Tuesday, March 31, 2015

Why US Dollar got stronger even with money printing

Well, why did the dollar strengthen amidst the fact that the US has printed money? Well, there are some reasons. 

First of all, maybe the US dollar is not the ugliest among the several sisters, and two, because of the increase in oil production in the United States, the trade deficit has narrowed, and so the dollar can be strong for a while. I don’t think it will last, but the consensus is that the dollar is the strongest currency around. And these other countries, say if Thailand or Singapore or Indonesia would start to print money, then they would weaken their currencies, or that would be the perception.

Monday, March 30, 2015

Anything is possible in Stock market

After 2000, the Nasdaq dropped more than 70 per cent, then the US housing market collapsed for the first time after the Second World War. Never before in the US had housing prices collapsed as it happened in 2007, 2008, and 2009. 

Home prices dropped more than 50 per cent in some of the US markets. And in 2008, oil prices went up to $147 a barrel but within six months it dropped by $32 a barrel in December.

All I want to tell you is that we had a stock market crash in 2007 and 2008 when the Dow Jones dropped by 50 per cent but many financial stocks dropped 90 per cent to 100 per cent because banks had gone bankrupt. When someone tells me markets can't go down, it's ridiculous. Of course, they can go down.

Oil prices have gone down, most commodity prices have fallen 40-50 per cent from their highs. In some markets in Asia, real estate prices have also weakened considerably. Why can't equity markets also drop by 30-40 per cent? 

I would like to see equities down 40 per cent. Then, I would say the stocks are reasonably valued.

Wednesday, March 25, 2015

Marc Faber on what happens if Greece exits EU

The Greece thing is being swept under the carpet. The problems had begun early on and by 2010 the credit outstanding was so large that it would have been very damaging for the banking system in Europe in case they would have written off. But, in my opinion, they should have written off at that time. Greece should have been kicked out of the European Union or some other political solution should have been found at that time. 

Instead, lenders gave more and more money. Greece's economy is not big enough to support $300-billion worth of foreign debt. There is also a geo-political angle to the Greece crisis. The hardliners in the US are very much aware that if Greece leaves the EU, then the Russians will be knocking on the door of Greece or the Chinese will establish naval bases in Greece; remember, Greece is part of the NATO. The Greece issue is more a political thing than economic. 

Economically, it's very clear that Greece will not be able to pay its debts.

Monday, March 23, 2015

India reform expectations may be too high

The problems for India are Indians themselves. The country needs a leader like Narendra Modi, but he needs to implement the reform policies. In my view that has hardly improved because of horrendous politics, bureaucracy and corruption. Reforms may rather disappoint. That's why I said that we are witnessing the beginning of a market correction. The expectations from reforms may meet with disappointment because they have been very high. I don't see foreigners meaningfully increasing  increasing their exposure to India.

Wednesday, March 18, 2015

India's actual growth is 5 percent rather than 8

The Indian economy is doing slightly better than others. But if you analyse the indicators growth would not be 8 per cent, what the government is claiming. I think the Indian economy is growing maximum 5 per cent per annum. 

Look at the current economic environment, exports are not growing strongly, industrial production in the second half of last year was barely up. Hence, I don't think the economy is growing anywhere near 8 per cent. It may be growing at 5 per cent. But when I compare 5 per cent growth with 0 per cent or 1 per cent growth elsewhere in the world, this 5 per cent growth is very good.

Monday, March 16, 2015

Marc Faber zero chances of Fed tightening 2015

I feel the US Federal Reserve will not increase interest rates in June this year because the US economy is not strengthening but actually weakening. 

And what investors frequently overlook is that the US monetary expansion will be for six straight years now and the US bull market will also be more than six year old. The economy is weakening though, the job market is strengthening somewhat, but that's a lagging indicator. It is only the low-paying jobs which are essentially replacing high-paying jobs. The other economic indicators are mostly disappointing. And given the strength of a strong US dollar, I don't think the US Fed will be keen to increase interest rates. Hence, my expectation is of no interest rate increase by the US Federal Reserve for this year.

Thursday, March 12, 2015

Marc Faber feels optimistic on India economic growth

I think that Indian growth will be among the strongest in the world, along with maybe Vietnam and Cambodia. Will it be 6.5 percent or 6 percent or 8 percent, who knows? Also, GDP is not a very relevant statistic in my opinion. More relevant is GDP per capita in real terms, inflation-adjusted.

In general, if you can grow at just 4%, it’s a huge growth rate compared to Europe and the US. So, relatively speaking, I am positive about the Indian economy, but there is a lot of political resistance to implementation of the reforms at the pace Mr Modi would probably like to do and with the intensity he would like to do.

Wednesday, March 11, 2015

Marc Faber on Gossip

Gossip is controversial. Gossip columnist Liz Smith opined that, “Gossip is one of the great luxuries of a democracy. It is the tawdry jewel in the crown of free speech and free expression. You don't read gossip columns in dictatorships.” Other people had different views and were far more critical of gossiping. According to Rita Mae Brown, “Gossip is irresponsible communication,” while Bertrand Russell observed that, “No one gossips about other people's virtues.”

However, since the anthropologist Robin Dunbar maintains that two-thirds of all human conversation is gossip, we need to deal with it as much as we have to accept rumors as part of unofficial channels of communication within political and economic systems that do not provide the information we require.  

For years I have had this nagging suspicion (actually I was convinced) that economic data were being manipulated and I heard countless rumors about the questionable “adjustments” made by the Bureau of Labor Statistics, which were simply concocted to embellish the true state of the US labor market.

Luckily, some people in the know have recently come out and voiced similar concerns about economic statistics published by the government. Jim Clifton, Chairman and CEO at Gallup (a highly reputable organization), recently penned a blog aptly entitled, The Big Lie: 5.6% Unemployment. Clifton writes:

“Here's something that many Americans - including some of the smartest and most educated among us - don't know: The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading.”

Recently a Gauguin painting was sold by the Staechelin Family Trust (old Basel family) to the Qatar State Museum for reportedly US$300 million. My friend Kenny Schachter is convinced that within the next ten years a piece of art will be sold for one billion dollars.          

Pulitzer Prize winning author of children’s books and poetry, Phyllis McGinley opined that, “Gossip isn't scandal and it's not merely malicious. It's chatter about the human race by lovers of the same. Gossip is the tool of the poet, the shop-talk of the scientist, and the consolation of the housewife, wit, tycoon, and intellectual. It begins in the nursery and ends when speech is past.”

However, may I suggest that you gossip “politely” and with “grace” because as Buddha said: “The tongue like a sharp knife... kills without drawing blood.”


Monday, March 9, 2015

India has a huge bureacracy

Basically the current [Indian] government has already implemented numeric reforms and I am sure that Narendra Modi [India Prime Minister] would proceed at a much faster pace and implement further reforms if he could. However, in India we have to deal with an incredible bureaucracy and so it is not that easy to implement everything you want. 

In the US, Ronald Reagan also wanted to cut down the bureaucracy and he only managed to do that to a very small extent. So it is a tough job but I think the overall economy is okay. 

In the meantime, the share market has gone up a lot over the last 12 months and the valuations are in most cases no longer terribly compelling. I just looked at Nestle India , it is selling at close to 50 times earnings. So everything has to move in the right direction to justify these valuations.

Thursday, March 5, 2015

Buy oil for rebound trade and Gold bottoming

We had a very sharp drop [in Oil prices] and markets don't go up in a straight line and don't drop in a straight line so I think we can have a rebound here. Some oil stocks are reasonably valued. 

Most analysts now predict Oil can drop to $20 a barrel whereas a year ago they were all predicting it will go up to $150 a barrel. So there is a chance that oil is kind of bottoming out here. But I wouldnt bet too heavily on an a major low. But I would bet on a rebound. I think oil stocks and oil servicing stocks could rebound.

Equally Gold shares are the most attractive within the equities market. They've been hammered over the last 3 years and are showing signs of bottoming out.

Wednesday, March 4, 2015

Impossible for Greece to pay its Debt

I think the Greek problem is real. In my view, it is less an economic issue than a political issue. Basically the US would hate to see Greece becoming or separating from the EU simply because immediately there would be Russian influence in Greece or Chinese influence, so it is a geopolitical issue more than an economic issue. 

Economically it is very clear. Greece cannot pay its debt, it is impossible, it is mathematically not possible and so a solution has to be found probably a compromise, probably the Greek politicians will be bribed by some handouts or whatever it is and they will continue to muddle through.

The problem is that Greece should never have joined the EU in the first play and when it joined and first problem occurred, which was about four-five years ago, it should have been kicked out right away. Now the problem is not that larger and I would say this is a problem for the global economy. McKinsey recently published a study whereby global debts today are USD 57 trillion larger than in 2007. 

So all we have done is kicked the can down the road and the problems are still there, excessive debt will make it very difficult for the global economy to again grow in a sustainable way.

Monday, March 2, 2015

Vested interests in making sure Greece stays in EU

The Greek problem has been postponed, it hasn't been solved and the problem is really that it has debts, the country with its economy simply cannot service or pay the debts amount which amount to something like  $250 Billion to $300 Billion and the economy is not strong enough to support that. 

Second, in the discussion on Greece what is frequently overlooked for the NATO, EU and the US, an exit of Greece might open up an opening of closer relationship between Greece and Russia or Greece and China, and that the western allies want to prevent at all costs. So I think in the context of Ukraine where the West will have to make concessions that Russia controls Eastern Ukraine including the strategically important cities, at the same time a compromise will be made that Russia stays out of Greece and that more money will be forthcoming from the EU, maybe partly also paid by the US. But strategically speaking NATO, EU and US don't want Greece to leave because it is strategically very important.