Only Asset Class That is Relatively and Absolutely Depressed is Gold & Silver SharesShare on Facebook Tweet on Twitter
Posted by Marc Faber: The Gloom, Boom & Doom Report
on Monday, 12 January 2015 16:28
In this interview Marc lays out his reasons for an imminent Stock Market Correction/Crash of 30-40%, and why the only sector that is truly beaten down right now are the gold and silver mining shares. Some key summaries of this 13 minute interview are below - Money Talks Editor
When speaking about an imminent stock market correction, Marc Faber argues that since the market hasn't had more than a 10% correction since 2011, it is likely that we will se a 30-40% decline in the not to distant future.
Marc has witnessed many bull markets and crashes in his career. Marc says that bull markets frequently go on for longer than expected, but the current bull market is already very old, and has been going up steeply since 2009 – in other words, more than 5 years old. “The one thing I can say, is that we are in a aging bull market, and the recovery has lasted longer than the typical recovery phase over the past 100 years.”
We ask Marc if the Fed's current slowdown in tapering will be reversed in a stock market correction? Marc points out that whenever there is a problem with liquidity in the markets (1988, 2000, 2007), the Fed has stimulated the economy by injecting liquidity, so it's not unlikely that the Fed will again try to support assets markets. The problem is when this goes on long enough, numerous assets aren't affordable for the majority of people. The impact of this may be negative for the economy, because some asset prices may rise disproportionally in comparison to other prices.
On the multi year low in mining equities, Marc says that general assets are very high right now. And the only asset class that in Marc's view are beaten down now are the gold and silver mining shares. When looking at the Dow Jones Index in comparison to the GDXJ(junior gold mining stocks index), the underperformance from the GDXJ has been colossal. As a contrarian or as a value investor, Marc sees reasonable value in the gold mining stocks right now. Government bonds and other assets are essentially inflated, but the gold mining stocks are deflated.
Speaking on the influx on gold into Asia... Marc thinks it's an interesting situation, because in the west we have rumors of central bank's manipulation of the gold market to keep the price depressed. Marc believes that these rumors are insensible – the West should want to sell their gold at a high price, not at a low price point.
Finally, in the last 20 years, there has been a huge increase of wealth in Asia. The increase in gold purchases in Asia, comes from a growing population, and a population which is increasingly affluent. Marc says that in terms of the Asian stock markets, they are relatively depressed in comparison to the US stock markets, and there is better value there.
About Marc Faber
Dr Faber publishes a widely read monthly investment newsletter "The Gloom Boom & Doom Report" report which highlights unusual investment opportunities, and is the author of several books including “ TOMORROW'S GOLD – Asia's Age of Discovery” which was first published in 2002 and highlights future investment opportunities around the world. “ TOMORROW'S GOLD ” was for several weeks on Amazon's best seller list and is being translated into Japanese, Chinese, Korean, Thai and German. Dr. Faber is also a regular contributor to several leading financial publications around the world.
How This Great Race to Disaster Finally EndsShare on Facebook Tweet on Twitter
Posted by Bill Bonner & Chris Hunter - Diary of a Rogue Economist
on Friday, 09 January 2015 09:19
The Dow rose 323 points yesterday, or 1.8%.
People come to think what they must think when they must think it. But what do they think now? Why do they think stocks are so valuable?
Apparently, they believe that Janet Yellen, Mario Draghi and Haruhiko Kuroda – the powers that be – will continue to make stocks go up.
The Fed has stopped active liquidity pumping. But it still has its hand on the pump handle, just in case.
The European Central Bank is promising and preparing to pump as soon as it can get the Germans out of the way. And the Japanese – the world leaders in modern state finance – are pumping with both hands.
Gaming the System
Since 2009, the Fed has put more than $3.5 trillion to work on investors' behalf.
This – along with the help of the ECB, the Bank of Japan, the Bank of England, the People's Bank of China, etc. – has helped lift stock markets by $18 trillion.
Richard Russell – Peace Of Mind, Gold & The Erratic Stock MarketShare on Facebook Tweet on Twitter
Posted by Richard Russell via King World News
on Wednesday, 07 January 2015 10:00
With continued uncertainty in global markets, today the Godfather of newsletter writers, 90-year old Richard Russell, covers everything from peace of mind, to gold and the erratic world stock markets. Russell also takes a close look at the importance of January in determining market direction for 2015.
....read it all HERE
Caution Caution Caution The Tide Has Gone OutShare on Facebook Tweet on Twitter
Posted by John Rubino - DollarCollapse.com
on Friday, 02 January 2015 11:07
Scenes From a (Suddenly) Nude Beach
Warren Buffett's classic aphorism "You only see who's swimming naked when the tide goes out" is being tossed around more frequently these days, as the world gets yet another deflation scare. Zero Hedge just published a great piece on this topic, which should be read in its entirety. In the meantime here's a summary of the story with a few added bits.
Let's begin with the common sense premise that overly-easy money sends a false-positive signal to market participants, leading them to buy and build things that maybe shouldn't be bought or built. Then, when money goes back to a more reasonable price, the bad decisions (malinvestment in economist-speak) are revealed and financial turmoil ensues.
Today's situation has its roots in the 1980s, when the developed world got too lazy to live within its means and started borrowing way too much money. It then tried to inflate away its debts by creating a tidal wave of new currency and pushing interest rates down to unnaturally low levels. Flush with extra cash and cheap credit, consumers (especially in the US) bought huge amounts of imported junk. This in turn led China -- the main producer of said junk -- to go on an infrastructure/factory building spree of epic proportions, which shifted into hyper-drive after the 2008 crash. Chinese demand for industrial materials like copper, iron ore, and oil soared, pushing their prices far above historical averages.
This in turn led miners and drillers to mine and drill on an unprecedented scale, which caused the supply of industrial materials to surge. The flashiest case in point is the US shale oil boom, which sent domestic oil production back to levels not seen since Texas' blockbuster oil fields were young.
But it was all a money illusion, and every part of this process has recently hit a wall. Consumers refuse to go more deeply into debt to buy non-necessities, even when money is nearly free. Faced with lower demand and poor cash flow from the past decade's overbuilding, China has tapped the brakes on its infrastructure build-out. The US is trying to stop monetizing its debt, which has sent the dollar through the roof on foreign exchange markets, thus making life even harder for about half the world's population.
As a result of the above, demand for basic materials is returning to normal levels, which, in the face of inflated supply, is tanking prices across the commodity complex.
In other words the tide has gone out, leaving a whole beach full of naked (and unfortunately not very attractive) bodies. Specifically:
Shale oil junk bonds. Back when oil was over $100 a barrel, everybody wanted to lend to drillers, especially in the exotic (and as it turns out fatally-flawed) shale oil sector. $170 billion of energy-related junk bonds are now outstanding, and they are tanking along with the price of oil.