Monday, July 31, 2017

Stocks are still risky to buy at these elevated levels

The S&P is up 23 percent since January 2016. Gold is up 20 percent and this year, Gold is up 9 percent but the GDX, the Gold ETF is up 80 percent since January 2016.

The risks have increased as stocks have gone up. Don't be overly optimistic. 

If you look at the market, there are lots of stocks that are lower, and significantly lower than they were at the highs. And so, it's not an all-clear signal.

My Asset Allocation Twenty-five percent in real estate; my real estate is mostly in Asia. Twenty-five percent in equities; I have mostly Asian equities. Then I have some precious metal and gold shares. I don't change that asset location a lot, but I am aware that there is a risk because if equities go down, then obviously all my bonds will likely go down.

Monday, July 24, 2017

Thursday, July 20, 2017

Missed opportunity in buying Bitcoins

Bitcoin speculation
“I would be reluctant to hold bitcoin and other cryptocurrencies, but I acknowledge that it was a mistake not to buy bitcoin after they had dropped to around $200-300."

"In my opinion, the people that are really involved in the bitcoin market are the same people that are involved in stocks like Snap, Facebook, Amazon…they are individuals who are involved in the more speculative side of the market."

Government regulations on Bitcoin
“If they become big, it’s not ‘maybe,’ it’s ‘for sure’ the government will regulate them. As soon as something becomes profitable in the U.S., it is subject to regulation and taxation.”

Wednesday, July 19, 2017

Gold prices at an attractive level to buy

On Gold
"We were up last year by around 9% and this year we’re still up 6-7% so it hasn’t been such a bad currency and this is against the U.S. dollar. My view is, of course, the [gold] price will eventually go up much higher. Around this level, it is an attractive opportunity to accumulate."

US Federal Reserve
"I’d like to see the day when they reduce the balance sheet and the market reaction because if stocks go down…I think the Fed will be very reluctant to increase interest rates and even more reluctant to reduce the balance sheet"

“The whole exercise that central banks have begun of accumulating assets on the balance sheet, it cannot end well. It will end in a disaster, we just don’t know when.”

Asset Price Bubble
"We have inflated asset prices and if the asset inflation comes to an end and asset prices decline, I think it will hurt the system.”

US Dollar
“I don’t think anyone should be positive about the U.S. dollar in the long run. I think it will go down against gold.”

Monday, July 17, 2017

Is the time to panic upon us ? Probably not yet

My friend Michael Gayed at Pension Partners recently wrote that many market participants seemingly were simply forgetting that volatility mean-reverts, and that stocks tend to go down much faster than they go up and that “the time to panic is upon us.”

I am not sure that “the time to panic is upon us,” but even if the US stock market were to move higher a change in leadership would not surprise me with FANG type of stocks no longer advancing.

Don’t forget Charles MacKay’s observation that,
“Men, it has been well said, think in herds; it will be seen that they go mad in herds while they recover their senses slowly and one by one.”

Tuesday, July 11, 2017

Monday, July 10, 2017

I do Not believe in the concept of "Central Bank Independence"

My friend Albert Edwards at Societe Generale recently wrote an excellent strategy report.

According to Edwards, “While politics in the West reels from a decade of economic crisis and stagnation, asset prices continue to surge on the back of continued rapid growth in G3 QE.
In an age of ‘radical uncertainty’ how long will it be before angry citizens tire of blaming an impotent political system for their ills and turn on the main culprits for their poverty – unelected and virtually unaccountable central bankers? I expect central bank independence will be (and should be) the next casualty of the current political turmoil.

Personally, I do not believe that there is really such a thing as “central bank independence.” Furthermore, the financial and real estate sector and wealthy people in general are always highly supportive of expansionary monetary policies. It lifts their asset prices and wealth. Like Edwards, I also condemn the “monetary madness” of central banks but I accept that there were then, as there are now, mitigating circumstances.

Edwards further opines that, the “Evidence of the impact of monetary madness on assets prices is all around if we care to look. I read that a parking spot in Hong Kong was just sold for record HK$5.18 million ($664,200). What about the 3.5x oversubscribed 100 year Argentine government bond? Sure, everything has a market clearing price, even one of the most regular defaulters in history. But what concerned me most about the story was it was demand from investors (reverse enquires) that prompted the issue. Is it just me or can I hear echoes of the mechanics of the CDO crisis? ……. But no one cares when the party is still raging and investors, drunk with the liquor of loose money, are blind to the inevitable catastrophe that lies ahead.

Edwards makes a good point. “Monetary madness,” as he calls it has fueled little consumer goods price inflation, so far, but a colossal asset bubble around the world. The suppression of interest rates (particularly so in Japan and the Eurozone) have also compressed the interest rates on junk bonds to extremely low levels. These securities are bought by investors that are desperate for higher yielding fixed interest securities.

Concerning the 100-year Argentinian bond though, Philip Grant of Grant’s Interest Rate Observer had this to say: “Eight times in its 194 year financial history has Argentina defaulted on its borrowings, most recently in 2014 amidst its dispute with creditors from its prior episode of financial ruin in 2001. At its historical pace, the soon to be-issued 7.125s of 2117 (priced at $90 to yield around 7.92%) will default more than four times over before that so very-distant prospective maturity date.”

via gloomboomdoom

Thursday, July 6, 2017

Wednesday, July 5, 2017

Invest in equities but beware of an even bigger financial crisis

I don't rely on Central Bank forecasts. 

I'm 71 and for sure in my lifetime, unless I have an accident tomorrow, I will see another financial crisis and a massive one.

All I want to say is, we have a colossal credit bubble in the world. Can it expand? Yes, but it cannot expand forever. One day there will be a limit and one day there will be another huge crisis because the debt level today is higher than it was in 2007.