Saturday, December 31, 2011
This month report is entitled "The Preoccupation with the Future frequently prevents us from seeing the Present as it is".
There are no attachment with this monthly market commentary (MMC) :
I'll try to post highlights of the Gloom Boom Doom market commentary a bit later.
Monday, December 26, 2011
Jim Rogers: Martin, it's very serious. America is the largest debtor nation in the history of the world and it's getting bigger and bigger by leaps and bounds at the rate of over $1 trillion a year. And in Europe you have several bankrupt countries and no one is dealing with the problem. If you look at the projections for all the European countries, none of them have reduced debt a year or two or three from now. So, this situation is serious and getting worse.
Martin Webber: Thinking back to the mid-1990s, capitalism seemed ascendant, western capitalism had triumphed over communism, economies were growing, stock markets were growing. Who do you blame for the fact that we have ended up in this mess?
Jim Rogers: Well, essentially it's governments and central banks; especially in the US they just kept spending money and the central bank just kept printing money. But there are several culprits.
Martin Webber: Who else apart from these authorities?
Jim Rogers: The government of United Kingdom, the central bank in the United Kingdom, the governments in places like Greece which used phoney bookkeeping, but also even Italy and France and Germany. They all started using phoney bookkeeping. They knew that the other countries were using phoney bookkeeping and they all said, oh it's okay, everything will be okay in the end.
So, the central banks and the governments were going hand-in-hand and spending money they did not have. Now, that's wonderful. It's great. It can cause huge growth. As you just pointed out, for 15 years you had great growth. But eventually, somebody has to come up with and pay for it, or eventually you just run out of other people's money.
Martin Webber: What seems to be going on at the moment is that central banks are creating money, lending it to banks, who are then lending it to governments in terms of buying their bonds because the private investors are no longer doing that. So you have got government owned institutions effectively buying government bonds. People don't seem to really understand what on earth can be going on?
Jim Rogers: It is a recipe for disaster. I am glad you pointed it out because there is nothing more authoritative than the BBC. It's a Ponzi scheme, it's a fraud, it's a sham and we are all going to have to - we are already starting to pay for it, Martin. It's going to be much, much worse in the end.
Eventually one of two things has to happen. We have to get together now and ring-fence the problem and figure out how we are going to survive and start over. Or, in a year or two or three, the market is going to say, no more money, we won't put up any more money. And then the whole system collapses, then you have gigantic chaos, social unrest, governments failing, civil war - huge mess.
Martin Webber: Let's try the more optimistic scenario. You say it is possible still to get a grip on this problem, what are the measures that need to be taken right now then to avoid the other scenario of civil war?
Jim Rogers: Well, at the moment some governments have credibility, Germany for instance still has credibility. And if they all got into a room together and Mrs. Merkel said, okay, you guys are going to fail, you have failed, and now you are going to fail. We are going to hold these banks, these companies up. We are going to make sure they survive. We are going to make sure bank deposits are okay. We are going to make sure checks continue to clear and the system will survive. Some of you are going to take huge losses and huge pain, but then we start over.
It would be a terrible two- or three-year period, Martin, but then the system could survive and we could rebuild after the people who have made mistakes take the losses. That's what capitalism is supposed to be all about. If you fail, you fail.
Martin Webber: And what are the mistakes then? Is it that the people who bought government bonds of France, Italy and all the other countries are going to have to take losses?
Jim Rogers: Absolutely. The banks who made these loans, and the bondholders who bought these loans, and the stockholders who own stock in these banks. They were making mistakes. They are all going to have to take huge losses. Now you are going to say, that's very painful, that's bad.
Well, I will remind you Martin that in the early '90s, Scandinavia had the same problem. They did exactly this. They ring-fenced everybody, many people failed, there was horrible pain, but after three or four years Scandinavia has been one of the great growth areas of the past 15 years or so. That's the way the system is supposed to work.
In Japan in the early '90s, they said nobody will fail. Well you know they have lost two decades in Japan. You know about zombie banks. You know about zombie companies. The Japanese way doesn't work. It is not going to work in America or Europe.
Martin Webber: So we got a situation there where people invested in banks lose money, presumably people with pensions who have investments in these banks lose money, and government bonds lose money too. But the politicians have a much nicer sounding solution it seems, which they have just come up with, which is that the European Central Bank creates money, lends it to the IMF and the IMF then lends it back to them. Sounds much nicer, doesn't it?
Jim Rogers: It sounds wonderful, doesn't it? But it is not based on reality. It's based on "Never Never Land." It's based on the "tooth fairy." Somebody has got to come up with real money somewhere along the line and payoff real debts somewhere along the line.
Martin Webber: But isn't that possible, that if you are the government, you can create as much money as you want because it's your money?
Jim Rogers: You certainly can. You can debase currency, and history is replete with governments that have debased their own currency and ruined their own currency for hundreds of - well for thousands of years it has been going on. You can do that and everything is okay for a while, but eventually you have inflation, you have high interest rates, you have currency turmoil, you have people no longer trusting each other to invest with each other, and then you have the end of the system, and we have chaos, and it starts over again.
Martin Webber: Is that not the more likely scenario in that the politicians never like to tackle problems. They are always interested in the next day's headlines. Isn't it more likely they will find yet another ruse to put off the day of reckoning?
Jim Rogers: Absolutely. You are a very insightful observer of the passing scene. That's exactly what they are going to do. If a politician ran on the platform, oh my gosh, we have got to take a lot of pain. Even if he won, Martin, which is very unlikely, but even if that politician won, after six months or a year or two of serious pain, he will be either thrown out or assassinated or something would happen because people would say this is too much pain. We didn't know you meant it was going to be this bad. Let's get out of this.
Martin Webber: Now many people say it's the euro that's at the heart of this crisis. They are calling it the "euro crisis." Is that how you see it?
Jim Rogers: No, absolutely not. It's not the euro. The world needs the euro or something like it to compete with the US dollar. We need another sound currency. The eurozone as a whole is not a big debtor nation. The eurozone has some debtor problems, some debtor nations, debtor states, but it's not a big, big problem. The euro is good for the world. It needs to work.
Martin Webber: Do you think in the past that political leaders were stronger, perhaps were less influenced by short-term considerations, had a greater feeling for the common good, perhaps the people themselves had a greater community spirit and would actually be happier to take austerity to understand you have to live within your means. Do you think in a way it's not just the political class, this is something at issue in society as a whole?
Jim Rogers: That's good observation, yes. We did have more discipline and more understanding in the past few decades, but that's partly because of the history of those decades. We remembered the First and Second World War. We remembered the Great Depression. We remembered what happened when you got too leveraged and couldn't pay your bills. We knew what happened when you debased your currency.
But now of course, since the Second World War, we have had two or three generations grow up who don't remember all of that, haven't read their history, politicians who didn't know anything about history at all and don't know anything about economics at all. So everybody thinks there's a free lunch.
Martin Webber: Do you think the media is to blame?
Jim Rogers: Well, the media are the same ones, Martin. I mean, you and everybody else grew up went to the same schools, had the same teachings and had the same period of good times. Since the Second World War, things have been pretty good in most of the western world, the developed world anyway, and we all grew up thinking, well this is the way the world is and it has been that way. But that's not the way the world has been for the past few thousand years.
Martin Webber: We have had this "Occupy Wall Street" movement emerging. Do you have any sympathy with any of the things that they are saying?
Jim Rogers: Well, I do have sympathy with the fact that they are saying, we shouldn't have bailed out the banks. I would have let all those banks go bankrupt, as you've heard me say before. But beyond that I don't have too much sympathy with them. You know, we all want a free lunch. I would like somebody to pay my bills too. I would like somebody to take care of me the rest of my life too.
Listen it's outrageous that the government took the money and saved the banks. Absolutely, they are right about that. It's outrageous, totally outrageous that governments went and bailed out some banker so they could keep their Lamborghinis and their summerhouses. But beyond that, I don't have too much sympathy with them.
Martin, whenever there are hard times, people look for somebody to blame. And they always blame the financial people, they always blame foreigners, and they always blame reporters. They always say, well if the reporters didn't write about this problem, we wouldn't have a problem. So be careful. Financial types get blamed first, the foreigners get blamed second, you are next.
Martin Webber: Okay. I am prepared.
Wednesday, December 21, 2011
Jim Rogers recently told Fox Business Network that he plans to short US bonds in the future and to buy them now would be a “terrible mistake”."I am not short bonds yet but I plan to be short bonds," he said. "If the world economy gets better, you are going to make money in commodities because that is where the shortages are. If the economy does not get better, they are going to print money and when it does get better, you better own commodities, such as silver and rice."
Rogers warned it would be dangerous to own US T-bills now but admitted he had been burned a few times recently when he attempted to short the asset class.
Tuesday, December 20, 2011
Sunday, December 18, 2011
Thursday, December 15, 2011
- From the non-dismemberment of the Euroland to the dismemberment of the United Kingdom: The United Kingdom could be broken up with Wales and Scotland becoming independent countries.
- The Future of the USA 2012/2016 : The United States are insolvent and ungovernable. The US dollar may drop by 30% against a basket of currencies.
- Yearly evaluation of LEAP anticipations – 82% success in 2011
- Strategic and operational recommendations - Currency trend reversal, gold constant and British pounds currency crisis by 2015.
- The GlobalEurometre - Results & Analyses - 65% of respondents expect a collapse of the US dollar in 2012.
Wednesday, December 14, 2011
Let's see the Gold chart between June 2006 and December 2011. (Source: Boursorama)
The gold chart recently broke the trend it started in 2008. Having said that it is currently oversold according to with an RSI-14 of 27.50. This could then be a buying opportunity, but since gold broke the trend there may be more downside. How much downside? Let's see the 11-year chart to provide a forecast.
In that time frame, gold is still in an uptrend, and the level line of the channel shows support (around 1350), so Gold could potentially down to around 1400 USD. Currently is around 1570, so it would be approximately another 10% drop. So the downside is limited (provided the long term fundamentals and trends stay intact), it appear it could be a good time to buy more gold even though more downside it likely. It would however become a screaming buy around 1400 dollars. On another note, Gold price evolution may be linked to the S&P 500, as if the index falls below a certain level, say 1000, we are likely to see further quantitative easing (or similar).
Let's now study Silver. Here's the silver chart (via SLV ETF) between June 2006 and December 2011.
Silver has also just broken the trend it started in 2008, it is however not yet in oversold territory with a RSI-14 of 33.8. If SLV cannot rebound quickly, it could easily go back to the low 20s with a very strong support at 20. This kind of level would also mean Gold between 1200 and 1300 which I don't think we'll get to.
To conclude, if we don't go through a major market panic in the next few weeks, it might be a good time to buy some Gold and Silver, especially if you are fine with a potential further 10% correction in Gold and over 20% in Silver in the short to medium term and are confident in the long term fundamentals of precious metals.
Friday, December 9, 2011
Most people will be lucky if they still have 50% of their money in 5 years time. That's why he recommend equities as they should still have some values, would avoid government bonds, and said cash is only useful for short period of time.
He discusses about the Europe crisis, and possible solutions.
He thinks there could be dual currency. i.e for greece the Drachma and the Euro, like it is done in South America, where you can use both the local currency and the dollar.
Wednesday, December 7, 2011
2012 Investment Strategy
Fed Is the Worst Central Bank
Own Japanese Stocks for 2 to 3 Years
Adam Smith for President?
China's #1 Problem
Euro Will Survive 2012
Tuesday, December 6, 2011
Yes, it's short, it's just 4 pages long and comprise a list of notes to himself, subject that he plans to write about mainly:
- Caution is advised due to the situation in Europe.
- The U.S., and to some extent the world, will not easily recover from the current level of debt overhang.
- Western world will know a period of slow growth due to population dynamics and lack of savings especially in the US and the UK.
- US income gap inequality.
- Equity markets have been absolutely bombarded by bad news since last spring.
- Profit margins are likely to decrease.
- “No Market for Young Men.”: A market forecast of the market (S&P 500) based on previous bear market and showing it return below 1000 and staying there for about 10 more years.
- Underweight equities until the market becomes cheap again or during the next 3rd year of the presidential cycle (2015) whichever comes first.
Finally he gives some recommendations:
- Avoid lower quality U.S. stocks but otherwise have a near normal weight in global equities.
- Tilt, where possible, to safety.
- Try to avoid duration risk in bonds. For the long term they are desperately unattractive.
- I like (personally) resources in the ground on a 10-year horizon, but I am nibbling in very slowly because, as per my Quarterly Letter on resources in April 2011, I fear a major short-term decline in commodities based on a combination of less bad weather – which has been bad, but indeed less bad – and economic weakness, especially in China. Prices have declined, often quite substantially, since that letter. However, I believe chances for further price declines in resources are still better than 50/50 as China and the world slow down for a while, and the weather becomes a bit more stable.
He talks about the Chinese economy and explains it's likely to have an hard landing.
If the Chinese economy slows down, commodities price goes down and country such as Brazil, Canada, Australia will all be affected.
Thursday, December 1, 2011
This month report is entitled "We live in a Society that espouses Merit, Equality, and a Level playing Field and exalts People with Wealth, Power, and Celebrity".
There are 2 attachments to the monthly market commentary (MMC) :
- A publication by Walter Molano dated 28th of July 2011
- A publication by Walter Molano dated 17th of November 2011
Walter T. Molano is a Managing Partner and the Head of Research at BCP Securities, LLC.
I'll try to post highlights of the Gloom Boom Doom market commentary a bit later.
Tuesday, November 29, 2011
Saturday, November 26, 2011
They discuss about government debts, equities, gold, the global economy and politics.
Some random quotes:
- "I would rather buy Italian government debt at 7% than US treasuries at 2%".
- "The best would be to break up the Eurozone ..with local currencies and the Euro co-exisiting..."
- "You're better off investing in equities rather than in bonds or cash over the next 10 years"
- "It's beautiful, wherever you look there are problems..."
- "I'm very concerned about the slowdown in China"
- "I own some companies like Hang Seng Bank and Sun Hung Kai Properties" and he doesn't invest directly in Chinese companies.
- "I'm fully prepared to have less money over the next years" (due to higher taxes).
- "It's my biggest worry, that eventually we'll have war".
- "People that have deposit in the bank may lose money, who knows" in reference to MF Global and other companies that play with clients' money.
- "Nothing will be done, the entitlement will continue, the government finance will continue to deteriorate and one day the government will go bust. Before that they'll print money..."
Saturday, November 19, 2011
2012 is likely to be cursed with the same problem as 2011 with western debt crisis in Europe, the US, Great Britain and possibly Japan. As now, there will be a "fight" between market forces which want to liquidate the debt and the central banks & governments who want to print money to avoid deflation at all cost. There are also talks about a debt bubble in China, but their citizen and government have savings and reserve, so although they will suffer as well, they should be OK.
We know that the US, UK and Japanese central banks have done quantitative easing, and will probably do it again, although there is political pressure not to do so. The ECB has not (officially) done quantitative easing yet. The US and UK are in the worst possible position since both their government and citizens are heavily indebted and have trade deficits. The Japanese government has a lot of debt, but has a current account surplus and not much private debt. Europeans are in the middle.
In the next few years, peak oil (and peak everything) will also have a serious impact on your investment, so I'll also give some longer term investments ideas to try to preserve capital.
Here are eight investment ideas I have for 2012 in no particular order:
- Rice and agricultural commodities:
I like rice for 2012 as last year, it has not performed very well and there is currently a global glut due to Indian rice production that largely offsets the issues due to the floods in south east Asia. For individuals investors, it relatively tricky to invest in Rice. For people who have access to the French stock market, you can buy RICEF PI OPENN (FR0010606509 - 1377N). Read Investing in Rice for other options and more details.
Longer term, agricultural commodities should perform well due to rising global population, aging of farmers worldwide, reduction of arable land and possibly massive money printing by central banks.
The good news is that there are plenty of options to invest in agricultural commodities via ETF such as DBA, RJA and ELEMENTS Rogers Intl Commodity Agri ETN (RJA), PowerShares DB Agriculture (DBA) and iPath DJ-UBS Agriculture TR Sub-Idx ETN (JJA). If you prefer agricultural stocks, you could invest in Market Vectors Agribusiness ETF (MOO)
- Crude Oil
This is both a short term and long term investment. Many pundits explain that today, oil costs around 70 USD per barrel to produce. For 2012, if you see crude oil (WTI) go below 70 USD, you can consider investing massively in the commodity, even though it may go much lower. In that case, production will slow considerably until prices go above 70 USD (and more) again.
Since peak oil is inevitable and the IEA says reserves are declining by above 6% per year, so we'll have a supply problem even if the economy is in recession and demand collapses. A US military report also says that surplus may disappear in 2012, which serious shortage occurring in 2015.
First, I'll explain how not to invest in crude oil namely United States Oil (USO), iPath S&P GSCI Crude Oil TR Index ETN (OIL) and the likes as they have an horrific decay and their target is zero after numerous reverse splits. I'm not kidding. If you invest in a commodity linked ETF always try to compare it with the tracked commodity for a period of at least 2 or 3 years. Actually, it does not hurt to do it for any ETF you plan to buy.
Unless you have access to oil futures, it also difficult to invest in crude oil for individual investors and you cannot easily store the thing like you do with Gold and Silver. You invest in Crude oil (WTI and Brent) via ETF such as ELEMENTS Rogers Intl Commodity ETN (RJI) or a fund like Barclays Capital Funds - Global Commodities Deltafor Singapore/ Hong Kong investors. Those follow Jim Rogers commodity index, so they are composed of a basket of commodities and only 40% is actually invested in crude oil. If you have better alternative that do not involve buying an oil tanker, I'd appreciate.
An alternative way to invest in commodities is to buy stocks in the middle east, for example via Market Vectors Gulf States Index ETF (MES).
- Gold and Silver Bullion and/or Coins
Gold and Silver have had a tremendous run for the last 10 years, but as long as we have negative real interest over the world they should perform relatively well. Having said that, an 11 year bull market, with no negative year (for Gold) is not very common, so I would not be surprised if we have 1, 2 or 3 years where Gold does nothing. I would also not be surprised, if Gold and Silver become bubbles as the central banks print money to try to save the system. You can invest in gold via GLD or PHYS ETF and silver via SLV or PSLV. PHYS and PSLV are managed by Eric Sprott, so I'd trust those more than GLD and SLV. If you are afraid of default risk by third party, then simply buy physical Gold and Silver and store them at home. If you are a US citizen and are not afraid of default by your bank, google "celente mf global".
Finally, gold stocks are cheap relative to gold bullion on an historical basis. You can read The case for Gold Miners vs Gold and Eric Sprott: Time to Buy Gold Stocks for details. Hong Kong investors may have to make their own Gold stock portfolio, see Hong Kong Gold Mining Stocks and Gold ETFs for a list of Gold stocks in the Hang Seng.
- US Natural Gas
Over the last 5 years, US natural gas is down 39% (Source: Indexmundi) at 128.30 USD per 1000 m3 and at the same time, Russian natural gas is up 20% at 435 USD per 1000 m3 and Indonesian natural gas is up a whopping 160% at 377.22 USD per 1000 m3.
Usually, commodities trade similarly over the world, but natural gas is different since it is difficult to transport. The reason for the decrease in the US is fracking, a technology breakthrough, which dramatically increased recoverable natural gas reserve in North America.
This may not be an investment that rewards investors by 2012, but with such a large price difference between the US and the rest of the world, there will certainly be people who will work on liquified natural gas (LNG) and terminals are planned in the US.
Once again commodity investing is difficult, and products such as UNG should be avoided like the plague. Actually, I could not find a proper way to invest in natural gas, except by buying natural gas stocks, please read Investing in Natural Gas for details. If you have ideas, let me know.
- Short long dated US Treasury Bonds
If has been tried unsuccessfully over the years, so the timing is uncertain, but the fact that long dated US treasuries bonds will be much higher at some point in the future is a certainty.
The US is the worst offender in term of debt: high government debt, high private debt, low saving rate and massive trade deficits. It can't get worse than that.
The federal reserve is also committed to print money to avoid deflation at all cost, this means the US dollar will lose value and investors will sell their low yielding treasury bonds (10-year to 30-year) and find assets with better value.
If you can't short treasury bonds directly, you can invest in TBF ETF, although it decays a bit you may be able to keep it a few years, contrary to TBT or TMV. Read How to short US treasuries for more information.
- Alternative Energies
With peak oil and pressure against coal use due to climate change, alternative energy will have to be developed if we may to keep living a good life. Investments in solar, wind, (alternative) nuclear, cold fusion and more will be made and there will be a lot of failures, but it's likely some companies will have an amazing success. Alternative energy stocks are very depressed at those levels after the 2008 bubble.
This is a long term investment (5 to 10 years) and 2012 may not be the right time, but who knows. Avoid investing directly in alternative energy stocks, as you are more likely to lose a lot of money and invest with ETF or mutual funds instead. Since we don't know which technology will prevail, I'd also avoid investing in Solar fund or Wind ETF independently, but rather find a funds that covers a broad range of alternative source. If I had a gun on my head, I'd rather invest in wind energy rather than solar energy, as the former has a better EROEI.
Based on the comments above, you could invest in ETFs such as Market Vectors Glb Alternatve Energy ETF (GEX) or First Trust NASDAQ Cln Edge Smrt Grd Inf (GRID) as well as mutual funds such as BGF NEW ENERGY.
Companies related to water such as water treatment, pipes and valves manufacturers... will benefit of the water issues around the world. For example, I can feel some investments are needed in the water infrastructure in Thailand and with climate change and rising population, better water management is needed for agriculture.
This is also a long term investment and unlikely to pay off immediatly in 2012 but you can invest with PowerShares Water Resources (PHO) and PowerShares Global Water (PIO) , read Invest in Water with ETF for details.
- Buy the Euro
This may seem counter-intuitive with all the bad press and talks about the end of the Euro, but the truth is Europe is trying to take care of its debt problem now and the ECB is reluctant to print more money to further help the indebted countries thanks to pressure from Germany.
The US and UK central banks seem to be happy to print as needed, and the Japanese Yen seems overvalued as investors take refuge in this currency.
So if you are a holder of US dollar, British pound or Japanese Yen you may consider buying Euros, especially if it seems the debt crisis is resolved, European government keep implementing austerity measures, private investors take their losses on bad investments and the European central bank is not involved in printing currency.
The best way to safely (without leverage) invest in the Euro would be to open a fixed deposit in Euro if your bank/country allows it. If it is not possible, you could also invest in a currency ETF/ETN such as CurrencyShares Euro Trust (FXE) or iPath EUR/USD Exchange Rate ETN (ERO).
Wednesday, November 16, 2011
They talk of the current economic situation in Europe and US, why Jim Rogers has move to Singapore (for is daughters), the loss of freedom in the US, Jim Rogers current investment themes (commodities), his views on Silver and Gold and more.
Tuesday, November 15, 2011
- Global systemic crisis: 30,000 billion US dollars in ghost assets will disappear by early 2013 / The crisis enters a phase of widespread discounting of Western public debt
- An on average 30% discount of Western debt between now and early 2013 ... without activation of sovereign CDSs, which appear a vast scam
- 2017 – End of the transatlantic relationship formed after 1945: The last US soldier leaves European soil
- Strategic and operational recommendations
. Gold: Stay on course!
. Stock Market: Restrictions grow tighter!
. Commodities: Warning, danger!
. Currencies: Lurch ahead!
- The GlobalEurometre - Results & Analyses
The full GEAB 59 (PDF format) is available to subscribers for 200 Euros per year (10 + 6 issues).
Here are the expected annualized return (based on valuation and historical earning growth):
US Large caps: 1.8% per year
US Small caps: -0.4% per year
US High Quality: 5.4% per year
International Large caps: 5.8% per year
International Small caps: 4.6% per year
Emerging Markets: 5.6% per year
Different kinds of bonds are expected to return between -2.3% and 1.3% per year so that is all bonds are expected to return negative interests except emerging market bonds. Managed Timber is expected to return 6% per year.
Those are real returns adjusted for inflation of 2.5% per year.
You can receive GMO's forecasts (monthly) and the quarterly newsletter for free by registering at http://www.gmo.com
Sunday, November 13, 2011
They discussed the current European debt crisis, his current portfolio allocation recommendation (25% stocks, 25% real estate, 25% bonds and 25% gold) and his views on the market.
He thinks emerging markets have bottomed out for the time being and that US market will probably continue to outperform other market, because of the Federal Reserve policy. The fed is considering a target of 7.5% unemployment before raising rates, but it may actually never happen.
Friday, November 11, 2011
It's not practical to store potable water as an investment and if you were able to do so, your government would probably seize it if there was a real water crisis. An easier way to invest in Water is to buy companies that provides pipes, valves and solutions to water treatment. You can invest via 2 ETF:
- PowerShares Water Resources (PHO) an ETF focused on small and medium US companies such as Valmont Industries and Badger Meter.
- PowerShares Global Water (PIO) an ETF focused on medium-sized to large international companies such as Suez Environment and KSB Aktiengesellschaft.
Investing in water companies is probably a long term bet (5 to 10 years or more) and you should probably not expect rapid gains, especially in the current environment.
He first explains Europe and the US are both a disaster and then gives his investment strategy:
- Short European stocks, US technology stocks and emerging markets.
- Long precious metals (Gold and Silver) as well as agricultural commodities.
- Long currencies (but do not specify which ones).
When asked if Gold is in a bubble, he replies that very few people own it so it can't be in a bubble.
Tuesday, November 8, 2011
He said (as in previous interviews) that QE3 has already started, because when Bernanke says he will keep interest rate at zero percent until 2013, he can't just sit he must intervene to keep the interest rate at that level and that shows in the money supply.
Precious metals (Gold and Silver) and agricultural commodities are his main commodity investments, but he also likes on base metals. He still prefers Silver rather than Gold because the former is still way down it's all time high.
Finally, he explains that crude oil will go higher than anyone expects because reserves are going down every year, although if a major event occurs (such as Spain going bankrupt), crude oil would go down with it, but that would then be a buying opportunity.
Monday, November 7, 2011
The Fund is managed by Russell Hoss, CFA, portfolio manager, who also oversees two of Euro Pacific Asset Management's other fund offerings, the EP China Fund (EPHCX) and EP Asia Small Companies Fund (EPASX). The strategy is targeted towards US-based investors who are concerned that global inflation, growing fiscal deficits, and below-trend growth rates are challenging the investment outlook for mature economies.
The EP Latin America Fund uses a top-down approach to identify countries within the region that have extensive natural resources, maintain balanced budgets, and carry low levels of debt. Once countries with these characteristics are identified, the fund uses bottom-up fundamental analysis to identify under-levered companies with leading market share, attractive free cash flows, and a stable dividend history.
Wednesday, November 2, 2011
He explains his view on the situation in Europe and the US regarding debt issues, mention commodities bull markets during economic hard times and tells his worry about agricultural supply issues including the worrying aging of farmers. (Average farmer age in the US: 58, Japan: 66 and Australia: 66).
Monday, October 31, 2011
This month report is entitled "The Strongest Principle of Economic Development Lies in Human Choices".
There are 2 attachments to the monthly market commentary (MMC) :
- The Missing Chapter - A Personal View of Russia - Twenty Years After by Eric Kraus, Managing Director of Anyatta Capital
- The Inflation Pulse Returns and Implications on the Fall Melt-Up of 2011 by Michael A. Gayed, Chief Investment Strategist at Pension Partners, LLC
The second attachment refers to "Inflation, Deflation And The Fall Melt-Up of 2011" article on Seeking Alpha where Mr. Gayed explains how to navigate the markets which consistently changing market sentiments from deflation to inflation fear and vice-versa. He uses the price ratio of the Treasury Inflation Protected Bond ETF (TIP) relative to nominal 7-10 Year Treasuries (IEF) to anticipate sentiment.
I'll try to post highlights of the Gloom Boom Doom market commentary a bit later.
Sunday, October 30, 2011
That was their average forecast:
- S&P 500: 1,428 vs Current: 1,229
- 10-year Treasury yield: 2.86% vs Current: 2.14%
- Inflation rate: 2.05% vs Current: 3.9%
- Unemployment rate: 8.7% vs Current: 9.1%
- GDP growth in fourth quarter: 2.5% vs Second quarter, 2011: 1.3%
- Gold price per ounce on Sept. 30, 2012: $1,835 vs Current: $1,704
- Value of euro: $1.40 vs Current: $1.39
- S&P/Case-Shiller 20-City Composite Home Price Index: 136.6 vs Current: 142.8
- Barrel of oil: $95 vs Current: $92.58
- S&P 500: 1000
- 10-Year Treasury yields: 2.5%
- Inflation Rate: 2.5%
- Unemployment Rate: 8.8%
- GDP Growth Rate: 1%
- Gold Price: 1850 USD
- Euro: 1.37 US dollar
- S&P Case-Shiller 20-City Composite Home Price Index: 135
- Barrel of Oil (WTI): 125 US dollar
Friday, October 28, 2011
First, they explain that oil has been mostly absent from recent financial headlines, but availability and price of crude oil remains a key factor in world growth:
While the recent clamor over EU solvency and weak global growth has temporarily displaced its media attention, oil’s crucial importance to the world economy has not dwindled in the slightest. Oil remains the world’s greatest single energy source todayThen then mainly focus on the lack of oil production growth:
By historical standards, the world has been coping with constrained oil production and high oil prices for most of the past six years. This tightness in oil supply has been a significant factor limiting global growth, and it would appear that no matter what financial solutions are eventually engineered by our politicians, global growth will remain significantly restricted by the real economy’s ability to produce oil. Limited global supply growth means that the Western world now faces significant competition for oil from emerging markets whose citizenry are willing to work much harder for far less. This will continue to result in a narrowing gap of per capita consumption between emerging and developed economies as the emerging economies continue to gain relative economic strength, wage growth, currency appreciation and purchasing power. We believe strategic investments in oil producers and service companies will offer an effective way to profit from this trend.
Global oil production has grown very little (since 2005), appreciating by a mere 2% in total production. This production plateau generated the 2008 oil price spike to nearly $150 per barrel. Subsequently, despite the economic stagnation experienced by developed economies, the price of Brent Crude Oil has averaged over $78 per barrel, four times higher than the ~$18 average that Brent traded at in the 1990s.
and that the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA) have had to consistently reduce their production forecasts over the years as you can see in the chart below with forecast for 2015 and 2020:
They also shows other charts with price forecast made in 2002 with price ranging between 15 to 30 USD (high price scenario) between 2002 and 2025, in 2009 they revised this with a price range of 50 to 200 USD. (2008 USD).
In the next section, they look at the causes of high oil price namely supply constraints, high production cost, middle east export are riskier and costlier and increased demand from emerging countries:
First, and most importantly, global supply is struggling to grow because we are not finding and bringing into production any new "super giant" oilfields. This reality was well documented by the EIA in a study it published in 2008.3
The EIA study revealed that the largest 1% of oilfields (798 total fields) in the world account for over 50% of global production.
What has been discovered and brought into production in the past few decades are smaller fields, which normally have higher decline rates. As these new smaller fields replace production from larger fields, and older larger fields age, we can expect the global observed decline rate to increase from the current estimated rate of 6.7% (or 4.7 million barrels per day annually).
High Production Costs.
Middle East Exports are Increasing in Cost and Risk.
Oil prices are also high due to rising production costs, and it’s worth noting that new production sources, such as offshore, tar sands and other unconventional sources are amongst the highest cost producers today... As a result, it is becoming clear to many industry analysts that current oil production cannot be sustained under $75 a barrel and the price required to sustain production seems destined to continually rise.
Increased Demand from Emerging Markets.
The so-called "Arab Spring" uprisings in countries such as Egypt and Libya are forcing these and other major oil producing nations to spend more of their oil revenue on social assistance programs. For example, as a result of newly announced social spending in Saudi Arabia, it is forecasted by The Institute of International Finance, Inc. that the budget balancing price of Saudi oil will jump from $68 per barrel in 2010 to $85 per barrel in 2011 and then continue to rise, but at a slower pace, to $110 per barrel by 2015.
They also spend a large part of the letter comparing the US and China in terms of economic growth and oil consumption.
As globalization continues, we can expect job growth to be higher in countries where the citizenry are willing to work harder for less. This roughly characterizes the emerging market countries which for the most part are also large exporters of goods and services, run significant trade surpluses and have strengthening currencies. These factors enable them to continue to increase their per capita and total oil consumption. Conversely, higher wage Western nations are fighting rising unemployment, trade deficits, weakening currencies and, consequently, are being forced to reduce their oil consumption.
To conclude, they recommend that western investors hedge themselves against declining purchasing power and oil consumption by buying oil producer and service companies:
You can subscribe to Sprott Asset management's Market at Glance newsletter free of charge or download the PDF version.
For North American workers and investors, one way to hedge against a decline in living standards is to use your current relative advantage in oil purchasing power to accumulate oil reserves that will be developed in the future. This purchasing power advantage, currently evident in the time a worker in the West must work to earn a barrel of oil, will eventually dissipate, as world labour markets recalibrate and shift wealth from West to East....
The recent market decline and ongoing volatility is affording investors with an opportunity to invest in oil producers and service companies, in particular junior and mid-cap companies, at attractive valuations. Equities are pricing in much lower oil prices over the long-term. Our view is that while there may be additional volatility in the crude oil price in the short-term, long-term pricing will remain high and equity prices will rise to correct this disconnect.
My take is that you although you can invest in oil producer such as Exxon, BP and the like, you could also invest in Oil Producing countries via Market Vectors Gulf States Index ETF (MES) for example. However, since supply will go down overtime, that means reserve of oil companies will also go down so this is a negative for such companies although crude oil price is likely to increase. Another way would be to invest in Crude Oil directly either buy buying commodities futures or ETF, but be careful which one you choose (e.g. avoid USO at all cost).
Bloomberg Consensus of Predictions for Year-End 2012 (unless otherwise noted):
1. UP Standard & Poor’s 500-stock index: 1,428 Current: 1,229
2. UP 10-year Treasury yield: 2.86% Current: 2.14%
3. DOWN Inflation rate: 2.05% Current: 3.9%
4. DOWN Unemployment rate: 8.7% Current: 9.1%
5. UP GDP growth in fourth quarter: 2.5% Second quarter, 2011: 1.3%
6. UP Gold price per ounce on Sept. 30, 2012: $1,835 Current: $1,704
7. UP Value of euro: $1.40 Current: $1.39
8. DOWN S&P/Case-Shiller 20-City Composite Home Price Index: 136.6 Current: 142.8
9. UP Barrel of oil: $95 Current: $92.58
Analysts are rather optimistic, except for the Case-Shiller index.
They also don't see huge swings in the markets (they never do).
Wednesday, October 26, 2011
There are several ETF and funds to short the CAC 40 including:
- Lyxor Etf Short Cac 40INSHC:PAR (in the US)
- ELAN FRANCE INDICE BEAR (FR0000400434) (in France)
Lyxor ETF only started its quotation in March 2010. Between that time and today, the CAC 40 lost 17.62% while the ETF gained 1.93% (Source: Google Finance). Not really what we should expect. Bear in mind that this ETF is denominated in US dollar, so the exchange rate should also be taken into account.
ELAN FRANCE INDICE BEAR is older having started in 2002. After 9 years, the CAC 40 gained 3.19% where the mutual fund lost 44.49% (Source: Boursorama). Again not such a good performance, but decay over time is expected for such products. This is even worse if we take dividends into account.
So we should only use those products for relatively short period of time (a few months to 1-2 years) and timing is very critical.
Let's assume a 50% retracement (Fibonacci) of the recent fall.
The top was reached around 4160 (18 February 2011) and the bottom around 2780 (22 September 2011), so a 50% retracement would be around 3470. If we reach this level within1 or 2 months, the RSI-14 could also indicate the CAC 40 is overbought and could be a good starting point to start to short the French stock market.
Shorting (even through via ETF) is quite dangerous in the current environment since politicians always seem to find reasons to stimulate. So I may or may not start a position once the target level is reached.
Wednesday, October 19, 2011
Sunday, October 16, 2011
Anonymous Analytics (@AnonAnalytics) has just tweeted the following:Anonymous Analytics is seeking an analyst with significant experience analyzing international banks: anonanalytics [at] hushmail [dot] com
So after investigating Chaoda Modern Agriculture (0682.HK)and releasing a damning report leading to its suspension on the Hong Kong stock market, it seems they are now in the progress of checking out some international banks.
Chaoda Modern report took about 20 days to be ready. So we may receive a new report about an international bank within 30 days, if they manage to find a volunteer.
Saturday, October 15, 2011
- Global systemic crisis – First half of 2012: Decimation of the Western banks
- Global systemic crisis: LEAP/E2020 anticipation of 40 countries’ risks 2012-2016 (USA, Euroland, BRICS, Japan, UK, Australia, Argentina, Sweden, Egypt, Switzerland, Philippines, Mexico, South Korea, Morocco, Libya, Syria, Iran, Israel, Poland, Thailand, Indonesia, Saudi Arabia, Tunisia, Chile, …) - Widespread collapse at the heart of the global geopolitical dislocation phase... with very different prospects for exiting the crisis depending on the country
- GEAB $ Index – October 2011: The US$ fall accelerates against the €, ¥, Ұ and R$ basket
- Strategic and operational recommendations
- Banks: How to avoid being trapped in the decimation of Western banks?
- Gold – Currencies: A new inflexion point coming up
- Commercial real estate: The moment of truth comes closer
- The GlobalEurometre - Results & Analyses
The full GEAB 58 (PDF format) is available to subscribers for 200 Euros per year (10 + 6 issues).
Friday, October 14, 2011
He's still bearish on Chinese banks even though the government has stepped up to buy Chinese banks shares.
He emphases that his company focuses on the property market in China and that this market has only started to decline.
In the second part of the interview, they discuss US politics: GOP debate, his support for Obama and income inequality in the US.
Finally, he talks about European banks and the need for recapitalization.
Tuesday, October 11, 2011
He said he was bullish on the US dollar:
Despite the fact that the (European Central Bank) and the European government will flood the market with liquidity to bail themselves out, global liquidity is tightening," Faber said. "Whenever global liquidity is tightening it is bad for asset prices but good for the U.S. dollar, as was the case in 2008.He also discussed the debt issues in the USA, Europe and Japan and explained there is no way to repay that debt without a major collapse:
We've had far too many interventions in the Western world where the share of total economy that goes to government and is government-sponsored has grown. That essentially makes it very difficult for the Western world to grow sustainably...I don't see how the Western world including the U.S., Japan and Western Europe can grow. They're going to stagnate.Finally, he ranted against regulations in the US:
We have expansionary fiscal policies, we have expansionary monetary policies but we have restrictive regulatory policies and it curtails any initiative by the small businessman and the large businessman. He doesn't employ and invest capital in the U.S. He does that in China or somewhere else in the world where the regulatory environment is more favorable.
He discussed about the current bailout of European banks and called for letting the market work and let bad banks fail.
He's still long commodities and expects the ECB and FED to print more money.
QE is already there as Bernanke said interest rates will be kept low for 2 more years.
Monday, October 10, 2011
- US Large caps: 3.1% per year
- US Small caps: 1.5% per year
- US High Quality: 6.6% per year
- International Large caps: 7.2% per year
- International Small caps: 6.0% per year
- Emerging Markets: 7.2% per year
Managed Timber is expected to return 6% per year.
Those are real returns adjusted for inflation of 2.5% per year.
So the best performing assets should be international large caps (Europe & Japan?) and emerging markets and the worst performing assets should be US and international bonds.
One way to act on this forecast via ETF would be to buy iShares MSCI Japan Index Fund(EWJ), iShares S&P Europe 350 Index Fund (IEV) and iShares MSCI BRIC Index (BKF) on the long side, and buy short ETF for bonds such as ProShares Short 20+ Year Treasuries (TBF). If you can short, you could do so with SPDR Barclays Capital International Treasury Bonds (BWX).
You can receive GMO's forecasts (monthly) and the quarterly newsletter for free by registering at http://www.gmo.com
Wednesday, October 5, 2011
As I blogged on the 1st of October, Marc Faber is out with the latest issue of his famous Gloom, Boom, and Doom market commentary entitled "They are Ill Investors that think there is no Treasure Island, When They can See Nothing but a Sea of Problems".
A summary has been released by Nathaniel Crawford on Seeking Alpha:
- Stocks: Yes, stocks are very oversold, but that does not mean they cannot go lower. The dreadful price action in both Copper and the Shanghai Composite points to new lows for the equity markets. After US stocks make a new low below 1100 on the S&P 500, there could be a year-end rally followed by a more meaningful decline into 2012. Investors should use any bounce in stocks as an opportunity to reduce their equity exposure. At this point, Faber advises no more than 25% of your portfolio be in stocks.
- Gold: At $1900 gold was extremely overbought, and a correction was necessary. However, Faber now believes that gold could undergo a significant correction similar to what happened between 1974-1976, when gold fell 40%. Faber notes that a large decline in gold is now a distinct possibility. The first support level for gold is at the 200 day moving average around $1500. Despite the potential for a pullback, Faber still likes gold and believes it will trade significantly higher.
- Dollar: It's true that the dollar has no intrinsic value and is being printed into infinity, but the US dollar will be your best friend for the next few months. As global liquidity contracts on EU debt concerns and a possible hard landing in China, Faber advises investors to be long the dollar. Note this is a short-term call; longer term the dollar is going to zero.
- Treasuries: Despite being bullish on the US dollar, Faber does not recommend treasuries, noting that they are overbought and susceptible to a large correction.
- China and Copper: If you think the market is falling because of incompetent EU bureaucrats you are behind the curve. According to Faber, the price of copper is signaling a very serious slowdown (if not complete collapse) in China. This is what is really behind the move down in all commodities. A hard landing in China would be devastating for the global economy. The Shanghai composite is making new lows along with copper, which is very bearish. Also stay away from the Australian and Canadian currencies. If China crashes, these markets will get massacred.
- Emerging Markets: Stay away from these at all costs. All emerging markets are falling and making new lows. Even though Faber likes these longer term, they could still fall another 20%-30% before they would be good buys. These markets could even fall to their 2009 lows. However, this will represent a good buying opportunity because these markets will be the first to bottom.
Tuesday, October 4, 2011
They discussed about the currency law debated in congress mainly related to the Chinese RMB currency manipulation. Jim Rogers aid if the US implemented tariffs, everybody would suffer, the dollar could plunge and interest rates go up.
He then explained that he owned the US dollar because everybody was negative about the the dollar and that many people perceived the US dollar as a safe haven.
Finally, they talked about the economic outlook for the US and the world.
Saturday, October 1, 2011
This month report is entitled "They are Ill Investors that think there is no Treasure Island, When They can See Nothing but a Sea of Problems" probably referring to the current bearish sentiment of investors (e.g. AAII September 22 sentiment: 25.33% Bullish vs 48.00% Bearish).
There is no attachment to the monthly market commentary (MMC) this time.
I'll try to post highlights of the Gloom Boom Doom market commentary a bit later.
Update: The October market commentary highlights are now available at http://etf-investment-ideas.blogspot.com/2011/10/marc-faber-october-2011-market_05.html
Wednesday, September 28, 2011
QE3 has already started when Bernanke announced he would keep the interest rate close to zero for 2 years. At that time, M2 measure of the money supply when straight up.
Jim Rogers expects a correction in Gold and Silver. Gold has gone up for 10 years in a row, this is unprecedented even during the 1970s bull market and a correct should be expected. He would buy Silver and Gold on further dips as all commodities will probably end up in a bubble. Of course, if the US dollar becomes confetti, there is no ceiling on the price of Gold.
There has been a recession every 4 to 6 years in the US, so he thinks we'll get another one this year or at least one within 2013. That time will be worse since there are no bullets left. The US had a huge debt problem and they can't triple the debt again, the market won't let them. Same thing for money printing, it would become very difficult now.
Developing countries won't be spared by the next recession occurring in the US and Europe as they are major economies and trade partners of emerging economies. Jim Rogers is actually currently shorting emerging economies.
He'd rather go the Scandinavian way (take the pain now) than the Japanese way (kick the can down the road) in reference to past crises.
Finally, when asked if he saw any investing opportunities right now, he recommended people to try to invest in Myanmar and North Korea if they can, as those 2 countries are starting to opening up like China did 30 years ago. Investing in those countries if illegal for American citizen. (For other individual investors, it's also difficult to get exposure since there are no ETF available yet.)
You can listen to the interview below.
Tuesday, September 27, 2011
The environment is very similar to 2008 with financing drying up, global liquidity shrinking, assets price collapsing, but the US dollar and US government bonds are strong.
He thinks industrial commodities remain vulnerable. he sees Gold and Silver increasingly perceiving as cash. He would not hold long dated US treasuries for more than 3 weeks (except as a trader).
He would try to accumulate shares on the downside in Asia.
Although not in the video above, Marc Faber also mentioned that "We overshot on the upside when we went over $1,900," and "We're now close to bottoming at USD 1,500, and if that doesn't hold it could bottom to between USD 1,100-1,200."
Please refer to my previous blog post Is it Time to Get Back into Gold and Silver? for details about the 1200 and1500 USD levels.
Monday, September 26, 2011
Following the recent Gold and Silver sell-offs, Peter has written an update to his subscribers:
This past week has been a rout for precious metals. From last Monday to today, gold has dropped 10.9% and silver dropped 30.4% (per the London fix). For gold, from $1794 to $1598, and for silver, from $40.46 to $28.16.
The metals have been on a tear for the past few years. Because of this, investors and speculators that do not understand the fundamentals appear to have joined the bull run, and then quickly departed at the first sign of trouble. Good riddance to them, I say. While sharp declines do test the mettle of some value investors, I believe this leaner market presents a great buying opportunity.
The situation in Europe continues to deteriorate daily. Greece is in default and larger EU members look sure to follow. Meanwhile, gridlock is the password in Washington. QE III is coming, and with it, the dollar is headed for another big decline in purchasing power. The Swiss National Bank just instituted a peg to curb inflows of global investors seeking a safe haven – costing franc holders 25% of their position in the course of a week.
To me, this situation screams, "buy gold!" But, unfortunately, herd-like investors are being corralled into the US dollar. However, as with any move that defies reason and economic law, this will not last.
Sunday, September 25, 2011
Let's start with Gold and the chart between April 2006 and September 2011. (Source: Boursorama)
Gold has been in a upward channel since 2008, it has recently broken the trend on the upside, but is now back to trend, but not yet at the bottom line of the channel. If you believe the fundamentals (and trend) for Gold have not changed, you could start to buy now, but this would be a screaming buy around 1500 USD per ounce.
The RSI is at 33, so it is not technically oversold yet. This will be technically oversold when if it is below 20 or 30 (different sites use different thresholds).
If you wait a few more days, you could buy at lower price. But as I have learned with Gold, the correction seldom comes and I have wrongfully postponed purchases in the past.
Now let's look at Gold from a longer term perspective with the logarithmic chart of Gold between 2000 and 2011.
There is also a long upward trend here, but the lower line of the channel is around 1200 USD per ounce. The last time, it touched the lower line was during the 2008 market panic. If you believe we are going to experience a similar scenario where everything will be sold due to margin calls, then you might want to start buying Gold below 1300 USD per ounce.
Now, let's see the case for Silver. Actually since Godl and Silver are highly correlated most of the time, we could consider following the Gold charts above to time Silver buys. Having said that, here's the silver chart (via SLV ETF) between April 2006 and September 2011.
Although it's not as clear as with the Gold chart, there is an upward channel since 2008, with the current SLV price of 29.98 and the lower line of the channel around 27.50 as well as an RSI of 23, it could be a good timing to start buying tomorrow especially if Silver corrects further. Of course, if Gold goes back to the lower level of its 10-year channel, then this won't be a buying opportunity as it could fall much further. However, if Gold goes back between 1200-1300 as discussed above, Silver could go into the low 20s.
To conclude, if we don't go through a major market panic in the next few weeks, it should be a good time to buy Gold and especially Silver. But if you believe it's likely there is an across the board sell-off of all assets irrespective of their fundamentals, you may consider delaying those purchases.
Thursday, September 22, 2011
Marc Faber says he can't predict when the crash will happen but the stock market is going down because it's discounting a very bad event. However he does not know what the event is yet.
Amazingly he also praised Bernanke. But that was because he did not expand the balance sheet.
Faber says government intervention has gone so far that reducing intervention and lowering the deficit will cause temporary pain. He predicts President Obama will do anything to get the votes including providing handouts.
Wednesday, September 21, 2011
His view is that the austerity measures in Europe will lead to less growth, and that government spending in Europe is a larger part of GDP than in the USA (25% for the US vs. 35 to 50% for European countries).
Then they discuss about China in the middle of the interview (3:30 to about 9:40).
Chinese growth is beginning to sputter and property stocks and real estate developers are leading the declining. Sales of real estate are down 50% in major Chinese cities this year.
The Chinese government balance looks good on paper. But if we look at state enterprise (that are implicitly backed by the government), the debt to GDP ratio went from 100% to 200% that is the same or even worse than European countries, especially the PIIGS.
Jim Chanos explains that most people will be surprised (on the downside) by the Chinese growth by the end of this year and/or beginning of next year. He even quoted the CEO of Japanese company who said he had trouble getting paid for his escalators.
Even if the Chinese government tries to reign in the increase in debt, many real estate developers turn to the black market, and that experts expect 50% of new loans to go bad, that kind of issue could wipe out the Chinese GDP growth this year. A Chinese slowdown of that scale would negatively affect the global economy (remove 1% of global GDP growth).
In order to play the Chinese crash, Jim Chanos is short Chinese banks, Rel Estate developers, commodities and any company that sells to China. He is however long Macau casinos.
At the end of the interview, he gives his views on the US. He agrees with the Buffett rule as taxes are now a small part of the GDP and says he is still short healthcare stocks (as the US government needs to reign in Medicare costs) and Netflix (as the DVD business is dying).