Stocks & Equities

Marc Faber Sees A 1987-Like Crash Approaching

Posted by Zerohedge.com

on Thursday, 10 May 2012 10:20

When given the opportunity to expand on his thoughts, Marc Faber, of the Gloom, Boom, & Doom Report, provides dismally clarifying detail on the state of the world. In this excellent (must-watch on a day when nothing changed but European stocks dead-cat-bounced) Bloomberg TV interview, the admittedly ursine Faber reflects on the US (slowing of revenue growth and the real linkages to European stress) noting that unless we get a huge QE3, there will be "a crash, like in 1987" noting he believes we have seen the highs for the year; on the likelihood of QE3 (agreeing with us that the Fed won't act unless asset markets plunge first); on Greece's exit of the Euro and whether policy-makers can manage the exit properly "bureaucrats in Brussels and the media are brainwashing everybody that if Greece exited the euro, it would be a disaster. My view is the best would be to dissolve the whole euro zone"; on the difference between investment markets and economic reality (thanks to financial repression); and on the global race-to-debase "I do not have a high opinion of the U.S. government, but the bureaucrats in Brussels make the government in the U.S. look like an organization consisting of geniuses. The bureaucrats in Brussels are completely useless functionaries".

To Watch the Video or Read More CLICK HERE

Marc Faber 2009 180



Unscrambling the Euro Eggs

Posted by Bruce Krasting

on Thursday, 10 May 2012 08:57

On April 17 I wrote about a conversation with an individual who lives in Athens. He had this to say about the coming Greek elections:

    “The other parties are communists, radicals and crazies. If they have a hand in the new government, then on May 7 Greece will be forced to take dramatic steps. The whole idea that the country should suffer, so the bankers can get paid will have to change.”

He also said this:

  “The attitude in Brussels and Bonn towards Athens will change after the election as well!”

He had that right, so I called him back to get an post-election update.

BK: Is it true that you will soon spending Drachmas?

Athens: This seems to be the only possible outcome. Germany will no longer support Greece, neither will the IMF.

BK: What would the new Drachma be worth in Euros?

Athens: Far less than the rate that was used to convert Drachma to Euros in 2001. At least 50% less. For Greece, the exchange rate for the Euro will be the key, but you can’t forget that the Drachma will also have a new exchange rate for the dollar.
Greece joined the Euro in 2001 at a fixed conversion of 341Greek Drachmas to the Euro (EURGDR). In the period preceding the link, the USDGDR was 328.

Assume the Drachma floats freely and promptly loses half of its value versus the Euro. The market rate would be EURGDR 682. If the EURUSD was trading at 1.3000 it would mean that the USDGDR would be 568. The GDR would lose half its value against the Euro but it would only lose on 37% versus the dollar. I asked the fellow from Athens about this:

Athens: There is the proof. The Euro is too high against the dollar.

I thought that was an interesting comment. I went back and looked at the original conversion rates to the Euro for France, Italy and Spain and compared them to what the USD exchange rates would be today:




Gold & Precious Metals

John Hathaway Calls a Market Bottom

Posted by Louis James interviews John Hathaway

on Thursday, 10 May 2012 08:49

Dear Readers,

We're continuing with our series of video conversations, as we believe they will be most useful to you while they are fresh. But fear not: if Doug has a "guru moment" or experiences an urgent need to comment on something in the news, we'll step in with his thoughts. Meanwhile, John Hathaway's comments are particularly relevant and reassuring, given the fluctuation we're seeing in gold this week.

Thanks for reading/viewing, and more soon,


Louis James

Senior Metals Investment Strategist
Casey Research

[John Hathaway revealed more valuable insights about the precious-metals market at the Casey Research Recovery Realty Check Summit. Joining him were Doug Casey, James Rickards, John Mauldin, and 27 other financial experts. You can hear all of their presentations – which include timely stock picks and asset-protection strategies – on the Summit Audio Collection.]

Interviewed by Louis James, Editor, International Speculator

Louis James: Ladies and gentleman, thanks for tuning in. We're at the Casey Research Recovery Reality Check Summit. We're talking with John Hathaway, one of the more successful fund investors – institutional investors – in our precious metals field near and dear to my heart. John, can you give us a quick version of what you talked about here, for those who didn't make it to the conference?

John Hathaway: Sure, yes. I think we're at the end of a correction that resulted from the peak last summer. It was overcooked, kind of hyperventilated hysteria over the debt-ceiling talks, the rating downgrade of the US sovereign debt, and I think basically the stocks and the metal had been working off that boiled down to what we now have is a simmer. I think we are at a position where there's not a lot of downside, and I would not be surprised by revisiting the previous highs of $1,900 and maybe even new highs over $2,000 this year.

What will do that is basically – so much of the narrative has been quantitative easing. When Bernanke announced on the 29th of February that they were done with quantitative easing (and if you believe that I've got a bridge to sell you, but for the time being let's assume that there won't be any), I was very impressed that gold did not go to a new low. It printed somewhere below $1,600 at the end of the year, made a couple-of-day swoon, but it didn't go to a new low. And then when the Fed minutes came out it also did not go to a new low, it kind of reiterated what Bernanke said. So the narrative may be changing. I'm not ruling out quantitative easing as a possibility, but there are things out there that gold might be looking at that the CNBC mentality hasn't figured out.

Remember that gold rose for many years before we even heard of quantitative easing; it was in a steady uptrend. So what could those things be? What would take gold – what would be the new headlines that might take gold to higher highs? To me, the biggest thing is that the Federal Reserve has purchased something like 61% of all new Treasury debt in the last year; and if they aren't going to continue that, then what's going to happen to rates?

Louis: Right.

To Read More or Watch the Video CLICK HERE



Stocks & Equities

Metals Down, Miners Up — What It Might Mean

Posted by John Rubino

on Wednesday, 09 May 2012 16:17

Gold and silver are down again today, but the mining stocks are up big. One day does not a trend make, but this is still a possible indicator of several things:

1) The plunge in mining shares has finally gotten the attention of investors who understand that most of these companies are viable and profitable, and that they won’t go to zero. So at some point the downtrend will stop, and though today might or might not be that day, it’s definitely coming. Downside risk, in other words, is now smaller than upside potential.

2) Share buyers are watching the mess in Europe and concluding that austerity is being replaced with monetary and fiscal ease. The European Central Bank will have no choice but to buy up trillions of euros of peripheral country debt to keep the eurozone together — or the currency union will fall apart and former members will go back to their old currencies and devalue aggressively. Either outcome is inflationary and therefore great for precious metals.

CLICK HERE for the 3rd Reason




Is China a Currency Manipulator?

Posted by Aziz Economics

on Wednesday, 09 May 2012 12:28

Mitt Romney thinks so:


    China has an interest in trade. China wants to, as they have 20 million people coming out of the farms and coming into the cities every year, they want to be able to put them to work. They want to have access to global markets. And so we have right now something they need very badly, which is access to our market and our friends around the world, have that same– power over China. To make sure that we let them understand that in order for them to continue to have free and open access to the thing they want so badly, our markets, they have to play by the rules.

    They’re a currency manipulator. And on that basis, we go before the W.T.O. and bring an action against them as a currency manipulator. And that allows us to apply tariffs where we believe they are stealing our intellectual property, hacking into our computers, or artificially lowering their prices and killing American jobs. We can’t just sit back and let China run all over us. People say, “Well, you’ll start a trade war.” There’s one going on right now, folks. They’re stealing our jobs. And we’re gonna stand up to China.”

The theory goes that by buying U.S. currency (so far they have accumulated around $3 trillion) and treasuries (around $1 trillion) on the open market, China keeps demand for the US dollar high.  They can afford to buy and hold so much US currency due to their huge trade surplus with America, and they buy US currency roughly equal to this surplus.  To keep this pile of dollars from increasing the Chinese money supply, China sterilises the dollar purchases by selling a proportionate amount of bonds to Chinese investors.  Supposedly by boosting the dollar, yuan-denominated Chinese goods look cheap to the American (and global) consumer.

First, I don’t really think we can conclusively say that the yuan is necessarily undervalued. That is like assuming that there is some natural rate of exchange beyond prices in the real world. For every dollar that China takes out of the open market, America could print one more — something which, lest we forget — Bernanke has been very busily doing; the American monetary base has tripled since 2008. Actions have consequences; if China’s currency peg was so unsustainable, the status quo would have collapsed long ago. Until it does, we cannot conclusively say to what extent the yuan is undervalued.



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