Monday, April 9, 2018

Volatility likely to remain high for 2018

Marc Faber discusses about the bubbles that may have popped and recommends a reduction of long stock market positions. Below excerpt from Gloomboomdoom.

In earlier reports I mentioned two conditions that were needed for the formation of a major stock market top: Excessive speculation and heavy participation by the public, and the revelation of a major fraud. The speculation in Crypto-currencies over the last six months fulfills the condition of heavy speculative activity by the public. The potential disclosure of massive irregularities in the online space, and accounting and other fraud at quite a few other companies, crypto currencies, and government agencies are likely to shortly fulfill the condition of fraud disclosure, which usually shakes investors’ confidence badly. [Kindleberger calls the moment where investors realize that the time to withdraw from the market has arrived “revulsion.”]

According to Thomson Reuters, “The overall tech sector now has a 27% weight in the S&P 500, making it by far the largest component.” Therefore, considering all the fundamental and technical factors which could potentially become very negative, I reiterate my recommendation to reduce equity positions. Furthermore, I strongly recommend to underweight FAANG and related stocks, which account for a high percentage of equity index funds’ assets.

Last month, I explained that higher interest rates were far from certain and that Treasuries could rally. I opined that it was possible that higher interest rates already had a negative impact on the over-leveraged and asset-price driven US and global economy.

It is likely that 2018 will bring about plenty of turmoil in asset markets and that volatility will remain very high.

Monday, April 2, 2018

America has lost a lot of prestige due to failed interventions in foreign nations

Marc Faber talks about how the world has moved away from an American facing model. China has been gaining prestige and importance along with a declining US importance to the global economy.

The tariffs are going to backfire on the US very badly because you have to understand that the US was economically very powerful until the early 1980s. The same was the time in the 70s and early 80s. If America sneezes, Asia catches the cold because all the exports went to America. But this is no longer the case nowadays. Take steel. 2% of US steel imports are from China and only 1.5% of Chinese production of steel is exported to the US.  

Even if the US would not buy any steel at all from China, it would not matter to the Chinese. At the time of Davos in February, a Chinese owner of the world’s largest bus company was interviewed and they asked him about US tariffs and chances of trade war with US. He said we really do not care. We export our buses to 150 different countries in the world, what do we care about the American market and that is true for many companies. The American market is no longer that relevant. China exports more to commodity producers than to the US and the same applies to the South Korea.  

What has changed in the last 30-40 years is that whereas Asia and the world was American-centric before, the world has become much more China-centric in Asia and it is a much more multi-dimensional global economy where the US has lost a lot of its importance, relatively speaking. It has also lost a lot of prestige because of their failed interventions in Iraq, in Syria, in Libya, in Afghanistan, everything they touched, they messed up. 

via economictimes

Wednesday, March 28, 2018

On historically low interest rates and world trade

Dr Marc Faber talks about Interest Rates and how they have never been so low for so long.

In terms of interest rates, historically, our standards have been at the lowest level in the history of mankind from say 3000 BC up to now. So, in 5,000 years of history, we have never been this low. In the US, the low for the 10 years treasury was at 1.37% in July 2016 and in Europe, in many cases, there have been negative interest rates.  
Recently, that has moved up a little bit but in Switzerland and in Japan, basically we still have negative interest rates and we have had them essentially for the last eight-nine years. This is a very unusual situation. I do not think anyone could expect interest rate to stay this low for much further. There is a rising tendency but recently the treasury bonds in the US have sold off quite considerably and I believe that we could have one more decline in interest rates as a result of a recession that may happen later on this year or next year. So, I actually went long on some treasury bonds in the US.  

On the original aim of Global Trade and why it may have been unsuccessful for the Western multinational companies.
Concerning global trade, .... the idea was that multinationals in Europe and especially in the US could open up new markets like China and then sell their goods into these markets. But conditions have somewhat changed in the sense that it is the Chinese and other emerging economies that sold their goods into the US. 
So to some extent, it backfired on the US and as you know the US is not the fair player and they reacted negatively. These trade sanctions or trade barriers, in my view are not very negative for China and other countries. Rather they are very negative for the US. This is my assessment of the situation. 

Monday, March 26, 2018

The correction has not happened yet

The Markets may be overdue for a correction

"I was expecting a correction a long time ago. It has not happened but when it happens, it happens in a more severe manner. So far, it has not happened very severely in the US. We are down not even 10% from the January 26 high. A correction would be a 20% decline and the bear market would be something like a 40% decline. It is nothing very serious yet but it may become very serious in future."

via economictimes

Tuesday, March 13, 2018

Marc Faber interview - Geopolitics and Empire

Click here if the video does not play

Topics discussed are
- Stock market 
- Housing and bond bubbles, central bank manipulation, 
- Gold
- Investors should be diversified. 
- Average salaries vs Asset prices
- Investor sentiment 
- US no longer the dominant economy (adjusted for Purchasing power)
- Chinese applying for more patents around the world than the US
- US economy could go into a recession which could trigger a war to divert attention. That is a possibility. In that situation, Physical Gold and crypto currency could be a good thing to own.