labor costs are rising and Vietnam labor costs have not risen as much. In addition, the education level of the workforce is higher than the surrounding region. I'm assuming that Marc was talking about the investment opportunity of Vietnam. However, based on his past comments he could have just been referring to other reasons to favor Vietnam.
http://wallpaperus.org/vietnamese-4416x3312-wallpaper-2357403/