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Faber To Shiller: “You Keep Your U.S. Dollars And I’ll Keep My Gold”





 

“Everyone should keep gold in their portfolios” as the precious metal will be able to offer value to investors even in a worst-case scenario, said Marc Faber, the publisher of the Gloom, Boom & Doom report. "In the worst case scenario, in the systemic failure that I expect, it would still have some value,” Faber, who is also the founder and managing director of Marc Faber Ltd., said today at an event hosted by Evli Bank Oyj in Helsinki. Faber said his outlook was so bleak that he is “hyper bearish”. He joked that “sometimes I’m so concerned about the world I want to jump out of the window.”.. In response to a question from Yale University’s Robert Shiller querying the recommendation to hold gold, Faber said: “I’m prepared to make a bet, you keep your U.S. dollars and I’ll keep my gold, we’ll see which one goes to zero first.” Shiller, who is the co-creator of the S&P/Case-Shiller index of property values, responded "I'm inclined to think gold prices after this crisis might return to a lower level. Given the low yields of the alternatives [ie, bonds], the valuation of the stock market doesn't look so bad." Faber, whose advice has protected millions of investors in recent years, warned of a global systemic crisis possibly due to massive size of the global derivatives market which is now worth over an incredible $700 trillion. He warned “when the system goes down,” and only plastic credit cards are left, “maybe then people will realize and go back to some gold-based system.”

 
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Frontrunning: January 24





  • When the cash runs out: Nokia to Omit Dividend for First Time in 143 Years (BBG)
  • Passing Debt Bill, GOP Pledges End to Deficits (WSJ)
  • Japan logs record trade gap in 2012 as exports struggle (Reuters)
  • so naturally... Yen at 100 Per Dollar Endorsed by Japan Government’s Nishimura (BBG)
  • Japan rejects currency war fears (FT)
  • In Amenas attack brings global jihad home to Algeria (Reuters)
  • Investors grow cagey as Italy election nears (Reuters)
  • Mafia Victim’s Son Holds Key to Bersani Winning Key Region (BBG)
  • Bernanke Seen Pressing On With Stimulus Amid Debate on QE (BBG)
  • U.S. to lift ban on women in front-line combat jobs (Reuters)
  • Red flags revealed in filings of firm linked to Caterpillar fraud (Reuters)
  • Apple Sales Gain Slowest Since ’09 as Competition Climbs (BBG)
  • Spanish Jobless Rate Hits Record After Rajoy’s First Year (BBG)
  • North Korea Threatens Nuclear Test to Derail U.S. Policies (BBG)
 
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Apple Earnings Shock Offset By Good Cop/Bad Cop Macro Data





While the main topic of conversation overnight was the Apple implosion after earnings (which was mercifully spared inbound calls from repo desk margin clerks who had all gone home by the time the stock hit $460), there was some macro data to muddle up the picture, which, like everything else in this baffle with BS new normal came in "good/bad cop" pairs. In early trading, all eyes were focused on Japan, whose trade and especially exports imploded when the country posted a record trade gap of 6.93 trillion yen ($78.27 billion) in 2012 and the seventh consecutive monthly drop in exports which showed that improved sentiment has yet to translate into hard economic data. Finance ministry data on Thursday showed that exports fell 5.8 percent in the year to December, more than economists' consensus forecast of a 4.2 percent drop. Trade with China was hit particularly hard following the ongoing island fiasco, which means that all the ongoing Yen destruction has largely been for nothing as organic growth markets simply shut off Japan. This ugly news was marginally offset by a tiny beat in the HSBC China manufacturing PMI which came slighly above consensus at 51.9 vs exp. 51.7, the highest print in 24 months, but as with everything else coming out of China one really shouldn't believe this or any other number in a country that will not allow even one corporate default to prevent the credit-driven illusion from popping.

 
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RANsquawk EU Market Re-Cap - 24th January 2013





 
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Guest Post: Do I Have To Report My Offshore Gold...?





As you probably know, in 2010 the US government passed one of the most arrogant, destructive, poorly conceived pieces of legislation in history, now known as the Foreign Account Tax Compliance Act (FATCA). FATCA heaps all sorts of reporting requirements on US taxpayers with foreign financial accounts - in a mind numbing 544 pages... Here’s the bright side of all this nonsense: now that the rules are finally settled, it’s now going to be much, much easier for US taxpayers to open foreign bank accounts. Over the past three years, the opacity of FATCA was too risky for banks. Today, while the final rules are cumbersome, they’re at least settled. So the banks know how to operate. I’m hearing from a number of overseas banker contacts, from Singapore to Panama to Malta, that they’re once again opening their doors to US customers.

 

 
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"Return = Cash + Beta + Alpha": An Inside Look At The World's Biggest And Most Successful "Beta" Hedge Fund





Some time ago when we looked at the the performance of the world's largest and best returning hedge fund, Ray Dalio's Bridgewater, it had some $138 billion in assets. This number subsequently rose by $4 billion to $142 billion a week ago, however one thing remained the same: on a dollar for dollar basis, it is still the best performing and largest hedge fund of the past 20 years, and one which also has a remarkably low standard deviation of returns to boast. This is known to most people. What is less known, however, is that the two funds that comprise the entity known as "Bridgewater" serve two distinct purposes: while the Pure Alpha fund is, as its name implies, a chaser of alpha, or the 'tactical', active return component of an investment, the All Weather fund has a simple "beta isolate and capture" premise, and seeks to generate a modestly better return than the market using a mixture of equity and bonds investments and leverage. Ironically, as we foretold back in 2009, in the age of ZIRP, virtually every "actively managed" hedge fund would soon become not more than a massively levered beta chaser however charging an "alpha" fund's 2 and 20 fee structure. At least Ray Dalio is honest about where the return comes from without hiding behind meaningless concepts and lugubrious econospeak drollery. Courtesy of "The All Weather Story: How Bridgewater created the All Weather investment strategy, the foundation of the "risk parity" movement" everyone else can learn that answer too.

 
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The High Price Of Understated Inflation





The reliable data which policymakers and the public need if effective solutions are to be found is not available. As Tullett Prebon's Tim Morgan notes, economic data has been subjected to incremental distortion; Data distortion can be divided into two categories. Economic data has been undermined by decades of methodological change which have distorted the statistics to the point where no really accurate data is available for the critical metrics of inflation, growth, output, unemployment or debt. Fiscal data, meanwhile, obscures the true scale of government obligations. While he does not believe that the debauching of US official data is the result of any grand conspiracy to mislead the American people; he does see it as an incremental process which has taken place over more than four decades. From 'owner equivalent rent" to 'hedonics', few series have been distorted more than published numbers for inflation, and few if any economic measures are of comparable importance; and the ramifications of understated inflation are huge.

 
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Guest Post: The Hipster Techie Mental Map





We all have inner maps that assign awareness, priority and importance to geographic features. For those who work inside the Beltway, Washington D.C. dominates their mental map of the world. Residents of Manhattan famously regard it as the center of the financial, art, fashion, etc. world. In the hipster techie mental map, Washington D.C. doesn't exist, and New York has a small tech innovation footprint. In this world view, politics, finance and fashion are not what changes the world for the better; only tech does that.

 
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The Business Cards Of The Rich, Famous, And Infamous





In today’s climate of cell phone contacts, Facebook and LinkedIn, business cards may be becoming a thing of the past. Then again, they can still say a lot about you. Whether boilerplate or highly designed, staid or comical, FlavorWire has gathered twenty business cards of fascinating and famous people from Abraham Lincoln to Lady Gaga, Einstein to Lady Gaga, and from Houdini's triangular card to Marc Zuckerberg's "I'm CEO, Bitch!"

 

 
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RANsquawk EU Market Re-Cap - 23rd January 2013





 
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What Really Goes On In China





From a valuation perspective, Chinese equities do not, at first glance, look to be a likely candidate for trouble. The PE ratios are either 12 or 15 times on MSCI China, depending on whether you include financials or not, and do not scream 'bubble'. And yet, China has been a source of worry for GMO over the past three years and continues to be one. China scares them because it looks like a bubble economy. Understanding these kinds of bubbles is important because they represent a situation in which standard valuation methodologies may fail. Just as financial stocks gave a false signal of cheapness before the GFC because the credit bubble pushed their earnings well above sustainable levels and masked the risks they were taking, so some valuation models may fail in the face of the credit, real estate, and general fixed asset investment boom in China, since it has gone on long enough to warp the models' estimation of what "normal" is. Of course, every credit bubble involves a widening divergence between perception and reality. China's case is not fundamentally different. In GMO's extensive discussion below, they have documented rapid credit growth against the background of a nationwide property bubble, the worst of Asian crony lending practices, and the appearance of a voracious and unstable shadow banking system. "Bad" credit booms generally end in banking crises and are followed by periods of lackluster economic growth. China appears to be heading in this direction.

 
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Kashkari Resigns Amid 'Spotty' Fund Performance, Heads Back To Public Office





The ex-back of the envelope TARP calculation "chump" become wood-chopper, turned equity portfolio manager has gone full circle and decided his time is better spent serving the public good once again. As the WSJ reports, Neel Kashkari is considering running for office in California. The napkin-laden chrome-dome has seen his funds suffer from spotty performance since their launch - all underperforming the benchmarks. We can't help but think the timing of his announcement odd given his love affair with Apple and tonight's collapse but that would be harsh judgment on the always self-denigrating 39 year-old. Of course, we will hear the impressive nature of him leaving a well-paid job to run for office as his patriotism runs wild; we are less 'believer'. Still, managing to have your name turned into a noun and a verb is no easy task...

 
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Guest Post: Apparitions In The Fog





After digesting the opinions of the shills, shysters and scam artists, I am ready to predict that I have no clue what will happen during 2013. The fog of uncertainty is engulfing the nation, making consumers hesitant to spend and businesses reluctant to hire or invest. Virtually all of the mainstream media, Wall Street banks and paid shill economists are in agreement that 2013 will see improvement in employment, housing, retail spending and, of course the only thing that matters to the ruling class, the stock market. Even among the alternative media, there seems to be a consensus that we will continue to muddle through and the day of reckoning is still a few years off. Those who are predicting improvements are either ignorant of history or are being paid to predict improvement, despite the overwhelming evidence of a worsening economic climate. The mainstream media pundits, fulfilling their assigned task of purveying feel good propaganda, use the 10% stock market gain in 2012 as proof of economic recovery. The facts prove otherwise... Every day more people are realizing the con-job being perpetuated by the owners of this country. Will the tipping point be reached in 2013? I don’t know. But the era of decisiveness and confrontation has arrived. The existing social order will be swept away. Are you prepared?

 
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Surveying The Wreckage; AAPL Plummets To January 2012 Lows And Still Going





AAPL's after-hours loss in market cap is greater than the market cap of one BlackRock, Starbucks, Target, Costco, or Nike. Down almost 9% from yesterday's close, AAPL is trading down to January 2012 levels (off 35% from its highs) and is now notably less capitalized than the entire European banking system. Of course, this has had serious consequences for the major indices that are trading after-hours (and futures). Futures traded down to the day-session lows before closing but QQQ are now trading at 6-day lows in after-hours...and as S&P futures reopen they are gapping down a little more.

 
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AAPL Meets EPS, Misses Revenues, Fails To Impress With In Line iPhone Sales, Total Cash Grows To $137.1 Billion





The most anticipated earnings release of the quarter has come and it has been a dud, at least judging by the market's expectations and its response. Because while EPS beats just barely (a far cry from the epic EPS beats of Steve Jobs days) coming at $13.81 on expectations of a $13.53 print, revenue outright missed, coming at $54.5 billion on expectations of a $54.9 billion Q1 2013 result. Furthermore, fears about profit margins were proven correct, with total gross profit coming in at $21.1 billion, which alas was 38.6% of revenue, well below the vaunted 40% threshold (as a reference margin was 44.7% a year ago, and 40.0% a quarter ago). And finally, the breakdown by components in the iPhone 5 release quarter was just, well, meh.

 
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