"The Contrarian Investor" (on Saturday - see sidebar) says sell, too:
"Anyway, we believe that Friday’s stock market rally (in the US) is a good opportunity to liquidate any existing holdings of stocks."
Sunday, August 19, 2007
Doug Casey goes to Argentina
This is getting very 1920s/1930s - Argentina as the home for the jet set. Here's Doug Casey:
...we're at the end of a 25-year boom. It's gone on more than a full generation now. And I'll tell you how it's going to end: It's going to end with a depression, and not just a depression; not just another Great Depression; it's going to be the Greater Depression...
I think what you ought to have is your citizenship in one country, your bank account in another country, your investments in a third, and live in a fourth. You've got to internationalize yourself...
What am I doing about this? I've been all over the world. I guess I've lived in 12 countries now. And out of 175, I've been to most of them, numerous times actually. What am I doing, where do I want to go, where am I living? Well, in New Zealand.... But... the currency has doubled and the real estate within that currency has doubled at least. So I'm getting out of New Zealand. Where am I going now? I'm going to Argentina...
I wouldn't touch Europe with a ten-foot pole...
...everything in Argentina costs between 10% to 30% of what it costs in North America. That's correct. It's that cheap... So you're getting a massive immigration from rich Europeans that can see the handwriting on the wall and like it down there. And I really like it down there. It's just a great society, great society, great place to hang out, prices are right. I mean this can solve most of your investment problems right there, just by transplanting yourself, if you've got some capital.
This may sound like it's only for the really rich, but I have had perfectly ordinary clients sell up their over-priced ordinary British homes and move permanently to the Far East. For personal reasons, I can't be a globe-trotter, but international relocation is happening on a much bigger scale than London to Provence. For a while, I subscribed to one magazine, "International Living", that looks for bargain locations to spend the rest of your life - Panama appears to be a good one, if you dress conservatively and mind your own business.
So although Mr Casey talks dramatically in a non-Brit sort of way, he is backing his judgement with his considerable money; and ordinary types like ourselves currently have options that we could scarcely have dreamed of before WWII. Whether we will always have such options, is another question.
...we're at the end of a 25-year boom. It's gone on more than a full generation now. And I'll tell you how it's going to end: It's going to end with a depression, and not just a depression; not just another Great Depression; it's going to be the Greater Depression...
I think what you ought to have is your citizenship in one country, your bank account in another country, your investments in a third, and live in a fourth. You've got to internationalize yourself...
What am I doing about this? I've been all over the world. I guess I've lived in 12 countries now. And out of 175, I've been to most of them, numerous times actually. What am I doing, where do I want to go, where am I living? Well, in New Zealand.... But... the currency has doubled and the real estate within that currency has doubled at least. So I'm getting out of New Zealand. Where am I going now? I'm going to Argentina...
I wouldn't touch Europe with a ten-foot pole...
...everything in Argentina costs between 10% to 30% of what it costs in North America. That's correct. It's that cheap... So you're getting a massive immigration from rich Europeans that can see the handwriting on the wall and like it down there. And I really like it down there. It's just a great society, great society, great place to hang out, prices are right. I mean this can solve most of your investment problems right there, just by transplanting yourself, if you've got some capital.
This may sound like it's only for the really rich, but I have had perfectly ordinary clients sell up their over-priced ordinary British homes and move permanently to the Far East. For personal reasons, I can't be a globe-trotter, but international relocation is happening on a much bigger scale than London to Provence. For a while, I subscribed to one magazine, "International Living", that looks for bargain locations to spend the rest of your life - Panama appears to be a good one, if you dress conservatively and mind your own business.
So although Mr Casey talks dramatically in a non-Brit sort of way, he is backing his judgement with his considerable money; and ordinary types like ourselves currently have options that we could scarcely have dreamed of before WWII. Whether we will always have such options, is another question.
More on Marc Faber and the bear market
From Friday's Daily Reckoning:
"Excerpts from CNBC-TV18's exclusive interview with Marc Faber:
Q: How do you read the events as they have unfolded in the past fortnight? How do you think this might shape up?
A: Basically as you know, the US market went up until July 16. The Dow peaked out on July 17 above 14,000 and then it started to slide, mainly driven by financial stocks and by what people call a crisis in the subprime lending sector and the CDO and the BS markets. The question obviously is where do we go from here? Is it like 1998, where we dropped first and then recovered strongly towards the end of the year or is it something more serious? I think it's something more serious.
Q: If you had to predict - since your view is bearish, what percentage fall would you expect in emerging market equities over the next foreseeable period?
A: The S&P has a very good chance to decline by 20-30% and the emerging economy stock markets could drop by 40%. That may not mean that the bull market in emerging markets is over for good, because in 1987 we had drops in Taiwan of 50% and then the market went up another four times, so you can have a big correction and still be in the bull market.
But if someone came to me and said what is the upside on the S&P? We had 1,452 where the high was 1,555. I would say the upside and the big resistance in the market is between 1,520 and 1,530 so the upside is limited. But what about the risk?
What I noticed is investors are far more concerned about missing the next leg in the bull market on the upside, than about the risk of losing a lot of money. And I think, gradually this will change and that would mean lower equity prices and also prices of other assets such as commodities can go down substantially and obviously home prices around the world.
Dear Daily Reckoning readers should be aware...this is a downturn that COULD be extremely long and severe."
"Excerpts from CNBC-TV18's exclusive interview with Marc Faber:
Q: How do you read the events as they have unfolded in the past fortnight? How do you think this might shape up?
A: Basically as you know, the US market went up until July 16. The Dow peaked out on July 17 above 14,000 and then it started to slide, mainly driven by financial stocks and by what people call a crisis in the subprime lending sector and the CDO and the BS markets. The question obviously is where do we go from here? Is it like 1998, where we dropped first and then recovered strongly towards the end of the year or is it something more serious? I think it's something more serious.
Q: If you had to predict - since your view is bearish, what percentage fall would you expect in emerging market equities over the next foreseeable period?
A: The S&P has a very good chance to decline by 20-30% and the emerging economy stock markets could drop by 40%. That may not mean that the bull market in emerging markets is over for good, because in 1987 we had drops in Taiwan of 50% and then the market went up another four times, so you can have a big correction and still be in the bull market.
But if someone came to me and said what is the upside on the S&P? We had 1,452 where the high was 1,555. I would say the upside and the big resistance in the market is between 1,520 and 1,530 so the upside is limited. But what about the risk?
What I noticed is investors are far more concerned about missing the next leg in the bull market on the upside, than about the risk of losing a lot of money. And I think, gradually this will change and that would mean lower equity prices and also prices of other assets such as commodities can go down substantially and obviously home prices around the world.
Dear Daily Reckoning readers should be aware...this is a downturn that COULD be extremely long and severe."
Marc Faber: India rather than the USA
Here is a quote from Marc Faber and a bit of bio info, extracted from INR News:
"If a gun were put to my head and I was asked to choose between two options - putting all my assets into the US or into India - I would choose Indian equities, Indian real estate, and Indian art. The reason behind this choice is partly my strong conviction that US assets will continue to decline relative to assets overseas, and partly because I can see that India may be at the beginning of a lasting economic take-off phase" ...
...From 1978 to February 1990, Marc Faber was the Managing Director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, MARC FABER LIMITED which acts as an investment advisor and fund manager.(Marc Faber - A Simpleton's Guide to Economics and Investment Markets, part II )
By INRnews Correspondent
Dr Faber's comments on Indian urbanisation, the need for new infrastructure, and comparison with China, are also very interesting.
"If a gun were put to my head and I was asked to choose between two options - putting all my assets into the US or into India - I would choose Indian equities, Indian real estate, and Indian art. The reason behind this choice is partly my strong conviction that US assets will continue to decline relative to assets overseas, and partly because I can see that India may be at the beginning of a lasting economic take-off phase" ...
...From 1978 to February 1990, Marc Faber was the Managing Director of Drexel Burnham Lambert (HK) Ltd. In June 1990, he set up his own business, MARC FABER LIMITED which acts as an investment advisor and fund manager.(Marc Faber - A Simpleton's Guide to Economics and Investment Markets, part II )
By INRnews Correspondent
Dr Faber's comments on Indian urbanisation, the need for new infrastructure, and comparison with China, are also very interesting.
Saturday, August 18, 2007
Weathering the storm
The bankers have shown their hand - they fear deflation more than inflation. Pumping-in cash and cutting rates will keep us going through the economic squalls that they created by the same lax monetary policy. If you believe the monetarists, there will be a price to pay, but as long as this crisis management succeeds, the damage will be insidious rather than cataclysmic: money will slowly rot.Now that we know the opposition's strategy, what do we do? My guess is, hold cash, wait for further crises of confidence, and buy tangible assets, or assets backed by tangibles, at bargain prices.
That's why I think Buffett and Soros have been so clever in acquiring more rail stock in recent months. Railways are a natural Benjamin Graham choice: mature, income-producing investments. There are big barriers to entry - think of nineteenth-century land speculation and skulduggery, and add-in eco protests, modern politics and the unavailability of coolie labour. Rail has advantages over road, especially as so much freight now is containerised and port-to-city; but from an investor's perspective it is also solidly thing-based.
Other experts are into tangibles also. For example, Marc Faber likes real estate in emerging economies - and possibly in depressed areas of developed countries, and Bill Bonner has farmland in Argentina (the Chinese love beef). And then there's various types of commodity.I think we'll be back to putting money into things we can understand.
Friday, August 17, 2007
Following the markets today
As I hoped and more than half expected, the major Western markets are recovering from some of their fright. The FTSE has passed 6,000 again and at the time of writing, the Dow is back above 13,000. Those chest pains will eventually be laughed off as a bout of indigestion, and it'll be back to the fags and booze after a while.
The subprime mess was well-telegraphed, if ignored by many, and although we still don't know the full cost, it seems that yet again, the central banks are willing to pump money into the system, rather than reform it. Marc Faber's view that the crisis should be allowed to burn through and eliminate some of the players, is too gritty for the banking establishment.
My take on this is that it's an opportunity for those still in the market to quietly come out without panicking everybody else. The rise of the dollar and the temporary sharp falls in precious metals, are reminders that in a crisis, cash is king; though given Ben Bernanke's statement about dropping dollars from helicopters, maybe king for a day.
Risk avoidance leads to stronger dollar
That's the analysis of Kathy Lien at DailyFX.com yesterday:
These days, cash is a valuable commodity since a liquidity crisis means a lack of cash. The sharpness of recent moves and the lack of liquidity have probably pushed more traders to liquidate positions than to add funds. Flight to safety continues to send the dollar higher against every major currency with the exception of the Japanese Yen as more victims of the subprime and liquidity crisis surface.
There's a possibility of an interest rate reduction:
...the biggest question on everyone’s mind is when the Federal Reserve will cut interest rates. The market is current pricing 75bp of easing by the end of the year. There has also been speculation of an intermeeting rate cut.
But:
Like many central banks around the world, the Fed has been reluctant to lower rates because they feel that the markets need to be punished for their excessive risk appetite. Furthermore, they have said that they need to see market volatility have a “real impact” on the economy.
This, she thinks, is becoming apparent:
With major losses and bankruptcies reported throughout the financial sector, we expect companies to layoff staff left and right. [...] For the people in the “real economy,” their 401ks have taken a harsh beating while their mortgage interest payments are on the rise. It is only a matter of time when we see economics reflect that. The bad news is already pouring in with housing starts hitting a 10 year low and manufacturing activity in the Philadelphia region stagnating. Since the beginning of the year, the weak dollar has provided a big boom to the manufacturing sector. Now that the dollar has strengthened significantly, activity in the manufacturing sector should also begin to slow.
These days, cash is a valuable commodity since a liquidity crisis means a lack of cash. The sharpness of recent moves and the lack of liquidity have probably pushed more traders to liquidate positions than to add funds. Flight to safety continues to send the dollar higher against every major currency with the exception of the Japanese Yen as more victims of the subprime and liquidity crisis surface.
There's a possibility of an interest rate reduction:
...the biggest question on everyone’s mind is when the Federal Reserve will cut interest rates. The market is current pricing 75bp of easing by the end of the year. There has also been speculation of an intermeeting rate cut.
But:
Like many central banks around the world, the Fed has been reluctant to lower rates because they feel that the markets need to be punished for their excessive risk appetite. Furthermore, they have said that they need to see market volatility have a “real impact” on the economy.
This, she thinks, is becoming apparent:
With major losses and bankruptcies reported throughout the financial sector, we expect companies to layoff staff left and right. [...] For the people in the “real economy,” their 401ks have taken a harsh beating while their mortgage interest payments are on the rise. It is only a matter of time when we see economics reflect that. The bad news is already pouring in with housing starts hitting a 10 year low and manufacturing activity in the Philadelphia region stagnating. Since the beginning of the year, the weak dollar has provided a big boom to the manufacturing sector. Now that the dollar has strengthened significantly, activity in the manufacturing sector should also begin to slow.
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