Thursday, September 17, 2020

The problem with rising assets is that it may increase wealth concentration.


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Rising wealth concentrations could in turn, increases social tensions, and this social instability can cause further hardships for the populace. It's vital for a society to do what is right and not do things like make the stock markets go up.

Monday, August 24, 2020

We are moving straight into Socialism. Im afraid this will be negative for the US Dollar.

 

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Topics discussed include

-Some stocks have languished. Investors should look at stocks that are depressed. If you had an index of mom and pop stores, it would look disastrous. 

-Recovery inequities in the US have been concentrated in FAANG stocks. Recovery in US markets not representative of the entire market. 

-Gold and Silver has done better than any equities this year. 

-Commodities were in a bear market for around 20 years. After 2011, commodities did not perform well till around 2015. 

-Agricultural and industrial commodities are very depressed. If Central banks print money, purchasing power will diminish. Between 2009 to now, US stocks have performed very well. Emerging markets including India will begin to outperform US markets. 

-Do not think the outperformance of US markets will continue. Banks that ave under-performed globally look attractive

Thursday, August 20, 2020

August 2020 Monthly Report

I have the pleasure to make a small announcement. By now, with the strong performance of Treasury bonds, equities, and especially precious metals, all my readers who even had just a small allocation in gold and silver, have earned far more than the subscription price of this commentary.

Although we gold holders should all be happy about its performance, other assets such as US equities have also done fabulously well and have actually outperformed gold over the long term – this especially if we were to include dividends.

I just read an interview by Kate Welling with Joel Greenblatt, a well-known deep-value investor According to Greenblatt, stocks like Amazon, Google, and Microsoft, all stocks which he holds in his portfolio, were inexpensive.

However, Greenblatt adds that, “it just seems quite unlikely that we have hundreds of companies that will match the performance of the best of all time. But people are giving them advance credit, in terms of their stock valuations, for being the next Amazon, the next Google. So, we are short hundreds of those companies.”

Maybe we are in a period during which a value stock is a company such as Microsoft, selling for 10-times sales and 31-times estimated earnings but not according to my value criteria. Noteworthy is that whereas the tech sector now accounts for 37% of the S&P market capitalization, aggregate sales for the sector make up for only 10% of the index. In other words, the ownership of FAANG and related stocks seems to be an extremely "crowded" trade.

Actually, I believe asset markets reflect closely what is occurring in the world. Take precious metals markets. They are moving up not necessarily because they expect high consumer price inflation but because investors realize that the purchasing power of paper money is being eroded through the excess creation of money and negative interest rates.

Also, a safe assumption is that central bankers around the world will continue to print money. In other words, the central banks' balance sheets will further expand. How does an investor protect himself from this monetary inflation? He seeks refuge in assets, which cannot be multiplied at the same rate that money can be printed, such as precious metals or crypto-currencies. The investor may also choose to move money into assets whose supply cannot be increased at all such as Rembrandt, Picasso, van Gogh, etc. paintings or old stamps.

I concede that precious metals are near-term overbought, and that the bullish consensus is high. But, at the same time, there is huge pool of potential investors which do not own any precious metals at all and could come into the market – most likely at far higher prices.

My advice is to hold a basic allocation to precious metals, and if desired take occasionally trading positions. Should confidence in the system erode (I am surprised there is still any confidence left) it would take little money in the context of the entire size of global financial assets and of the liquidity, which central bankers create, to boost precious metal prices much higher.

Via Gloomboomdoom

Wednesday, April 29, 2020

Saturday, April 25, 2020

Tuesday, March 10, 2020

The Corona Virus could create a Severe Recession

Last month, I opined that, a severe coronavirus pandemic could tilt the global economy into recession and that therefore, it would be favorable for US Treasuries. Over the last twelve months, the long-term Treasury ETF (TLT) is up 30% and year-to-date 13%. By comparison, the S&P 500 Index is up 6% over the last twelve months, and is down 8% in 2020. US Treasuries remain inexpensive compared to European sovereign bonds and they are a great hedge against a further stock market decline. Near-term, Treasuries are very overbought but I continue to hold them because of my belief that the Coronavirus will tilt the global economy into a serious deflationary recession/depression.

In recent reports I have explained that I was reducing my equity exposure to around 20% of assets and increasing my cash holdings. I want to warn my readers not to be complacent. If the Coronavirus is going to be as bad as I believe it will be, I would not be surprised if all asset prices declined.

Most importantly, I suspect that the Coronavirus could be the event that pricks the monetary-inflationary credit bubble for good, depresses all asset prices, leads to severe economic hardship, and destroys central bankers.

Lastly, remember the words of the late Leon Levy: 
“For most people, the most dangerous self-delusion is that even a falling market will not affect their stocks, which they bought out of a canny understanding of value.”


via gloomboomdoom

Monday, March 2, 2020

QE Infinity - Marc Faber interview in 2020



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Tuesday, February 18, 2020

February 2020 Monthly Market commentary

Marc Faber talks about UBI and the uncertainty in the equity market in the February 2020 Monthly Market commentary

The other day, I came across an essay that aroused my interest because of its title: Universal Basic Income: A Dream Come True for Despots by Antony Sammeroff (he is the author of Universal Basic Income - For and Against. According to Sammeroff, although there are “heated disagreements between economists on just about every issue under the sun, there is probably one point that they are all actually unanimous on. That is the fact that every policy has winners and losers. Given that human wants are infinite but our means towards attaining those wants are limited, policies, by their nature, advantage some groups at the expense of others.”         

In the case of the Universal Basic Income (UBI) one potential drawback would be that the government debt would increase even more than it is currently expanding. I am well-aware that numerous economists including Narayana Kocherlakota have pointed out that the Federal Debt Is Nothing to Lose Sleep Over - because the government can borrow as much from taxpayers as it wants. Kocherlakota argues that, “Policy makers and voters often express concern about the level of the federal deficit, which topped $1 trillion last year, and the national debt, now more than $23 trillion. But, unlike a household that owes money to a bank, the U.S. government has the ability to tax its creditors. This power means that the federal government can afford any level of debt that is owed to American taxpayers.”         

In theory, Kocherlakota’s views are correct. I am less sure that his views work in practice. Moreover, a rising government debt combined with a UBI program would, as Sammeroff explains, “institutionalise the state as each of our patrons — and us as wards of the state. Once this relationship is established, we will enter into a frightening era where the government is our provider and the UBI can easily be weaponized by our rulers to shape us into compliance.”        

Paul Tudor Jones exclaimed recently that, "We’re just in the craziest monetary-fiscal [policy] mix in history. It’s so explosive, it defies imagination.... It’s crazy times…..The train has got a long, long way to go if you think about it.”

I am less sure about for how long the train has to go….. I am therefore reducing my equity exposure.       



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