Monday, June 18, 2007
More on Marc Faber
I missed this article from May 23 about Faber's recent recommendations - some on currency, but also some on commodities, e.g. gold versus oil.
Contrarian update
Let's take a look at the 6 contrarians favoured by Investment U:
Jim Rogers reportedly (today) likes farmland in Latin America, because of the water supply (I think Bill Bonner has gotten into this, too)
Marc Faber is sounding very cautious and cash-oriented at the moment, though I have previously quoted a report of his investments
John Templeton is quoted as stating the principle “invest at the point of absolute pessimism,” a point which surely hasn't yet been reached
Sam Zell has sold a real estate business (Equity Office Partners) to Blackstone - which makes the Chinese a part owner of New York, and the Daily Reckoning thinks Zell did rather better out of the deal than Blackstone. Zell is reportedly buying the Tribune media group
Eduardo Elsztain is in Argentine real estate
George Soros' recent portfolio is reported here and the same source reports his purchase of rail companies recently - an indication of moving towards more conservative value investing?
... and Steve Sjuggerud, also mentioned in the Investment U article that named the above, is tipping shares in a gold mining venture.
Jim Rogers reportedly (today) likes farmland in Latin America, because of the water supply (I think Bill Bonner has gotten into this, too)
Marc Faber is sounding very cautious and cash-oriented at the moment, though I have previously quoted a report of his investments
John Templeton is quoted as stating the principle “invest at the point of absolute pessimism,” a point which surely hasn't yet been reached
Sam Zell has sold a real estate business (Equity Office Partners) to Blackstone - which makes the Chinese a part owner of New York, and the Daily Reckoning thinks Zell did rather better out of the deal than Blackstone. Zell is reportedly buying the Tribune media group
Eduardo Elsztain is in Argentine real estate
George Soros' recent portfolio is reported here and the same source reports his purchase of rail companies recently - an indication of moving towards more conservative value investing?
... and Steve Sjuggerud, also mentioned in the Investment U article that named the above, is tipping shares in a gold mining venture.
Bulls AND bears buy bargains
If you read the IU article linked to the end of the previous post, you'll see one of the fabulously successful contrarian investors is John Templeton. You'll also see that the foundation of his fortune was investing in low-priced shares in 1939. The macro view DOES have a bearing on investment decisions.
Earlier, I quoted the new Chinese owner of the ThyssenKrupp steelworks, who expects the steel market to collapse again sometime and this is one reason why he bought the works at bargain cost - to survive when others go under because of debt.
Speaking of debt, Bill Bonner opined this week:
A credit expansion is always followed by a credit contraction. And this credit expansion has led to the world’s first, and biggest, planetary bubble. When it corrects, it will be the world’s first, and biggest, planetary bust. So keep your eyes on our Crash Alert flag, dear reader. We may be early. But we won’t be wrong.
Earlier, I quoted the new Chinese owner of the ThyssenKrupp steelworks, who expects the steel market to collapse again sometime and this is one reason why he bought the works at bargain cost - to survive when others go under because of debt.
Speaking of debt, Bill Bonner opined this week:
A credit expansion is always followed by a credit contraction. And this credit expansion has led to the world’s first, and biggest, planetary bubble. When it corrects, it will be the world’s first, and biggest, planetary bust. So keep your eyes on our Crash Alert flag, dear reader. We may be early. But we won’t be wrong.
Ignore the bulls AND the bears?
A stimulating article from Investment U about how some of the greatest investors admit they can never predict what the market will do. Their strategy is to buy businesses whose shares are worth much less than the assets, then sell when the share price catches up with the asset value.
I suggest you add Investment U to your favourites, for a good read round. And have a look at today's IU article on 6 top contrarian investors.
I suggest you add Investment U to your favourites, for a good read round. And have a look at today's IU article on 6 top contrarian investors.
Sunday, June 17, 2007
A cheerfully dissenting view
Rachel Beck of the Associated Press is determined to see the sunny side, quoting past history to show that interest rate hikes don't need to mean stock drops. And if investors' mood is less bullish, that means buying opportunities come up. And as long as the average yield on the S&P 500 is higher than that on Treasuries, etc.
However, what will the average yield on stocks be, when consumers buy fewer goods and services? And shouldn't the yield be significantly higher, to compensate for investor risk? And how long does it take for a less bullish mood to end? These soothing words don't quite reassure me, somehow.
However, what will the average yield on stocks be, when consumers buy fewer goods and services? And shouldn't the yield be significantly higher, to compensate for investor risk? And how long does it take for a less bullish mood to end? These soothing words don't quite reassure me, somehow.
The Sunday Telegraph gets bearish
Looking at the recent fortunes of US Treasury bonds, "Sunday Business" Editor Dan Roberts thinks the turning point has come:
I'm sticking my neck out and saying that the time has come. The writing is on the wall...What follows next may turn out to be mild turbulence or the start of a steeper nosedive. Either way, it seems a prudent time to adopt the brace position...
I'm sticking my neck out and saying that the time has come. The writing is on the wall...What follows next may turn out to be mild turbulence or the start of a steeper nosedive. Either way, it seems a prudent time to adopt the brace position...
How will China dump the dollar?
Peter Schiff says in Friday's Market Oracle that although Alan Greenspan thinks the Chinese must continue to hold US bonds since there is no-one else to sell them to...
...the Chinese do not have to sell, they only need to stop buying and let their existing bonds mature. Then the U.S. government, not the Chinese, will be the ones forced to find new buyers for its debt.
Most of the debt that the Chinese own is short-term. Therefore all the Chinese need to do is simply not re-purchase new Treasuries when the U.S. pays them for their existing notes. Perhaps Greenspan should rent a copy of the 1981 Kris Kristofferson movie “Rollover,” where the fear that Arab countries would not rollover maturing treasuries sent gold prices soaring.
Of course, even if the Chinese decide to cash out, they will be repaid in dollars, for which they will actually have to find buyers.
[...] To expect 1.3 billion hard-working, underpaid Chinese to indefinitely subsidize 300 million wealthy, over-consuming Americans is absurd. [...] When the Chinese finally wake up the American dream will disappear.
Finding someone to accept the dollars sounds a bit easier, especially if you are prepared to be a bit generous in the exchange. If you were the Chinese, what would you do?
Following this line of argument, if there is less demand for US Treasuries, their price drops and therefore their yield (the ratio of interest to purchase price) increases, which means higher interest rates. Which will make many debtors very uncomfortable or insolvent, and which will also force consumers to cut back on discretionary spending.
Lower demand means more unemployment, I guess, and a falling dollar means imports will cost more; also, exports will be cheaper to foreigners, who can therefore afford to pay more, so rasing the cost of those items in dollars. So, slumpflation for Americans?
But if countries across the world have been inflating their money supply to keep pace with the USA, maybe they will deflate in concert, too. So, maybe simply a deflationary slump, a worldwide bust?
I look forward to reading some expert who can explain the least painful way out of this. Breaking up factories to reduce oversupply?
No wonder no-one wants to be the first to burst the balloon.
...the Chinese do not have to sell, they only need to stop buying and let their existing bonds mature. Then the U.S. government, not the Chinese, will be the ones forced to find new buyers for its debt.
Most of the debt that the Chinese own is short-term. Therefore all the Chinese need to do is simply not re-purchase new Treasuries when the U.S. pays them for their existing notes. Perhaps Greenspan should rent a copy of the 1981 Kris Kristofferson movie “Rollover,” where the fear that Arab countries would not rollover maturing treasuries sent gold prices soaring.
Of course, even if the Chinese decide to cash out, they will be repaid in dollars, for which they will actually have to find buyers.
[...] To expect 1.3 billion hard-working, underpaid Chinese to indefinitely subsidize 300 million wealthy, over-consuming Americans is absurd. [...] When the Chinese finally wake up the American dream will disappear.
Finding someone to accept the dollars sounds a bit easier, especially if you are prepared to be a bit generous in the exchange. If you were the Chinese, what would you do?
Following this line of argument, if there is less demand for US Treasuries, their price drops and therefore their yield (the ratio of interest to purchase price) increases, which means higher interest rates. Which will make many debtors very uncomfortable or insolvent, and which will also force consumers to cut back on discretionary spending.
Lower demand means more unemployment, I guess, and a falling dollar means imports will cost more; also, exports will be cheaper to foreigners, who can therefore afford to pay more, so rasing the cost of those items in dollars. So, slumpflation for Americans?
But if countries across the world have been inflating their money supply to keep pace with the USA, maybe they will deflate in concert, too. So, maybe simply a deflationary slump, a worldwide bust?
I look forward to reading some expert who can explain the least painful way out of this. Breaking up factories to reduce oversupply?
No wonder no-one wants to be the first to burst the balloon.
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