Marc Faber December 2012 Market Commentary

Marc Faber has just released his December 2012 market commentary "Always try to be a little kinder than Necessary" on gloomboomdoom.com.

This month report explains that something is clearly not quite right with the economy, as the recent performance of Wal-Mart, Tiffany, Genesco, and Kohl’s show. What concerns Marc Faber greatly is that most asset markets had outsized gains since early 2009, excluding Vietnamese, Chinese, Japanese, and European equities, as well as US housing. He believes that investors’ expectations about future returns are far too optimistic, and that in a world that currently hardly grows, investors will need to reduce their future return expectations. Therefore, 2013 will most probably not be a good year for holders of assets, and he has now shifted to the preservation of the outsized gains he has achieved over the last 3 years.

Marc Faber also wishes Merry Xmas to everybody and reminds his readers to try to be as nice and kind to other people quoting Albert Schweitzer: "Constant kindness can accomplish much. As the sun makes ice melt, kindness causes misunderstanding, mistrust, and hostility to evaporate." 

The monthly market commentary including one attachment:

• The Fed’s Last Hope by Michael A. Gayed,Chief Investment Strategist at Pension Partners, LLC.

I cannot find the attachment, but Gayed mentions it in a marketwatch.com articles, and explains bonds have now very little value, and the relative advantage of dividend yields over bonds yields, will be bullish for stocks.

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

Jeremy Grantham's Quarterly Newsletter November 2012 Summary

Jeremy Grantham, GMO, has just released GMO Quarterly Newsletter which includes 2 parts:

• On the Road to Zero Growth by Jeremy Grantham (16 pages)
• "Help, Help, I’m Being Repressed!" by Ben Inker (3 pages)

The first section Jeremy Grantham explains that GDP growth in excess of 3% a year for the US is a thing of the past, and going forward growth is likely to be within 0.9%  a year. Even this estimate is optimistic as resources price increases are not taken into account, and those could eventually lead us to growth very close to 0%.

Here are the key points brought forward by Jeremy Grantham:

• The U.S. GDP growth rate that we have become accustomed to for over a hundred years – in excess of 3% a year – is not just hiding behind temporary setbacks. It is gone forever.
• Going forward, GDP growth (conventionally measured) for the U.S. is likely to be about only 1.4% a year, and adjusted growth about 0.9%.
• Population growth that peaked in the U.S. at over 1.5% a year in the 1970s will bob along at less than 0.5%.

• Productivity in manufacturing has been high and is expected to stay high, but manufacturing is now only 9% of the U.S. economy, down from 24% in 1900 and 15% in 1990. It is on its way to only 5% by 2040 or so. But growth in service productivity in contrast is low and declining. Total productivity is calculated to be just 1.3% through 2030, if we use current accounting methods.
• Current accounting cannot accurately handle rising resource costs. Spending $150-$200 a barrel in offshore Brazil in the future to deliver the same barrel of oil that cost the Saudis $10 will result perversely in a huge increase in (Brazilian) GDP. In reality, rising resource costs should be counted as a squeeze on the balance of the economy, as they lower our total utility.
• Measuring the non-resource balance of the economy produces the correct effect. The share of resource costs rose by an astonishing 4% of total GDP between 2002 and today. It thus reduced the growth of the non-resource part of GDP by fully 0.4% a year.
• Resource costs have been rising, conservatively, at 7% a year since 2000. If this is maintained in a world growing at under 4% and a developed world at under 1.5% it is easy to see how the squeeze will intensify.
• The price rise might even accelerate as cheap resources diminish. If resources increase their costs at 9% a year, it would take just 11 years before the economic system would be in reverse in the US! If, on the other hand, our resource productivity increases, or demand slows, cost increases may decelerate to 5% a year, giving us 31 years to get our act together.
• Increasing climate damage, reflected mainly in food prices and flood damage, is going to increase. With  any luck this will not be severe before 2030 but it is very likely to accelerate  between 2030 and 2050.
• U.S. real growth, according to GMO forecast, is 0.9% a year through 2030, decreasing to 0.4% from 2030 to 2050.
• GDP measures must be improved so that they begin to measure output of real usefulness or utility. The  current mish-mash of costs and of “goods” and “bads” produces poor and even damaging incentives. 
• Investors should be wary of a Fed whose policy is premised on the idea that 3% growth for the U.S. is normal.  Remember, it is led by a guy who couldn’t see a 1-in-1200-year housing bubble! Keeping rates down until productivity surges above its last 30-year average or until American fertility rates leap upwards could be a  very long wait! 

In the second part, Ben Inker talks about the Federal Reserve monetary policy, and even though QE managed to increase assets value, it did not really succeed in creating a wealth effect. The only one who benefited are households owning a house and carrying mortgage debt. as they could refinance their debt.  However, the other side is the coin, is that banks (such as Fannie and Freddie) have to pay the bill, and since those are owned by the government (i.e. taxpayers), as a whole there is no wealth effect. Due to low interest rates. this policy actually hurts prudent investors.

GEAB 69: Katrina-Sandy : From one Storm to the Other, the End of America as we Knew it

Here are the highlights of GEAB 69 (Novenber 2012) entitled "Katrina-Sandy : From one Storm to the Other, the End of America as we Knew it":

• Katrina-Sandy : From one Storm to the Other, the End of America as we Knew it - The LEAP team has a controversial view that says Sandy, a small storm that has put New York to its knees, has shown that America has greatly weakened, and that it's the country we once knew anymore. In this section they also address the political division of the US and its dire financial & economic situation.
• 2013, the king is naked: The great geopolitical dislocation of America. - The US economy is slowly but surely weakening, and 2013 will be the year of the real crisis where the "dollar wall" will collapse.
• China 2013 : The global riot laboratory - A view of riots in China, and their consequences.
• A Canadian Tragedy – The Slump of its Real Estate Market - Contrary to the view of Canadian banks who see a market stabilization, LEAP believe the recent slumps in Toronto and Vancouver announced the popping of the Canadian real estate bubble.
• Strategic and operational recommendations. Currencies may remain irrational for a little longer, it's not to late to escape from the stock market, get physical Gold and do not play short term trades, energy commodities are better for the long term, but may suffer in the short term, and it's really not a good time to invest in Canadian real estate..
• The GlobalEurometre - Results & Analyses. Only 65% of respondents expect the dollar to go down, which is the lowest figure since the survey started.

The full GEAB 69 report (PDF format) is available to LEAP 2020 subscribers for 200 Euros per year for 10 new issues + the 6 issues published before registration.

Marc Faber - Coming Next: Global Crash and U.S. Treasury Bubble Popping

Marc Faber is interviewed on Capital Account (Russia Today) by Lauren Lyster, where the talks about his views on US treasuries and capital markets, the Chinese economy and the consequences of a Chinese slowdown.


First, he explains that since 1981 were the yield was above 15%, US treasury have been in a bull market and is in bubble territory. But as with the Nasdaq in 1999, a bubble can continue inflation, and some friends of Marc Faber think 10 years trasuries will eventually yield less than 1%, and 30 years less than 2%. But his own view is that if yields increase again in markets such as the US and Japan, money will flow into equities, so he's not really worried if stock markets go down, even though he does not rule out a crash.

When asked about China, he basically says that Chinese government numbers are bogus, and when you look at Taiwan and South Korea, you'll find their exports to China are flat, and electricity consumption in China also show a weak picture of the Chinese economy.

Finally, he gives his outlook on what is happening now, and explains there is clearly a recession in Europe, the US is slowing down, but a China slowdown would be more important to the global economy, because it would have a strong impact on emerging economies. Currently Asia is certainly not in recession, but there is basically no growth.

Marc Faber appears in the first 10 minutes below, and the second part is about Libor with a zero hedge contributor.

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 May 2012 Market Commentary

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

This month report is entitled "Economics is the Sum of all our Choices". In this report, he refers to Alfred Marshall, one of the greatest economists that ever lived, who wrote in “Principles of Economics” that, “economics is a study of mankind in the ordinary business of life” and that, “the laws of economics are to be compared to the laws of the tides, rather than with the simple and exact law of gravitation. For the actions of men are so various and uncertain, that the best statement of tendencies, which we can make in a science of human conduct, must needs be inexact and faulty.” Mar Faber then explains that the same principles can be said about the movement of asset markets. Any forecast is therefore going to be inexact and faulty. 

There are 3 attachments with this monthly market commentary (MMC)

• A report by Geoffrey Batt,  Managing Member at the Euphrates Iraq Fund Ltd.
• "Another tsunami of cash is hitting Dubai, get invested!" by Peter Cooper at Arabianmoney.net
• A newsletter by the Child’s Dream Foundation, a charitable, not-for-profit organisation dedicated to empowering marginalized children and youth in the Mekong Sub-Region, which includes Myanmar, Laos, Thailand and Cambodia.

If you want to access the full Monthly Market Commentary (MMC) by Marc Faber, it is available for 300 USD per year. Sometimes, Summaries or highlights are available on the web, I'll repost it here if one becomes available.

GEAB 64 - France 2012-2014 - The Great Republican Earthquake and its International Impact

François Hollande

Here are the highlights of GEAB 64 (April 2012) entitled "France 2012-2014 - The Great Republican Earthquake and its International Impact":

• Global Systemic Crisis: France 2012-2014 - The Great Republican Earthquake and its International Impact.  François Hollande victory will trigger a set of massive changes in the direction of the European project, which make the French presidential election more important than the US presidential race.
• Political Anticipation Methodology - Knowing how to decrypt the attempts to take control of the collective psyche.LEAP here talks about the methods used by government (e.g. declaring wars) to control the collective narrative, for example by inventing an Iranian threat...
• The madness of Canada real estate, repetition of the US mistakes – Towards a slump in price between 15% to 25% from 2013. The current real estate boom in Canada is due to excessive private debt.
• Strategic and operational recommendations. AUD and NZD outlook, the great fiscal attack starts now, the next leg down for the US stock market and economy has (re)started, Canadian residential real estate prices will sharply drop and European politician ready to counter attack against Euro speculators.
• The GlobalEurometre - Results & Analyses. 74% of respondents (vs. 71% in March 2012) expect a sharp decline of the US dollar.

The full GEAB 64 (PDF format) is available to LEAP 2020 subscribers for 200 Euros per year (10 + 6 issues). 

Marc Faber: The Derivative Market Will Cease to Exist

Marc Faber is interviewed by Reuters (8th of December 2011) and says there will be a global market collapse and the entire derivatives market will one day cease to exist.

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.

Overpopulation and Lack of Morality are Major Economic Issues

Jeffrey Sachs is an American (mainstream) economist and Director of The Earth Institute at Columbia University. I was pleased (but shocked) that he addressed two "hot" issues (Overpopulation and Lack of Morality) and their effects on the economy.

In the first video "7 Billion People Equals (At Least) One Major Problem" he explains that the current population growth is not sustainable and that we must find ways to control this growth. His solution is to decrease the fertility rates, by actually decreasing the child mortality rate, as in developed countries couple make many babies to make sure they will be taken care of during the old age as there is no social security over there and traditional kids have to take care of parents. I don't think this would cut it, but this is a starter.

In the second video "U.S. Can Come Back by Rediscovering Virtue", he explains that if Americans can rediscover virtue and morality (a la Marc Faber), the US economy will improve. He started by saying "First I would like a return to legality. So much of the financial crisis was not only about poor judgment, but breaking the law... We need a moral economy -- if everybody thinks they can push every limit we're not going to have a functioning society."

He continues by saying we need a more collective actions and at the individual level he calls for each of us to strive to be virtuous, both in our personal behavior (regarding saving, thrift, and control of our self-destructive cravings) and in our social behavior as citizens and members of powerful organization, whether universities or businesses.