Free Republic

Jim Rogers and Marc Faber See Disaster Looming, Blame The Fed Posted on 12/21/09 at 11:47am by Bud Fox Legendary investors Jim Rogers and Marc Faber have similar outlooks on the financial crisis and the efforts of the Federal Reserve to revive the U.S. economy. What do they think of the Fed's quantitative easing policy? In a word, it is a recipe for disaster. According to Rogers, governments have not addressed the underlying problems which triggered the crisis, but instead have "flooded the world with money." He argues that trying to solve the problem of too much consumption and too...

For many stock investors, this decade can't end soon enough. Even with the rebound this year, the U.S. stock market is on the verge of posting its worst performance for any calendar decade in nearly 200 years of American stock-market history. Investors would have been better off investing in pretty much anything else, from bonds to gold or even just stuffing money under a mattress. Since the end of 1999, stocks traded on the NY Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade. In the process, the market has provided a...

China Acts To Calm Its Overheated Real Estate Sector - And Misdiagnoses the Problem by: Patrick Chovanec December 20, 2009 China’s leaders are becoming increasingly alarmed that a bubble may be forming in the country’s booming real estate sector. That’s why, late last week, they announced the reimposition of a nationwide property sales tax in an effort to rein in speculative buying. But while their intentions are sound, the new tax takes China in entirely the wrong direction, and is more likely to make the problem worse rather than better. To understand why, it’s important to realize what the new...

Dow Selloff Goes Triple Digits, Gold Tanks, Traders Sense "Different Feel" Joe WeisenthalDec. 17, 2009, 12:07 PM Maybe the bull argument -- that the market is barely down despite all the bad news -- won't hold up. The Dow is now down triple digits. Gold is down over $30 and may not hold $1100/oz. One trader we we talked to acknowledged a noticeably "different feel" to the market today. Between the amazing, surging dollar, and all the other fears, we'd have to agree.(What's up?)

No, but for a long time they seemed to. The best kept secret of the past 20 years has been this: When the Los Angeles Lakers won the NBA championship, the market would almost always fall that year. When the Lakers lost, the market would usually rise. An investor who put down $1,000 into the Nasdaq at the start of 1987 and stayed fully invested through 2007 would have ended up with $7,604. But an investor who bought the Nasdaq in years the Lakers lost and stayed in cash when the Lakers won would have finished with $21,189.

Is That A Door Slamming?Posted by Karl Denninger in Banking System at 14:48 Tuesday, December 15. 2009 Gee, you think this might have something to do with the equity and tarp exit right now nonsense? Citibank card chargeoffs 10.29% .vs. 8.79% (all month-over-month) and $617 billion in "Citi Holdings" (worth god only knows what), a cutesy game of asset-shifting and sausage-hiding the bank set up after Pandit came to power. Capital One 9.6% .vs. 9.04% AXP falls to 7.6% (that's actual improvement; was 7.8% last month) JP Morgan/Chase, 8.81% .vs. 8.02%. Bank America, 13% .vs. 13.22% (is that percentage even...

Has The Stock Market Finally Woken Up To The European Crackup And The Surging Dollar? Joe WeisenthalDec. 15, 2009, 4:33 PM Stocks weren't down by that much today -- the Dow was just down 50 -- so there's no reason to get too freaked out yet. But we wonder if just possibly the market is waking up to the new world that's emerged in the last couple of weeks. Gold is at a 4-week low. Oil is below $70. The dollar is surging. Unemployment in the US is tapering. The Euro appears to be breaking up (it's not yet, but...

Merrill Lynch: Ignore The Bubble In Pessimism, 2010 Will Be Awesome The Pragmatic CapitalistDec. 15, 2009, 4:53 AM We are just about finished wrapping up our series on 2010 outlooks. In this article we’ll outline Bank of America Merrill Lynch. Bank of America Merrill Lynch is very bullish heading into 2010 (an outlook similar to RBC). They see many of the trends of 2009 continuing into 2010 and driving equity markets around the world higher by double digits (see JP Morgan’s bullish emerging market outlook here). Ethan Harris, head of North American economics summarized the Merrill outlook: “We believe the...

Overrating Agencies (Economy) By Joel Bowman 12/13/09 Taipei, Taiwan – As nervous investors await news of the next sovereign debt debacle, Moody’s Senior Vice President Tom Byrne gave them another reason to remain on guard this week. During an interview in Singapore on Friday, Byrne made the following comment concerning the health of the US and UK economies. “The outlook is stable.” Byrne’s placating remarks came in quickstep after a report from his firm earlier in the week let slip that the two massively indebted sovereigns may “test the AAA boundaries.” That report, in turn, emerged after the kafuffle in...

But silver is where the real opportunity lies. Jim Rogers has been doing the media rounds lately, and yesterday evening he showed up on CNBC talking to Maria Bartiromo. He remains -- not surprisingly at all -- bullish on gold and silver. CNBC: With central banks now buying gold and many people worried about paper money, gold will be a great investment over the next decade and relatively few people are invested in it, he said. At a speech in Prague Rogers surveyed about 300 people, including big money managers, and 76 percent had never owned gold, he said. "So...

Richard Russell: Downturn Will Be 'Vicious' by: The Pragmatic Capitalist December 09, 2009 Despite the incredible 60% rally and chatter of a new secular bull market many investors remain highly skeptical of the equity markets. David Rosenberg recently released his 10 reasons why the rally is over and Meredith Whitney says the market is again at risk of a downturn. But there is perhaps no one more skeptical of the rally than the great Richard Russell, author of the Dow Theory Letters. Russell continues to believe we are in a secular bear market and currently believes we could be in...

Hedge Fund Titan John Paulson Bullish On Bonds And Equities, Inflation Concerns Remain Stock-Markets / Investing 2010 Dec 09, 2009 - 09:59 AM By: Trader_Mark John Paulson... super bull? Goodness. To some degree I find "whale watching" a bit overrated, but after being the most obvious winner of the mortgage meltdown, and then piling into gold ahead of a huge run ... Paulson's moves are watched by the investment world very closely. One of the hottest investors on the planet is now chock full of bonds - especially the moral hazard kind (i.e. backstopped by US government). And has his...

Negative Data For Global Growth By Chris Gaffney 12/09/09 St. Louis, Missouri – The dollar continued to gain strength throughout Tuesday, but gave back some of these gains overnight. The big story yesterday was the downgrade of Greece’s debt rating by Fitch Ratings, and warnings of possible rating downgrades for the US and UK. The sell off in oil has also weighed on some of the commodity-based currencies, but I’ll start today’s Pfennig with some data releases. Japan’s economy expanded less than a third of the pace initially reported as companies slashed spending. GDP rose an annualized 1.3% in the...

As multinational military forces have left Iraq, international petroleum companies have eagerly descended -- seduced by the long-term potential of vast oil reserves off-limits to foreigners for decades. Yet lingering violence, legal questions and political uncertainty make doing business in this country a gamble. In the first international oil auction held last June, widely seen as a failure, the Iraqi government awarded a firm contract to only a consortium of British Petroleum and the China National Petroleum Co. to further develop the Rumaila field over 20 years. Iraq recently forged an initial agreement with a group comprising Exxon Mobil and...

Fund executive: Don’t Expect V-Shaped Recovery Published: Monday, December 7, 2009 By Trevor Delaney, AP Personal Finance Editor NEW YORK — There’s something different about the Masters’ Select Funds. Though it’s not unusual for mutual funds to be managed by a team of professionals, these funds put a different spin on it. Rather than bulk up with a sizable in-house team of analysts and portfolio managers, to establish their Masters’ Select Funds, Litman/Gregory Fund Advisors chose to play the role of overseer. It hired highly-regarded money managers as sub-advisors — each responsible for a portion of one of its funds....

80% Chance Of A Market Crash In The Next Year John P. Hussman, PhDDec. 7, 2009, 6:12 AM The following is an excerpt from fund manager John Hussman's weekly letter. You can read the whole thing here. I noted last week that from a Bayesian perspective, I would estimate a probability of nearly 80% that we will observe a second round of credit losses coupled with a market plunge in the coming year or so. That doesn't imply an all-out “crash,” but more likely a retreat similar in size to what we have often observed following other post-crash rebounds (about...

View to 2010: Downside Risks At Least As Great As Upside Potential J.D. Steinhilber December 07, 2009 Our stock market outlook is neutral as we move towards the end of 2009. The weight of the evidence seems to favor a continuation of the bull market into the first half of 2010, with the potential for additional gains in the broad averages of 10% to perhaps 20%. However, we expect bear market conditions will return at some point next year. The performance of the economy and corporate earnings will disappoint, as the private sector continues its deleveraging process, and government stimulus...

China: Don't Panic, We'll Keep Buying Tons Of Dollars Vincent FernandoDec. 5, 2009, 2:18 AM The Chinese government has come out to remind the market that it will keep buying dollats as its core currency reserve holding, even though it believes the dollar will depreciate in the long term. WSJ: "The composition remains as it was before. There is no major change" in the reserves, said Wang Xiaoyi, vice director of SAFE, which oversees the reserves. "We are not making any big adjustments in direction. Our operations are still as usual, meaning they follow the existing forex reserves management goal,"...

Precious Metals Stocks, Breakout Or Plunge? Commodities / Gold & Silver Stocks Dec 02, 2009 - 07:12 PM By: Przemyslaw_Radomski In a world of paper currencies and paper promises, I can think of many reasons right off the top of my head why the price of gold will continue to go up in the long term, however since this essay's length is limited, I'll just mention 5 of them. In short, while it may feel like a bubble to some, I believe we are just warming up. Last week I mentioned a few of such reasons, but I would like...

I am a real estate investor (wholesaler, for now) in the Baltimore, MD area and I was wondering if there were other RE investors out there in FRland. I wanted to open a forum thread to discuss strategies on how to invest in these harsh economic times and what to invest in. I've been a Real Estate investor for about a year and believe that we have a huge opportunity to make good money given that the housing market is so low. You know, buy low, sell high, right? However, I would like to talk to other RE investors who...

Is $6,300 Fair Value For Gold? By Ambrose Evans-Pritchard Economics Last updated: November 19th, 2009 The last parabolic spike in gold took off when central banks joined the fray in the 1970s, hoarding bullion with the same enthusiasm as gold bugs. Dylan Grice from Société Générale says it smells much the same today. He sees an eery similarity between the decision of India’s central bank to buy half the IMF’s entire sale of gold, and the move by France’s central bank to start converting dollars into gold in 1965 — which was, of course, the start of the slippery slope...

"The Illusion of Prosperity": U.S. Destined to Lag Rest of the World, Peter Boockvar Says Posted Nov 19, 2009 09:00am EST by Aaron Task in Investing "It's dangerous to be short this market," says Peter Boockvar, equity strategist at Miller Tabak. Despite a penchant for bearishness, Boockvar says the rally can continue as long as the Fed keeps rates at zero. "When you cut rates to nothing you're encouraging people to take risk," Boockvar says. "As long as asset inflation is [the Fed's] goal, the market could go higher but there are obvious consequences," including inflation. The Fed is trying...

Albert Edwards: The Market Will Hit New Lows Next Year Joe WeisenthalNov. 10, 2009, 11:34 AM SocGen's resident uber-bear Albert Edwards is at it again: Reuters (via Paul Kedrosky): People should question the happy clappy nonsense from sellside analysts," London-based Edwards, a global strategist with SocGen's Corporate & Investment Banking group, told a media briefing. "We are not saying that people should not participate in the rallies -- that will get you fired as a fund manager -- but they should not become too convinced of the recovery," he said. Edwards is more worried about Japan in the near term...

Rosenberg: Something Big Is About To Happen The Pragmatic CapitalistNov. 10, 2009, 12:59 PM David Rosenberg notes the incredible lop sided trading environment. The dollar short/long equities trade has become the no-brainer trade and is beginning to appear crowded. David notes: Looking at the latest Commitment of Traders (COT) report, we can see some pretty interesting (and potentially disturbing) trends taking place (data for November 3rd): The only areas where the speculators (non-commercial accounts) are net short are in Treasuries and in the U.S. dollar. Everything else has massive net speculative longs and hence near-term vulnerable to a reversal. There...

That 10.2% Unemployment Report Was The Best Thing That Could Happen To Stocks Joe WeisenthalNov. 9, 2009, 6:56 PM Friday was stunning. After a shock unemployment reading of 10.2%, the market surged. And then, after a weekend of stewing things over, markets rocketed higher again today, and are now comfortably sitting at the highs of the year. So why the powerful rally despite the so-so fundamentals? Maybe because rising unemployment guarantees a continuation of sub-0% interest rates. Think about it. In recent months, stocks have maintained a tight 1-to-1 inverse correlation with the dollar. As the dollar declines, stocks go...

Stocks now pay way less than bonds once again, but neither pay much... BLINK and you missed it. US equities offered a greater yield on investment than did US Treasury bonds for less than five months... And from the day this oddity struck, 18 Nov. 2008, the S&P still had another one-fifth to fall. "When this inversion occurred, my two older partners assured me it was an anomaly," wrote the late Peter Bernstein in Nov. 2008. The inversion Bernstein referred to had occurred five decades earlier...back when the dividend yield offered by US equities slipped below the yield offered by...

Go For Gold: If The Fed Keeps Printing, The Dollar Will Keep Falling Posted Oct 22, 2009 07:30am EDT by Peter Gorenstein Gold bugs are buzzing with excitement. While the dollar continues to tank, the cheers from folks like Peter Schiff get louder. Ahbay Deshpande portfolio manager with the First Eagle Gold Fund takes a more measured approach to gold. He says talk of $5000 gold – an idea recently promoted by Schiff on Tech Ticker - is probably premature. However, "eventually we'll get there," he says, noting that "as sure as the Federal Reserve will print money and credit...

At The Value Investing Conference, All Anyone Wanted To Talk About Was Gold Joe WeisenthalOct. 21, 2009, 7:15 AM Rolfe Winkler makes an anecdotal, but important, observation from this week's Value Investing Conference Looking out a few years, I’m as bearish as anyone, I admit. But I’m a little worried that suckers could get caught in this gold rally. A hedge-funder I spoke with at the Value Investing Congress said half of the sessions were devoted to doomsday scenarios, precious metals, etc. Today there was a keynote from Eric Sprott of Sprott Asset Mgmt. Fully 70% of his assets under...

Now that the credit/bank crisis is two years old, and the Dow around 10,000, gold is at highs over $1000. One would think that with $3 trillion of direct US Fed bailout cash, plus $17 trillion of various guarantees and singlehanded support for the US mortgage/financial markets would do something. After the ‘Cash for Clunkers' stimulus, and all the other money thrown into the banking system since the collapse of Lehman a year ago, one would expect some kind of economic rebound. The financial pundits are all making a big deal out of the Dow rally to 10,000. Will it...

Having risen approximately 300% since the start of its bull run in 2001, Gold has far outpaced the investment gains in virtually every other investment class, including stocks, bonds, real estate and cash. Gold bugs feel certain that this time will be the ‘big one,' and that the precious metal will likely hit $2,000 - $3,000 an ounce, if not higher. Commodity experts like Jim Rogers also believe that Gold will continue to surge higher, right along with most energy, food and base metal commodities; in fact, some believe that the bull run in commodities still has another 5 -10...

I can't think of a better way to describe the last 2 years than as times of great uncertainty. Not only did we have two near catastrophic banking failures worldwide, but we also have the ever present Iran Israel nuclear contention. The USD held reasonably well during this period, although it's weaker. In any case, gold has held up amazingly well over the period of the last two years too, in fact is at highs. What else is except US T bonds? Pimco's Bill Gross just said the longer term of the US T yield curve is flattening and that...

Unlike the "legitimate bull markets" of many foreign markets, Peter Schiff believes the U.S. is merely experiencing a "rally in a bear market," and is lagging the rest of the world "for a reason." The worst is not over, according to Euro Pacific Capital's Schiff, who predicts the Dow will fall another 90% from current levels when measured against gold. A longtime dollar bear and gold bull, he foresees gold hitting $5000 per ounce "in the next couple of years," and predicts the Dow and gold will trade on a one-to-one ratio vs. the current level of around 9.7-to-1. Schiff...

"Whether through exuberant hedgies or anxious private investors, gold just keeps pushing higher..." SO SPECULATIVE BETTING on gold going higher now equals a record-busting 752-tonne position in Comex futures and options, yet this is not a bubble according to Michael Pento of Deltaga. Let's say otherwise. Let's say that gold prices, surging by almost $100-per-ounce in barely a month, are very much in a bubble...blown up by near-zero interest rates worldwide and a sharply negative cost of borrowing after inflation. Were that the case, the question before potential and existing investors would be simple: Is this "irrational exuberance" or a...

Hao Ting, who owns a petroleum-equipment business in Beijing, recalls the investment sales pitch from her private banker in Hong Kong at Singapore's DBS Bank: "The world is made for wealthy people. The more wealth you have, the easier it is to make money." Today she's out $10 million and owes the bank another $12 million. Hao and the bank are now suing each other in Hong Kong, with the bank saying it followed "local regulatory guidelines."

Talk is now circulating in financial quarters of a new "mini-bubble" in the making. Apparently the unbounded rise in the stock market is reviving fears of another collapse like the one suffered last year. Another reason that the "hated rally" has sparked fears is that we're about a year removed from the final "hard down" phase of last year's 6-year cycle collapse. September 2008 witnessed the financial markets crater and the intensity of last year's fear was unmatched in our lifetime. Not even the 1972-74 bear market, which was the worst since the Great Depression, witnessed a comparable level of...

Cs, broadband Internet connections, online brokerage accounts. These advances brought democracy to Wall Street, leveling the playing field between everyday investors and the insiders, right? Wrong. In fact, computers are ruining investing for the average investor. Sure, your PC lets you see when your stock is moving. But multiply its computing power by thousands, add a throng of software geniuses earning more than $1 million a year and an army of full-time analysts, and you start to understand how the biggest brokerages and hedge funds can stay a few steps ahead of any move you can make. Yes, you can...

The announcement of record profits for Barclays Capital on Monday was greeted with a bigger dose of resentment than of relief that the financial crisis has not proved absolutely terminal.There remains a deep sense of unease about investment banks and the techniques they use to make money. In my view, this is due in part to the veil of mystery that shrouds their operations. There's a lingering suggestion that money is being generated out of thin air and that this shouldn't be possible. It's unlikely that any hedge fund or investment bank will open their doors and say "look guys, here's how...

Did you know that the election of Barack Obama means that conservatism is dead forever more? The New Yorker thinks it is anyway. Its recent piece on the authors of the “Little House on the Prairie” series not only pronounces conservatism likely dead but also imagines the same fate for capitalism itself. This is just another example of how the self-congratulatory, isolated left constantly announces the death of capitalism and conservatism as it has been doing since FDR, our second most socialist president ever, came to power. So how does one get from talking about the beloved children’s classic of...

Since the 1950's GDP has largely been used to measure the economic well being of nations. It is the arguably the foremost statistical factor that economic growth is derived from. To illustrate the idea of why GDP is a poor gauge of well being in a country consider this example for a moment. In the US, any money spent to re-develop the World Trade center in New York after September 11th has in one way or another counted towards GDP growth. The same goes for any other natural or manmade disaster throughout the country. Likewise, any money spent by the...

The evidence keeps piling up that the U.S. economy has reached bottom and that a recovery of some sort is in the cards for the second half of this year. But that's where the consensus ends. The shape of any recovery remains a matter of heated debate on Wall Street. [...] The end result is that the recession that began in late 2007 has been worse than the initial estimates indicated. That, however, raises the possibility of a V-shaped rebound, because deep recessions typically have been followed by fast comebacks. But as everyone knows, the backdrop for this recession has...

Given the chance to make 30% in stocks or 25% in bonds (from the March lows), you ought to pick the bonds. Why? Two reasons...

Daniel Rice, manager of the BlackRock Energy & Resources Fund, is the best-performing U.S. equity fund manager of the past decade, according to Morningstar. He's also not afraid to speak his mind, especially when it comes to the subjects of global warming and alternative energy, as revealed in the accompanying video. Rice paints a "pretty dire picture" of the whole alternative energy industry, with the possible exception of wind, based on the following: Global warming patterns have reversed in the past decade, Rice says, citing studies by meteorologist Dr. Judah Cohen, whom BlackRock has on retainer. Ten years is microscopic...

Foreign currency funds can protect you from a dollar decline, but they might not be necessary. This week's G-8 meeting in Italy has kicked off with the traditional warm-up event -- yet another debate about whether the dollar will, or should, lose its place as the world's reserve currency. This time the governments of China, Russia and Brazil all plan to raise the issue. In keeping with recent tradition, any demands that the dollar be toppled will, of course, be accompanied by soothing remarks that they are demanding no such thing. For the rest of us, this debate raises three...

President Obama's nomination of federal appeals court Judge Sonia Sotomayor to replace retiring Supreme Court Justice David Souter heralds yet another victory for gun-makers. Yes, you read that right. Let me explain. While most investors have been rightly focused on the crisis in the markets and economy lately, some Americans have been focusing on other political issues, namely the Second Amendment. They wonder, will the Obama Administration and new Supreme Court nominee Sonia Sotomayor put the right to bear arms in jeopardy? Clearly, many think so, as evidenced by an increase in gun sales and an associated rally in gun...

Not one investor in a hundred realizes this, but now is a once-in-a-lifetime opportunity for income investors. Most people will never recognize this opportunity because they don't know what a truly great income investment is. Most income seekers like to buy things like commercial real estate stocks (REITs) to collect rents. REITs have a big problem: They're required by law to pay out 90% of their distributable earnings. So if they want to grow, they have no choice but to take on debt or dilute your interest by selling more shares. That's why so many REIT dividends have been cut...

Islamic supremacism takes another leap. Standard & Poor's starts TSX Islamic index Standard & Poor's is launching an index of large Canadian stocks with criteria defined by Islamic law – no companies with businesses in financial services, entertainment, alcohol, pork-related products or tobacco. The index operator said Wednesday the Shariah-compliant version of the S&P/TSX 60 "will create new opportunities for Islamic investors to benchmark their Canadian investments, and for asset managers to create new investment products serving the Islamic community." The S&P/TSX 60 Shariah index joins Standard & Poor's Shariah-compliant indexes in 51 other markets, including the S&P 500 Shariah,...

Are Bonds the New Stocks? Q&A with Robert D. Arnott This prominent financial analyst contends that the ‘cult of equities’ has obscured for many the importance of bonds, which can outperform equities for extended periods of time.

Maybe your DNA made you do it. Whatever investing mistake you have committed lately, there is probably a gene that is often associated with that behavior. Are you predestined to be the prisoner of your genetic code? To find out, I recently spent a day at the University of Pittsburgh getting a battery of DNA analyses and brain scans. I consider myself a patient and disciplined investor, so I volunteered as a guinea pig in Ahmad Hariri's imaging genetics lab to learn how my genes and brain activity shape my behavior. The results shocked me. After I spit into a...

nternational power broker Henry Kissinger -- who also happens to be Tim Geithner's first employer out of college -- said in a 2007 interview with Charlie Rose that "we're at a moment when the international system is in a period of change like we haven't seen for several hundred years." And what's changing? Former President of the World Bank James Wolfensohn is more specific:

You can't be a successful investor unless you can overcome your fears. So what's bothering you? Maybe, after reading one too many stories about investigations of Ponzi schemes, you are fearful that your entire portfolio may have been embezzled. Huge and scary! Yet I've seen nothing addressing this well and simply. There is one foolproof, easy way to be sure this never, ever happens to you. If you hire anyone to make investment decisions for you, be sure it, he or she is separate from whoever has custody of your money. That's it. Have your assets held at a major-name...