ECB money cannot help Greece

The ECB could buy all the Greek bonds or lend them the money. It’s futile. The money won’t do anything to Greece. It won’t help Greece. It will keep it kind of afloat. In the end, instead of foreign debt between $200 and $300 billion, Greece will have a trillion dollars in debt.

Greece will not be able to pay its debt

The EU should never have taken Greece as a member. When the first problem occurred a few years ago, they should have written off Greece right away. But no, the central bank and the ECB supported of-course by the Federal Reserve, they kicked the can down the street and lent them more and more money, with the result that Greece now owes the EU and banks in the EU in the tune of $250 to $300 billion. So here you have a little bit of a problem and in my view its inconceivable that Greece will be able to repay their debts, that should be very clear.

Now I'm more interested in what happens if Greece leaves the EU or is kicked out of the EU which I think is the right thing to do. The probability is 50-50. If Greece leaves the EU, what happens to the Euro, Will it strengthen or weaken... I believe it will strengthen. What the Euro needs is strong countries not weak countries. 

The biggest embarrassment to the bureaucrats in Brussels would be that if Greece leaves and does well economically. That would be the biggest surprise and really be annoying to the bureaucrats in Brussels who want to keep the EU at all costs. 

Government policies creating more children born out of wed lock

The question is why, nowadays, there are so many unwed mothers. A sociologist is probably better equipped to answer this question than I, but it would seem to me that there is also an economic explanation. As benefits have increased, an unemployed or low salary earning unwed mother can probably improve her mostly extremely modest standard of living by having some children for whom she can claim all kinds of allowances. (In some Western European countries, such allowances are far higher than in the US.)


VIA thedailyreckoning

Marc Faber: Socialism vs Capitalism

The problem with communism is the whole economy was run by the government. The whole economy was 100% government. 

In Singapore, we had a leader for the last 50 years and he's done a great job and it other countries also we had great leaders. But the issue really is how much governments do you want ? 

How much transfer payments do you want ? 

In my view small government is the best, maximum 15 to 20 percent of GDP. But now in Western world we have more transfer payments and governments close to 50 percent of GDP and in some countries more than 50 percent of GDP. So you have socialism. I'm not suggesting that the capitalistic system is the best, but probably out of all the bad systems it is the best.

Marc Faber on Richemont

Richemont has a lot of good brands, but I see two problems. 

First, the company is catering to the economy of the super rich, and that economy could be vulnerable, especially if asset markets no longer rise in value. 

Number two, many luxury chains have to pay very high prices for stores in the best locations, whether it is in Hong Kong or Zurich, or at the airports. Airport shops cost a fortune. Luxury-goods companies have high fixed costs, and they have to sell a lot of merchandise to cover them.

Some luxury manufacturers, such as Prada [1913.Hong Kong], have had disastrous results of late. I agree that luxury-goods companies are attractive investments long term, as people will buy Cartier and other brands. But I would be relatively careful about these brands and companies in the near term. Tiffany [TIF] just reported that fourth-quarter sales were disappointing, and its shares are off sharply today. [Tiffany fell 14% on Jan. 12.] There could be some disappointments among luxury-goods manufacturers.

Why Chinese stock market has big upside potential

I predicted in October that the Chinese economy would weaken but the stock market would go up. The Chinese stock market is in a similar position to the U.S. market in 1982. At that time, the U.S. market hadn’t done much for a while, and investors were bearish and underweight stocks. Then the market suddenly took off. There has been huge trading volume in Chinese stocks, and many people are opening investment accounts. 

The real estate market is done in China; it isn’t going to rise substantially in the near future, so speculators are moving into stocks. The market has shot up about 50% in the past three months. It will correct a bit, and then go higher. 

Bank stocks, especially, can move up from here. The sector is widely hated and has huge problems, but Chinese banks also have a big customer base.

Gaming and lodging companies tied to Macau were hit hard in the past 12 months and are also worth a look. In December, gaming revenue was down 30%, year on year. The stocks have corrected by 40% to 50%. In the next six months, there will be buying opportunities in the industry. You are paid to wait, because many of these stocks yield about 5%.

Marc Faber says why shorting Aussie Dollar and Canadian dollar could make sense

The U.S. dollar was in a bull market between 1981 and 1985 that exceeded expectations. If that happens again, which seems possible, I would short the Australian dollar. Australia -- and Canada, too -- have overvalued currencies. Mining expenditures for minerals, oil, and gas accounted for 3% of Australian gross domestic product in the 1980s and ’90s. Today such expenditures are more than 7% of GDP.

There is a colossal housing bubble in Australia, fed mostly by rich Chinese. Also, bank loans for real estate are 60% of total loans, the highest ratio in the world, followed by Norway. 

At the moment, the bullish consensus on the U.S. dollar is at a record, and bearish sentiment on the Aussie dollar is high. Many small speculators are short the Aussie dollar. It is possible the situation will reverse in the near term, and the Aussie dollar will rise 3%-5%. That is when I would short the Aussie dollar.

Hospitality REITS in Singapore looking attractive

I have recommended some Singapore real estate investment trusts in the past. They remain attractive as an asset class, but I would shift from the office-REIT market to hospitality trusts, which own hotels, and to health-care trusts. While office REIT's will come under pressure in 2017 because of supply coming on-stream, I am a believer in the growth of tourism in the area. Also, hospital medical expenses are tiny there, in relation to the rest of the world.

In Singapore, I like CDL Hospitality Trusts and Far East Hospitality Trust. Health-care trusts own hospitals that are leased to hospital operators. In that market, I like Religare Health Trust, Parkway Life REIT, and also aFirst REIT [FIRT.Singapore].

Faber likes 30 year US bonds... does not like US Stocks

The U.S. market is expensive. Yet, the whole world seems to think it is the only game in town. That suggests it may be vulnerable to a sell-off. I hate to short individual stocks because an activist could step in and send a stock soaring. Instead, I would short the SOX, or Philadelphia Semiconductor Index, through the iShares PHLX Semiconductor ETF [SOXX]. I would also short the Global X Social Media ETF [SOCL] and the iShares Nasdaq Biotechnology ETF [IBB].

While people think U.S. stocks are the only game in town, U.S. bonds are still attractive. Japanese government bonds now yield 0.27%. Japan’s government debt exceeds 200% of gross domestic product. Compared to these dynamics, U.S. Treasuries are cheap. Last year, I recommended the 10-year Treasury note. This year, I recommend buying 30-year U.S. government bonds.



VIA Barrons 2015 Roundtable