Marc Faber July 2012 Market Commentary

Marc Faber has just released the July 2012 market commentary on the gloomboomdoom.com website.

This month report is entitled "We are most deeply asleep at the Switch when we believe to control all Switches" where he discusses investors overconfidence both on the long and short side, and the lack of diversification that may result due to this overconfidence.

He explains that investors should consider carefully that win/win transactions are far less common than win/lose transactions, and usually, either the buyer or the seller makes a big mistake. In order to be successful, you have to make sure that you do not make that big mistake.

There is just one attachment to this monthly market commentary (MMC):

• “Money Illusion and Why the ‘Bond Bubble’ Must Burst.” by Michael A. Gayed,Chief Investment Strategist at Pension Partners, LLC

The report is no available publicly, but Gayed regularly contributes to Marc Faber MMC, and it's not the first time he talks about a "Bond Bubble". His investment outlook is that stocks are going to vastly outperform bonds, at least in real terms.

If you want to receive the Monthly Market Commentary (MMC) by Marc Faber, it is available for 300 USD per year.

GMO 7-Year Asset Class Forecasts - May 2012

GMO has just released its monthly 7-year Asset Class Forecasts and the expected annualized returns  for international and emerging markets have greatly increased:

• US Large caps: 0.8% per year
• US Small caps: -0.5% per year
• US High Quality: 4.8% per year
• International Large caps: 6.1% per year
• International Small caps: 5.3% per year
• Emerging Markets: 6.7% per year

Emerging markets and internal large caps could even produce pretty decent returns. On the other hands, bonds are still a disaster with expected returns between -2.1% to 0.8% per annum.

One way to act on this forecast is to buy iShares MSCI BRIC Index (BKF).

You can receive GMO's monthly forecasts and the quarterly newsletter by registering at http://www.gmo.com (It's free !).

GEAB 66: Global Systemic Crisis Red Alert !

Here are the highlights of GEAB 66 (June 2012) entitled "Red Alert Global Systemic Crisis September-October 2012 : When the 7 Jericho trumpets will blow for the world of before the crisis":

• Red Alert Global Systemic Crisis September-October 2012 : When the 7 Jericho trumpets will blow for the world of before the crisis. LEAP 2020 team has never seen so many economic, financial and political factors converge at the same time and this leads them to issue a Red Alert for Autumn 2012.They see 13 factors:
  
  1. Global recession.
  2. Insolvency of the financial system in the West.
  3. Increasing Weakness of bank assets such as sovereign debts, real estate and CDS.
  4. Slump of international trade.
  5. Geopolitical tensions, especially in the Middle East.
  6. Long term global geopolitical deadlock at the UN.
  7. Rapid collapse of funded pension plans in the Western economies.
  8. Increasing political rifts in major economies (USA, China, Russia).
  9. Lack of "miracle" solutions like in 2008/2009.
  10. Complete lack of credibility for countries battling with high private and public debts.
  11. Failure to reduce the unemployment rate and long term unemployment
  12. Failure of both monetary and financial stimulus policies and austerity policies.
  13. Complete lack of effectiveness of G20, G8, Rio+20, OMC... meetings
• Three economic-financial chocs at the heart of the heart of the historical choc of September/October 2012. "Taxmargeddon" will start in the US this summer, the City-Wall Street will have their own Bankia moment and QE will be too weak to be effective.
• Temporal converge of 4 major geopolitical crises for September/October 2012.  LEAP 2020 anticipate the Iran war will take place this year, along with continued conflicts in Syria, and the Afghanistan/Pakistan debacle. After the Arab Spring last year, they foresee the Arab Autumn.
  
• Strategic and operational recommendations. Need to re-adjust currency holdings,  stay invested in Gold, last chance to get out before massive stock market crash and major risk for banks. 
• GEAB $ Index June 2012 - First time since 2006 : The US dollar goes up against the currency basket €, ¥, Ұ et R$ .
• The GlobalEurometre - Results & Analyses. The majority of respondents think that a European solution to the crisis is better than national solutions (96% this month vs 91% last month)

The full GEAB 66 report (PDF format) is available to LEAP 2020 subscribers for 200 Euros per year for 10 new issues + the 6 issues published before subscription.

Barron's Midyear Roundup: Marc Faber Markets Outlook

Now is the time for Barron's Midyear Roundup. They had 10 experts on their panel including Marc Faber. Here are Marc Faber's picks.

Investment/Ticker	Price 6/6/12
Gold (spot, per ounce)	$1,619.30
Goldcorp/GG	40.24
Singapore REITS
Mapletree Comm Trust/MCT	S$0.92
Frasers Centrepoint Trust/ FCT	1.63
K-REIT Asia/KREIT	0.98
Mapletree Logistics Trust/MLT	0.98
Ascott Residence Trust/ART	1.06
Cache Logistics Trust/CACHE	1.03
Parkway Life/PREIT	1.81

and what he had to say:

Are things really as bad as they look?

FABER: The global economy has slowed considerably. Europe is in recession, and growth in U.S. GDP might owe more to statistical aberrations than reality. In Asia, the Chinese economy has been decelerating sharply, which impacts China's trading partners and industrial commodity prices. Lower demand for commodities hurts commodity producers, whether in Argentina, Brazil, Africa, or Russia.

Will things get worse before they get better?
Yes, possibly much worse. Central bankers will argue that more stimulus is needed. But the crisis has occurred in large part because governments have grown excessively large. The private sector produces growth. When government is 40%, 50%, 60% of the economy, the economy won't perform well. If you cut government spending meaningfully, you produce more growth, although this can be painful in the near term. Canada took this course in the mid-1990s. The outlook is grim for the federal deficit in the United States. Regardless of who wins the election, there will be compromises. But spending cuts will be back-end loaded and tax increases will be postponed. We won't see a federal deficit below a trillion dollars for a long time.

What will the stock market do for the rest of this year?
Most markets peaked in May 2011. The S&P 500 fell to 1,074 by Oct. 4 from 1,370. Then we had a strong rebound with the index making a new high at 1,422. This high wasn't confirmed by other indexes, such as the Value Line Index, the Russell 2000, and the Dow Jones Transportation index. The S&P 500 is vulnerable at this level. I anticipate further weakness in the second half of the year. Corporate profits will disappoint. Some 40% of S&P 500 earnings come from overseas, and a large proportion are generated in Europe.
There is no resolution to the problem in Europe because no one wants to accept austerity. The best outcome for Greece probably would be to exit the euro zone. But the new Greek drachma would depreciate by 50% to 70% against the euro. The Greeks don't want their pensions paid in a depreciating currency. Nor do they want austerity, as their pensions and government salaries would be cut by 50%.

How will the stalemate end?
The breaking point could be three, four, five years away. The world is heading toward a major crisis. In the meantime, central banks can continue to print money and markets might move up. Since 2009 stocks around the world have more or less doubled. But the economy hasn't performed well, and the typical household hasn't been helped. With quantitative easing, money flows into the hands of relatively few people. I am very negative about the outlook longer term.
It is safest to buy U.S. Treasuries because the U.S. can print money. It will pay the interest. But you are earning only 1.6%, and the cost of living is increasing by about 5% a year around the world. You are getting a negative real return.

So you're recommending equities, despite the poor backdrop?
I still like my January investment picks. As a group, Singapore REITS look OK. Among them I like Mapletree Commercial Trust [MCT.Singapore], Frasers Centrepoint Trust [FCT.Singapore], K-REIT Asia [KREIT.Singapore], Mapletree Logistics Trust [MLT.Singapore], Ascott Residence Trust [ART.Singapore], Cache Logistics Trust [CACHE.Singapore] and Parkway Life [PREIT.Singapore].
I am also warming to gold shares. Gold corrected to $1,522 last December from $1,921 in September. It rebounded to $1,795 in February and is back down around $1,600. The correction could last longer, but given that governments will print more money, gold is relatively effective as a currency. My preference is physical gold, but I would also own some gold shares, which have been decimated. Goldcorp [GG] is attractive because most of its properties are in the U.S., Canada, and Mexico. The company isn't exposed to regimes that are talking about nationalizing resources. In general, stock markets are oversold. The U.S. government-bond market is overbought. The U.S. dollar is overbought, and gold is oversold near term.

 Source: http://online.barrons.com/article/SB50001424053111904470204577446414018834948.html

Peter Schiff: Buying Treasuries is Like Buying Facebook

Peter Schiff is interviewed on Fox Business News on the 4th of June 2012.

He explains that the next recession (which is coming soon) will be worse than 2008. and the Federal Reserve will have to come up with QE 3 and eventually QE 4.
Interest rates are now too low, and they should be decide by the market instead of the FOMC.
He also compares current US Treasuries massive buys to the frenzy during Facebook IPO, and eventually bond investors will suffer, just as Facebook IPO investors have.

Jim Rogers on Gold, the Dollar, Agriculture, the US economy, 2013 Outlook and Government Statistics

Jim Rogers is interviewed by NewsMax on the 1st of June 2012.

First, he explains his views on the Eurozone crisis (particularly Spain and Greece) and the dollar: a terribly flawed currency, and certainly not a safe haven. Yet he owns the US dollar, because investors still perceive it as a safe haven.

Then he explains why he won't sell his Gold, and on the contrary expects to buy more, much more if it goes down further.

Switching to a typical subject for Jim Rogers: Agriculture. He explains that the agriculture sector will be the place to be in the decades ahead, especially as we run out of farmers.

He gives his outlook for 2013 and it's not pretty. This year should be OK, but a recession will strike hard in 2013 or in 2014 latest. Since the debt is so staggeringly high now, the next crisis will be worse, and recommend the hosts that if they are not worried about 2013, please — get worried.

Jim Rogers explains government statistics such as unemployment and inflation are massaged to look better. The US government is likely to abuse statistics at least until the presidential elections in November.

Finally, he sees the US Economic situation as being  very, very dire because at the beginning of next year, tax cuts are set to expire while automatic spending cuts,  are set to kick in at the same time, a combination dubbed by Wall Street as a “fiscal cliff.” And he says neither Romney or Obama will be able to fix the economy and they don't understand what's going on in the world.

Marc Faber June 2012 Market Commentary

Marc Faber has just released his June 2012 market commentary on the gloomboomdoom.com website.

This month report is entitled "The Political Function of Inflation is to Mislead Public Opinion" and he talks about the distortions created by inflation. He explains that scholars had longer discovered the viciousness of monetary inflation long time ago quoting Nicholas Oresme (14th century):

Among the many disadvantages arising from alternation of the coinage which affects the whole community is....that the prince could thus draw to himself almost all the money of the community and unduly impoverish his subjects. And as some chronic sicknesses are more dangerous than others because they are less perceptible, so such an extraction is more dangerous the less obvious it is.

He carries on saying that we need to consider seriously Sheila Bair’s tongue-in-cheek proposal to fix income inequality with a $10 million loan for everyone, especially if we are to believe the Keynesians that the "economy desperately needs a short run fix" (Krugman).

The main issue is that Keynesian economic policies are directly responsible for the current global economic crisis, because they have led to excessive debts in most Western societies, which will remain for a long time and be a drag on growth.

There is only 1 attachments with this monthly market commentary (MMC):

• "Natural Gas: A Contender for the Greatest Thematic Tailwind over the Next 20 Years" by Pedro Noronha, Noster Capital LLP

I could not find the report online, but this simply makes the case for investing in Natural over the long term. With peak oil, the limitations of coal both in terms of energy as well as political & environmental reasons, natural gas will become more and more prominent in the energy mix. Pedro Noronha is long on CHK.

If you want to access the full Monthly Market Commentary (MMC) by Marc Faber, it is available for 300 USD per year.

PS: Last month he also issued a temporary (and short) report in the middle of the month. I don't have access to it, but this kind of "urgent" report is usually not a good thing...