Marc Faber interview with One Road Podcast

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Hints of a Cryptocurrency bubble

Excerpt below from Marc Faber's December 2017 Market Commentary


THE PURPOSE OF ARGUMENT, OR OF DISCUSSION, SHOULD NOT BE TRIUMPH, BUT PROGRESS.

My friend Laeeth Isharc always sends me fascinating articles on just about any subject I can think of. The other day he sent me a piece which appeared in the New York Times by OP-ED writer Adam Grant entitled, "Kids, Would You Please Start Fighting?" 

Grant believes that if kids never get exposed to disagreement, we’ll end up limiting their creativity. 

He adds that, "We’ve known groupthink is a problem for a long time: We’ve watched ill-fated wars unfold after dissenting voices were silenced.….Teaching kids to argue is more important than ever. Now we live in a time when voices that might offend are silenced on college campuses, when politics has become an untouchable topic in many circles, even more fraught than religion or race. We should know better: Our legal system is based on the idea that arguments are necessary for justice. For our society to remain free and open, kids need to learn the value of open disagreement. 

If no one ever argues, you’re not likely to give up on old ways of doing things, let alone try new ones. Disagreement is the antidote to groupthink. We’re at our most imaginative when we’re out of sync. There’s no better time than childhood to learn how to dish it out - and to take it."

I fully agree with the views of Adam Grant. In my dealings with financial institutions I observed that fund management companies performed better if they had eclectic employees with completely different views about economic and financial trends than fund management companies whose senior staff members had homogeneous views and identical investment styles.

There are currently some interesting developments in financial markets. Momentum stocks such as Facebook, Amazon, Alibaba, Google, Microsoft, etc. seem to be under liquidation as investors shift their funds to other momentum markets. On both November 28 and November 29, when the Dow soared by 255 and 103 points respectively, most tech stocks were down.

It is entirely possible that the stock market continues to move up, but that the momentum stocks of 2017 fall by the wayside and underperform the overall stock market. It is not unusual that once a momentum sector goes out of fashion, the speculation moves to a completely different asset class.

In this context 2017 is a very special year. Not only has the speculation shifted to another asset class but to an entirely new asset class: cryptocurrencies.

With the advent of cryptocurrencies an important missing link in the final phase of the great asset bubble of 1981 to 2018 has been fulfilled: Heavy public participation towards the end of a major asset bubble.


via gloomboomdoom.com

Rise and Fall of civilizations

Marc Faber talks about the history of civilizations dating as early as the Egyptian empire.

Democracy and Social Security is a experiment, we don't know how long it will last.

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"Western leaders subconsciously realize they have to control the population somehow, and one way to control the population is to make them equal. One thing many people don't realize is democracy and Social Security is a experiment, we don't know how long it will last. For the last 5000 years we didn't have democracy."

There should be more focus on important issues such as excessive debts and unfunded liabilities

Marc Faber denounces the focus by the media on unimportant issues on his latest market newsletter,

"The liberal media has successfully brainwashed the public into accepting Keynesian and political interventions as desirable."

Stating Historical Facts can make one seem politically incorrect,

"Today's politically correct society prefers to waste its time with tearing down important historical monuments that are a reminder of our history, even if it was not always glorious. Important issues such as how we are going to resolve the problem of excessive debts and enormous unfunded pension fund liabilities, etc are ignored or neglected."

Another issue with today's media and sentimentalization is the media often jumps to use any content or statement without taking into account the full context. Marc Faber in a statement to MarketWatch adds,

"If you have to live in a society where you cannot express your views and your views are immediately condemned without further analysis and analysis of the context in which [they’re written]—if you can’t live with that, then it is a sad state of where freedom of the press and freedom of expression have come."

Money flowing out of India and into China

Marc Faber may be getting more Bullish on China according to the Financial Express,

"I think if you look at the major markets here in Asia, India and China, India is up close to 30% in dollar terms, and China hasn’t gone up a lot. So, I think some money will be taken off the table in India and move into China. 

Speaking specifically about his positions. I also increased my positions in China."

There will be very few places to hide during the next stock market collapse

Marc Faber warns in his October 2017 newsletter Gloomboomdoom report of the bubble like similarities between 2000 and today. When the current bubble bursts, it will be much severely felt by investors than ever before.

" The April 3, 2000 edition of Forbes Magazine, which unintentionally presaged the NASDAQ's worst week in its history, published an article entitled, ‘Ramp Champs: The Best-Managed, Fastest-Growing Tech Companies in the World.’

A month later these stocks had already declined by 66% from the early 2000 highs, and at the October 2002 low, the NASDAQ 100 Index had declined by 83% from the March 2000 high. 

The 2000 NASDAQ collapse - because of its narrow scope - did not cause widespread economic or financial hardship. This cannot be said of the current all-encompassing asset bubble. Whenever it will burst, the economic damage will be considerable all around the world as well as the capital losses to asset holders as there are hardly any places to hide. "

What bargain hunters should be looking to invest in

Buy low sell high ? Opportunities for price appreciation could be found in Agriculture, Precious Metals, Emerging market stocks.

"Relative to everything else, I think precious metals are not terribly expensive. I think agricultural commodities are inexpensive. I think are emerging markets, some of them have performed superbly this year, by and large there is better value in the emerging markets than in the US.

One market that has lagged behind just about everything is the Japanese stock market. It's just broken out on the upside recently. I think in the last few months of this year, we could get a big move in Japanese stocks on the upside."


via www.cnbc.com/video/2017/09/19/something-will-happen-and-stocks-will-plummet-argues-marc-dr-doom-faber.html

Many small events can trigger a stock market decline

The power of contrarian thought is very important to making money and to avoid losing your investment. Marc Faber says why he thinks the crowd may be wrong and what could trigger a stock market meltdown.

"You don't see, and I don't see. And, nobody sees. That's why people keep buying stocks. And yet, something will happen one day. I think it may very well come from a credit event. Or, it may come from the disclosure of a major fraud. Or, it may come because interest rates start to go up although Central Banks remain on the dovish side. There are many events that can trigger a decline.

In 2009 when stocks bottomed out, I can tell you that not many people saw why stocks would go up. Now it's the opposite. The sky is clear. Corporate profits have been expanding — they're good. Interest rates are low, but valuations are very high."       via CNBC

Emerging markets, US Dollar, Chinese stocks could do well

US Dollar short term rebound
"I think the dollar could easily rebound by 4 to 5 percent, or maybe even more. Longer term, I'm obviously not optimistic about the U.S. dollar. You just have to look at the U.S. administration and their economic policies that will not be very conducive for dollar strength in the long run"

Fed and US Govt policies
"They're actually shooting themselves in their own feet, so long term I'm obviously negative about the U.S. dollar."

Battle of the currencies
"The question is which currency is much better than the U.S. dollar? They're all not so desirable, that's why some people invest heavily in the so called crypto-currencies."

Bonds
"I don't want to increase my bond exposure. Every year, some bonds are maturing, and as a result I'm reducing somewhat the bond exposure. I think the environment going forward, as had been the case in the first six months of the year, is that active managers can perform well by being overweight." 


via www.cnbc.com/2017/09/13/dr-doom-marc-faber-president-donald-trump-administration-is-not-conducive-for-us-dollar-in-the-long-run.html

Asian markets outperforming US

The Indian market is up 30 percent this year and the Korean market is up 25 percent in US Dollar terms. So, we have had a shift in market leadership away from the U.S. to other markets and I think there is better value in Europe and still better value in Asia than in the US. 

Some Japanese companies are actually quite good value.

I personally prefer investments in Indochina, in Vietnam, Cambodia, Thailand, Myanmar and also Laos. That is the region I think has enormous economic potential and there will be plenty of opportunities. But for institutional investors, the Japanese market offers in some sectors very good value.



Marc Faber: Better value in Asia and European markets than US from CNBC.

Asia long term prospects are fine - India Demonitisation drive was a failure

India future growth prospects

For me, if India can grow at 5 per cent for next 10-20 years, that is a fantastic growth rate. But most Indians, they think their country should grow at 8-10 per cent. Forget it. Five per cent is a fantastic growth rate in a world burdened by high debt. For India, burdened by bad debts, 5 per cent is a fantastic growth rate.


India vs USA vs China

The sentiment about India is relatively optimistic. The market has relatively performed well. We are not interested in the next six months but next 20 years. US is not going to grow much. People will look more and more towards Asia as having a bright future, though not problem free. In terms of new industries, we have so many global companies out of India and China, which didn't exist 20 years ago. We have global players from Asia. The long term outlook is fine. Though, in my view, China's markets are relatively depressed.

Modi's demonitisation move

We all know demonetisation has been a catastrophe. It didn't achieve its objectives. It could have been done in a benign way, giving a period of six months wherein old notes could be exchanged so that nobody suffered.

Crypto-currencies, Bitcoin and bubbles

Last month, I explained that if an investor was looking for volatility he would find it in Bitcoins, but that I had no idea how much they would eventually be worth. A reader of ours was kind enough to point out to me that I was wrong.

According to Arne Wolframm, "there is no crypto-currency mania at all. There is 7 trillion dollars’ worth of gold, but only 44 billion worth of Bitcoin in this world. If there is so much demand for gold as store of value and currency, even though it is much harder to store, transact and divide than BTC, then there is no reason to assume there will be less demand for BTC, which is much easier to store, transact and divide."

Wolframm concluded his email by saying, "So, stop being stubborn and get on board with crypto! (Unless, that is, you can come up with a counter-argument that actually holds water, in which case I would be most grateful if you would share that with me). And yes, do ONLY buy the oldest, original, most secure, most advance, most widely traded, held, mined and accepted type of crypto currency: Bitcoin”

As I said before repeatedly, I do not know whether Bitcoins will be worth one day $500,000, or $1 million (the latest forecast I have seen) or far less than they trade at today (though that would be my guess). But regarding the fact that “it does not matter that” whereas the maximum supply of Bitcoins is fixed but not the number of competing cryptocurrencies I have a different view than Mr. Wolframm. It may be true that market participants choose to get paid in the “most widely accepted currency” except that the most widely accepted currency of the day may not be the most valuable and the most accepted currency tomorrow.

Yet, Wolframm may be right that Bitcoins continue to appreciate in the near term (as they have done so by more than 60% since he wrote to me. Year-to-date, Bitcoins are up by almost 400%). Because the maximum amount of BTC is fixed at 21 million and since we still live in a huge liquidity bubble (just look at the low level of interest rates) in which investors will buy anything that moves up, Bitcoins and other Crypto-currencies may become the favorite global “object of speculation.”


via gloomboomdoom

Holding stocks even if one is Bearish

"Well the globe is divided between essentially super bears and super bulls. I belong to the super bears but I have equity exposure because you have to think it through and you are very negative about the world and you do not want to hold everything in cash. Basically since 2009, we have not reduced but increased the debt level and we have in addition created a rise in inequality. 

The inequality benefits the very wealthy people but the wealthy people as a percent do not spend a lot of money and so the economy in this environment of increased wealth inequality is not performing particularly well. 

The markets have gone up substantially, we have an asset bubble driven by credit and obviously, the markets have become quite vulnerable. Having said that, if I look at the markets around the world what is striking is how expensive US stocks are compared to European companies and especially compared to companies in emerging economies. I would prefer to own international equities, European stocks and Asian stocks compared to say US stocks." 

via http://economictimes.indiatimes.com

Better to invest in select Indian stocks than the broader Indian Index

"I have been relatively positive about India for the last 12 to 18 months. I have applauded the Reserve Bank of India for keeping interest rates relatively high and stabilizing the currency. Since then the Indian market has significantly outperformed other markets. 

It is the second best performing market in Asia after South Korea which is surprising because South Korea has the potential of getting involved in a war but nevertheless it has been the best performing market in US dollar terms. 

In the Indian market, if you look at the composition of the index, the leading stocks are relatively expensive with frequently over 50 times earnings and so I am not that keen on the index anymore, but within the market. there are still some sectors that are relatively attractive and I still maintain what I have been saying for the last one and a half years that India would outperform the US over the next five to 10 years."

via http://economictimes.indiatimes.com

The US Fed will probably not reduce its Balance Sheet

"With the Federal Reserve, we don't know for sure what the impact will be. There is no clear co-relation between the movement of interest rates, between period of quantitative easing and tapering off. I do not believe that the Fed will reduce its balance sheet, but just in case they did, I am not sure that bonds will collapse and that interest rates will go up. 

There are many other factors. Everybody has been bearish about government bonds in the US, Europe and Japan. In the case of Japan, people have been bearish about Japanese government bonds for 15 years and what has happened is that interest rates kept on going down. So, we don't know exactly where we stand. 

The bond market in the US in my opinion would rather suggest that the economy is not that strong. That is the message from the bond market. If we look at the bond market in the US, the 10-year is yielding 2.228% at present. Now in France the yield is 0.72%, in Germany 0.45%, in Italy -where everybody said the country is bankrupt -the yield is 1.99%. 

In Japan, that has the biggest government debt as a percent of the economy of any country, the yield on the 10-year JGB is 0.05%. Bonds is a very complex issue and that has little do with immediate Fed action. 

In fact, the bond market doesn't like monetization. In other words, they don't like QE1, QE2, QE3. The bond market thinks that it is inflationary."


via indiatimes

US markets have limited upside

The US market is very expensive, and as markets become more expensive, they become more vulnerable to outside shocks. Even if there is no crash, the potential for American shares is extremely limited.What has driven the index is a narrow group of stocks -the FANG stocks and also the semi-conductor stocks -but the typical stocks haven't performed particularly well. 

I recommend a diversified portfolio of assets consisting of real estate, stocks, bonds and precious metals.With the equity portion.

Marc Faber VS Alberto Gallo

Recently, a Bloomberg column by Alberto Gallo caught my attention for its insights about the “Minsky Moment.”

According to Gallo, "In his theory on financial markets' fragility and instability, the late Hyman Minsky argued that ‘from time to time, capitalist economies exhibit inflations and debt deflations which seem to have the potential to spin out of control.’ Following the 2008 crisis, he inspired the term ‘Minsky moment’ to describe a sudden market collapse that follows the exhaustion of credit."
Gallo thinks that, "Today, we may be approaching a second Minsky moment. After the 2008 debt crisis, central bankers reacted with unconventional tools. If the problem was excess debt, the remedy applied was to lower interest rates and buy large quantities of it. Quantitative easing helped to avoid an even deeper recession, but it didn't solve the root causes of the crisis. Global debt levels are up 276 percent in the last decade to $217 trillion, or 327 percent of GDP, according to the Institute of International Finance. But this time around the issue isn't only excess debt – it is also that prolonged loose monetary policy may have left us with at least three collateral effects. The first is a misallocation of economic resources. By keeping rates at record-low levels, central banks have made it easier for inefficient firms to survive, as in a rising tide that lifts all boats. The second is a rise in wealth inequality, where the wealth effect from rising asset prices benefited asset owners and the old more than the young and the poor. The third is a suppression of risk premia and volatility across financial markets.”

I agree with most of what Gallo has to say, except that there is actually a lot of volatility already, which manifests itself in different asset prices simultaneously (except in the S&P 500), which has produced some unpredictable results. If you consider how the asset purchases of the ECB and the BOJ have vastly exceeded the Federal Reserve’s balance sheet expansion in 2016 and 2017, you would have assumed in advance US dollar strength and not US dollar weakness (though since the beginning of the year, this report has repeatedly argued that the US dollar was grossly overvalued).

The point is that we had plenty of volatility already within stock, commodity, bond and currency markets. The US dollar and the Euro are the world’s most actively traded currencies and between May of 2016 and the end of the year, the Euro lost more than 10% against the US dollar. This year the Euro has recovered and has so far gained 12%. Given the size of this market and its economic and financial importance I would regard these movements as very volatile.

I am actually bringing up the subject of volatility because some investors will argue that markets no longer make any sense. To this I would respond that frequently markets will move "without making sense" at the time of the initial move. But later, when we look back at market moves they make perfect sense. Therefore, when I see such a large move of the Euro against the US dollar I ask myself if the market is not implying that the Fed’s rhetoric about tightening monetary conditions is just what it usually is in the case of central banks: empty talk by some "ignoranti" with no or little action following through.

In the next twelve months, making money from equities will become trickier than in the first seven months of this year as some sectors, markets, and individual stocks do well while others decline. In the US, I would expect the FANG and related stocks to perform poorly, whereas mining, fertilizer, and commodity related companies (including oil) perform relatively better.


via gloomboomdoom

Stocks are still risky to buy at these elevated levels

The S&P is up 23 percent since January 2016. Gold is up 20 percent and this year, Gold is up 9 percent but the GDX, the Gold ETF is up 80 percent since January 2016.

The risks have increased as stocks have gone up. Don't be overly optimistic. 

If you look at the market, there are lots of stocks that are lower, and significantly lower than they were at the highs. And so, it's not an all-clear signal.

My Asset Allocation Twenty-five percent in real estate; my real estate is mostly in Asia. Twenty-five percent in equities; I have mostly Asian equities. Then I have some precious metal and gold shares. I don't change that asset location a lot, but I am aware that there is a risk because if equities go down, then obviously all my bonds will likely go down.

Central Banks are manipulating Interest Rates and Stock prices

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Missed opportunity in buying Bitcoins

Bitcoin speculation
“I would be reluctant to hold bitcoin and other cryptocurrencies, but I acknowledge that it was a mistake not to buy bitcoin after they had dropped to around $200-300."

"In my opinion, the people that are really involved in the bitcoin market are the same people that are involved in stocks like Snap, Facebook, Amazon…they are individuals who are involved in the more speculative side of the market."

Government regulations on Bitcoin
“If they become big, it’s not ‘maybe,’ it’s ‘for sure’ the government will regulate them. As soon as something becomes profitable in the U.S., it is subject to regulation and taxation.”

Gold prices at an attractive level to buy

On Gold
"We were up last year by around 9% and this year we’re still up 6-7% so it hasn’t been such a bad currency and this is against the U.S. dollar. My view is, of course, the [gold] price will eventually go up much higher. Around this level, it is an attractive opportunity to accumulate."

US Federal Reserve
"I’d like to see the day when they reduce the balance sheet and the market reaction because if stocks go down…I think the Fed will be very reluctant to increase interest rates and even more reluctant to reduce the balance sheet"

“The whole exercise that central banks have begun of accumulating assets on the balance sheet, it cannot end well. It will end in a disaster, we just don’t know when.”

Asset Price Bubble
"We have inflated asset prices and if the asset inflation comes to an end and asset prices decline, I think it will hurt the system.”

US Dollar
“I don’t think anyone should be positive about the U.S. dollar in the long run. I think it will go down against gold.”

Is the time to panic upon us ? Probably not yet

My friend Michael Gayed at Pension Partners recently wrote that many market participants seemingly were simply forgetting that volatility mean-reverts, and that stocks tend to go down much faster than they go up and that “the time to panic is upon us.”

I am not sure that “the time to panic is upon us,” but even if the US stock market were to move higher a change in leadership would not surprise me with FANG type of stocks no longer advancing.

Don’t forget Charles MacKay’s observation that,
“Men, it has been well said, think in herds; it will be seen that they go mad in herds while they recover their senses slowly and one by one.”

Q3 and Q4 2017 could be more challenging for equity prices

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I do Not believe in the concept of "Central Bank Independence"

My friend Albert Edwards at Societe Generale recently wrote an excellent strategy report.

According to Edwards, “While politics in the West reels from a decade of economic crisis and stagnation, asset prices continue to surge on the back of continued rapid growth in G3 QE.
In an age of ‘radical uncertainty’ how long will it be before angry citizens tire of blaming an impotent political system for their ills and turn on the main culprits for their poverty – unelected and virtually unaccountable central bankers? I expect central bank independence will be (and should be) the next casualty of the current political turmoil.”

Personally, I do not believe that there is really such a thing as “central bank independence.” Furthermore, the financial and real estate sector and wealthy people in general are always highly supportive of expansionary monetary policies. It lifts their asset prices and wealth. Like Edwards, I also condemn the “monetary madness” of central banks but I accept that there were then, as there are now, mitigating circumstances.

Edwards further opines that, the “Evidence of the impact of monetary madness on assets prices is all around if we care to look. I read that a parking spot in Hong Kong was just sold for record HK$5.18 million ($664,200). What about the 3.5x oversubscribed 100 year Argentine government bond? Sure, everything has a market clearing price, even one of the most regular defaulters in history. But what concerned me most about the story was it was demand from investors (reverse enquires) that prompted the issue. Is it just me or can I hear echoes of the mechanics of the CDO crisis? ……. But no one cares when the party is still raging and investors, drunk with the liquor of loose money, are blind to the inevitable catastrophe that lies ahead.”

Edwards makes a good point. “Monetary madness,” as he calls it has fueled little consumer goods price inflation, so far, but a colossal asset bubble around the world. The suppression of interest rates (particularly so in Japan and the Eurozone) have also compressed the interest rates on junk bonds to extremely low levels. These securities are bought by investors that are desperate for higher yielding fixed interest securities.

Concerning the 100-year Argentinian bond though, Philip Grant of Grant’s Interest Rate Observer had this to say: “Eight times in its 194 year financial history has Argentina defaulted on its borrowings, most recently in 2014 amidst its dispute with creditors from its prior episode of financial ruin in 2001. At its historical pace, the soon to be-issued 7.125s of 2117 (priced at $90 to yield around 7.92%) will default more than four times over before that so very-distant prospective maturity date.”



via gloomboomdoom

Some assets not performing well even with Central Banks money printing

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Invest in equities but beware of an even bigger financial crisis

I don't rely on Central Bank forecasts. 

I'm 71 and for sure in my lifetime, unless I have an accident tomorrow, I will see another financial crisis and a massive one.

All I want to say is, we have a colossal credit bubble in the world. Can it expand? Yes, but it cannot expand forever. One day there will be a limit and one day there will be another huge crisis because the debt level today is higher than it was in 2007.

We could print enough money that the Dow goes to 100,000

Either people with money will be taxed heavily or we'll have a massive deflation in asset prices — I repeat: massive. Eventually the system will break.

[Watch the full interview above]

Faber's Market Predictions You Wont Hear This From The Mainstream Economists

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Excerpts from the interview
-We are dealing with manipulated markets by Central Banks so it is very hard to predict.
-Markets can go much much higher before it all blows up

-Diversifying assets - own some Equities, Real Estate, Cash & Bonds, Precious Metals, 

-European markets will outperform US this year and their valuations are much lower than US.

-Prices of Real Estate in good areas of Toronto are very high but two hours out are not very high.

-Real Estate in the country side are more attractive and does not have the downside risks of where the speculation is occurring such as the Condo flippers. 
-Real Estate safer to invest than Financial Assets. Real Estate will Not go to Zero where as financial assets could go to Zero.

-Consumers in USA and Canada are tapped out - too much debt.

Marc Faber recommends US Treasury bonds, European corporate bonds and Emerging markets

Marc Faber speaks to CNBC 
- Bubble in popular stocks and they are highly priced.
- Liquidity bubble
- I would invest Europe or Asia rather than US
- Car Sales and retail sales weakening show US economy is weaker than thought
- Millenials are earning less than their parents, and paying 50% of their income for rents in places like New York and San Francisco.
- The Fed has been successful in boosting asset prices but wages has not kept up.

This bull market depends on FAANG stocks

I recently attended the annual Mauldin conference. What surprised me most is how bearish the attendees were. I can only explain this bearishness after an 8-year bull market as a result of most individual investors having lost so much money in the 2000 to 2003 and 2007 to 2009 bear markets. Consequently, they failed to capitalize on the subsequent huge bull market, which followed the March 2009 low.

Apple is one of the biggest companies in the world

In early May, Wolf Richter commented that, “Over the past 10 weeks – so since March 1, 2017 – five stocks in the S&P 500 index have gained a total of $260 billion in market value, the infamous FAANG stocks: Facebook, Apple, Amazon, Netflix, and Google (now Alphabet). 

By any measure, $260 billion is a massive surge in valuation for just five stocks, or 1% of the S&P 500, in just 10 weeks. And the rest of the S&P 500? On March 1, the index closed at 2,394. Today it closed at 2,397. In those 10 weeks, it went absolutely nowhere. Which means this: the remaining 495 stocks in the index lost as much in total market capitalization as the FAANG stocks gained.” 
I should add that this dichotomy has continued to this very day with the FAANG stocks having been joined by stocks such as Tesla and NVIDIA.

I need to emphasize that this kind of narrow leadership is symptomatic of an extremely mature bull market (after all the bull market is more than 8 years’ old by now), but as was the case of the NASDAQ bubble in 1999/2000, the investment mania in FAANG type of stocks (and Bitcoins) could last somewhat longer. We should not forget that between October 1999 and March 30, 2000, the NASDAQ 100 rose by more than 120%!

There is one issue investors should carefully consider. After the NASDAQ began to collapse post March 2000 a major shift in the stock market’s leadership occurred. NASDAQ stocks which had been the leaders during the bubble did not make new highs for years (most of them never) and it took the NASDAQ 100 until the end of 2016 to exceed the 2000 peak. However, the transition from the old leadership to the new leadership was not smooth and painless. Take as an example Newmont Mining (NEM). Along with the stock market, Newmont Mining rose until early 2000. Then, along with the NASDAQ slump the stock was also dragged down into October 2000 when it had declined from peak to through by 53%.

What I want to say is that once the FAANG stocks and their peers will break down it is likely that they will – at least initially - drag down the entire market and also the emerging new leadership.

Stress is caused by adversity and extreme stress by extreme adversity. Extreme adversity can be caused by a total loss of money (including divorce), the loss of a beloved one, the loss of one’s job, and a severe illness or accident. The extreme stress arising from loss of money can usually be avoided by disciplined diversification of one’s assets (stocks, bonds/cash, real estate, and precious metals). A geographical diversification is equally important.

via gloomboomdoom

They will print money until there is a credit collapse

One day there will be a credit collapse, but I think we aren’t yet there.  Before it happens they’re going to print. And when printing as it has done in the last 12 years in the U.S. leads to  discontent populations, because when you print money then only a few players in  the economy that benefit, not the majority of households.

Janet Yellen

Marc Faber on Canada Real Estate and More

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Many people have been bearish on Canadian Real Estate and for many years. They have also been bearish on Canadian Banks. And so far they haven't been proven to be right. One day they will be right, the markets will go down. As you've seen in Vancouver, the markets went down over the last two years and the last six months later it picked up again. So there is still a lot of money sloshing around in the world and in general international investors view Canada more favorably than the US.

Marc Faber praises India and its economic policies

What I maintained more than a year ago that over the next 5-10 years, India would outperform the US and other western markets. I think it is still a valid story. In general, you have a new government, Mr Modi who is trying hard to implement some reforms and he has actually a far better chance to implement these reforms than Mr Trump.

Secondly, this is something that is very interesting for me as an observer of economic history. I think central banks in emerging economies such as India, as an example, are much more responsible and much better educated about the perils of money printing. Mr Rajan and Mr Patel have done a very good job so far in stabilizing the rupee. In local currency, the Indian market is up something like 13 percent this year.

But in dollar terms, the market is up close to 18 percent because first the stock market went up then the rupee went up. The stock market is not that important for the majority of Indians because it is only a minority that owns Indian shares. But, the currency is very important for the majority of Indians and for foreign investors.

If you have a steady currency, a strong currency, you have money coming from overseas, looking for investments in India and so, I remain actually quite constructive about India. And over the next 10-20 years, India has the potential, I am not saying it will realize it, but it has the potential at least to grow at 5-7 percent per annum each year which is huge compared to the growth that we have in the US and in Europe.

Why money printing can resume in the US and other countries

In the US we are now eight years into an economic expansion. This is a very old expansion. We are more than eight years into a bull market which is a very old bull market. If the market goes down substantially, we have a recession again and we expect that in the next 1-2 years, then the Fed, in my opinion, they will launch qualitative easing -QE 4. They may not call it QE-4, they may call it helicopter money or Trump money or whatever it is. But I think they will print money as they have in Europe and Japan up to this very date.

Deutsche Bank has recently produced a statistic or it was Bank of America whereby in the first three months of this year, the balance sheet of the ECB and the Bank of Japan (BoJ) increased by more than USD 1 trillion. So, annually, by close to USD 4 trillion, we still have money printing and we do not know where it will end. I think it will continue because that is all they can do.

Commodity investing VS Precious Metals

A correction in commodity markets, 10-20 percent is a huge move because, as an investor, you have the roll over costs and you do not have dividends on commodities basically. So, I would be a little bit careful about economic sensitive commodities such as steel, iron ore, copper, aluminium and so forth, but I still like precious metals because if you look around the world and you see all these academics and central banks.

Stock Bull market is possible even if the economy is dropping downwards

In a money printing environment such as we had in Japan, in Europe with the European Central Bank (ECB), Bank of England and the Federal Reserve, you can have a bull market even if the economy is actually going down or not recovering much simply because of money printing. But, I agree with you. In principle, it is predicated on nominal gross domestic product (GDP) growth in the long run and on corporate earnings growth. And in my view, in the long run, if you take say, the US, what is the future growth rate of the US? Maybe 1-2 percent per annum.

So, corporate earnings in my view, will grow at 1 - 2 percent per annum in the long run, otherwise eventually, if they grow much faster than nominal GDP, corporate earnings will be nominal GDP which is not possible.

More Americans seem to want bigger governments

Simon Black, the founder of Sovereign Man, made some comments which truly astounded me. In his April 24, 2017 missive he wrote that, “In a poll conducted a few days ago by NBC News / Wall Street Journal, a record 57% of Americans responded that they want MORE government in their lives, and that the government should be doing more to solve people’s problems.

That’s the highest percentage since they started asking this question in 1995.

In fact, 57% is nearly double what people responded in the mid-90's. Furthermore, the number of Americans who feel the opposite, i.e. responded that the government is doing too many things that should be left to private businesses and individuals, fell to a near record-low 39%. Bottom line: people want more government.”

I find these poll results hard to believe given that over the last hundred years, as Western governments expanded as a percentage of GDP economic growth rates slowed down.

I studied fiscal and monetary policies and learned that taxation is an extremely tricky issue because, as the economist Gunmar Myrdal pointed out, “Taxation is a most flexible and effective but also dangerous instrument of social reform. One has to know precisely what one is doing lest the results diverge greatly from one’s intentions.” I seriously doubt that Mr. Trump and his ex-Goldman Sachs Treasury Secretary would know what they are precisely doing.

I also remember from my studies Sir Thomas White’s (British Minister of Finance 1911 - 1916) words:

“In such experience as I have had with taxation – and it has been considerable – there is only one tax that is popular, and that is the tax that is on the other fellow.”

via gloomboomdoom.com

CNBC Scott Nations takes on Marc Faber

I tell you when all is over people will love me for having warned them to have all their money in stocks. I'm used to people like you who always attack me.

In 2007 and 2012, I was relatively positive about bonds and I argued that emerging markets would go up strongly. Some emerging markets have gone up vertically and bonds have actually performed quite well.

You're accusing me of being wrong? I laugh at it.

US Dollar and US Stocks are at risk

The consensus was, at the beginning of the year that the only game in town are U.S. stocks and the U.S. dollar. I don’t believe that the U.S. dollar is structurally a strong currency. Now can it stay high as it’s rallied a lot against the euro but at this level, I don’t think that the U.S. is very competitive. So, my sense would be the U.S. dollar is vulnerable as well as asset prices in the U.S. both.

Dr Marc Faber explains the Gold Market

The gold market is very interesting because it consists of a very limited number of people who are “gold bugs” as they call them. And these are people that will accumulate gold, physical gold and gold shares and so forth, but this is the minority. And then there are the gold detractors. These are mostly fund managers and so-called central bankers. And central bankers are not particularly smart. And then there are people who simply haven’t heard about gold as an investment… and don’t forget that in the U.S. 50 percent of the people have no interest in investments for the simple reason that they have no money. You could show them any proposal for an investment, they wouldn’t be interested because they have not the money to invest in the first place.

But in general I think that people will gradually wake up to the fact that in absence of knowing how the world will look like in five or ten years, you need some diversification and in this environment, I think that some people will say “well, let’s own some gold.” Most people will only own five or ten percent but some people will own 20 percent and I think that if the whole world decides to own, just say three percent or five percent, and the fund managers who are very anti gold see gold prices running up again… the whole investment business has become a momentum game….. so if they see that gold is moving up in a convincing way they’ll buy gold.

So, my sense is that you need some gold strength and then people will come in and buy gold simply because it moves up. I buy gold all the time, of course within my asset allocation. 

I also have shares and bonds and real estate, but I always buy some gold to maintain the proper weighting.

Gold and Gold Shares are still at reasonable valuations

At the beginning of the year so many people have started to write reports about the surprise of 2017 and projections of 2017, so everybody has a view, nobody knows precisely and the lot will depend on central banks’ monetary policies. I don’t believe central banks can tighten meaningfully, maybe optically they do some, but in general I think they’ll keep money printing on the table as far as we can see, in other words, for the next few years. And eventually it will be friendly for precious metals and hard assets. 

Number two, hard assets such as precious metals are at the historical low point compared to financial assets, so I think that’s going forward there’s a huge discrepancy in the performance between financial assets which has been very good since 2009 and gold which has been more mixed… it’s also up but it’s been more mixed especially after 2011… that these hard assets will come back into favor.

So, if you’re asking what is my expectation for the rest of 2017, I think that gold shares are an attractive asset class. I think precious metals can easily move up another 20, 30 percent, possibly 100 percent or so. In general, I would say American investors should take the opportunity that the dollar is strong and that asset prices, in other words stocks and bonds in the U.S. has been strong to reduce their positions in the U.S. in terms of equities.

Real Wealth VS Fake Wealth - MUST READ

The other day, I was interviewed
 by CNBC. One of the participants on their
panel asked me whether I believed I was providing a service to investors by warning them that stocks could decline by between 20% and 40%, or even more. He further questioned my morality in dissuading investors from buying stocks that were being touted as a once-in-a-lifetime opportunity to make money following their March 2009 lows. Aside from 
the inaccuracy of the interviewer’s statement that I had been keeping investors out of the market, I was taken aback by the notion of a CNBC employee talking about morality. Every year, I attend several conferences and Hillary Clinton about ethical behavior, Trump about modesty and unpretentiousness, Bernanke and Yellen about “honest money”, and mobster Whitey Bulger about mercy. (Federal prosecutors indicted Bulger for 19 murders.) Still, the question prompted me subsequently to contemplate whether periods of high monetary inflation (printing money) make people wealthier in real terms. Last month, I explained that it is an irrefutable fact that inflation-adjusted millennials earn less, and have less wealth, than the baby boomers had
 at the same age.

Also, it is true that US household wealth is at an all-time high – certainly in nominal terms. But, as I have explained in the past, the distribution of wealth has become more unequal, with the 0.1% (the super-wealthy) doing extremely well, while the median household’s or asset owner’s wealth has declined by close to 40% in real terms (adjusted by the CPI) from its peak in 2007. I now wish to make some further observations about the increase in household wealth, in both nominal and real terms, of the 0.1%.


The Wealth Illusion

Say I own a nice property in Beverly Hills, Newport Beach or Palm Beach. I bought the property 15 years ago 
for US$1 million. It’s now worth US$10 million. Over the same period, the CPI is up by 25%. Therefore, adjusted for inflation, my house has appreciated by 75%, correct? Not so fast. First of all, the cost-of-living increase over that period of time
has been far greater than the CPI indicates (and includes taxes, home maintenance costs, school fees for my children, salaries of my housekeepers – that is, unless I’m a member of Congress who employs illegals).

So, the real wealth increase, even measured by an index of consumption-related expenditures, may be far lower than that which is deflated by the official CPI. Furthermore, let us assume that I decide to sell my US$10 million house in Beverly Hills with the intention of buying another house in Palm Beach, Newport Beach, San Francisco, or an equivalent location. What will I pay for that house? I suppose it will be something like the inflated price at which I’m selling my existing home. I invite a statistician to explain to me what is a more appropriate index against which to measure the price of my house: the CPI, or an index of property values in an equivalent location?

Measured against the CPI, my house has appreciated; however, measured against a property price index it may have gone up somewhat more, or somewhat less, than the index, depending on how the prices of other homes comparable to my house have moved in the same location. Now, someone might argue that, regardless, I would have done very well compared to the median
 US household and the 50% of Americans who have no assets at
all. That argument is correct. In an asset inflationary environment, asset holders do far better than people who don’t own any assets. (The same is true in a consumer price inflationary environment such as we had in the 1970's.) But my point is that, unless, after selling my US$10 million house, I move to an area that has appreciated only very little or has even gone down in price, in reality I have no net wealth gain. I concede that I could move to Mexico City, Rio de Janeiro, Bahia, New Orleans, Bali, Pattaya, Maputo, or a similar location, and purchase a house equivalent to the Beverly Hills house that I’ve just sold, but for a fraction of the price. In some places, I might even improve my standard
of living meaningfully. But in other locations, the environment may not be to my liking at all. The point I wish to make is that my wealth increase as represented by the Beverly Hills house is largely illusionary, unless I sell that expensive property and move to a far less expensive area. The same would be true of an investment in the stock market. In the 1970's, I could buy
the Dow Jones Industrial Average for less than 1,000. Now, I need to pay 21,000 for one Dow Jones, which is 21-times what I would have paid in the seventies. Over the same period of time, US household wealth has increased by about the same amount.

Naturally, the total return of the stock market (including reinvestment of dividends) over the same period
was far higher. The Dow Jones US Total Stock Market Index appreciated more than 100-fold between 1970 and 2017. The total returns of other indices such as the S&P 500 and the Dow Jones Industrial Average are of a similar magnitude, whereby value outperformed growth over the entire period.

There are several reasons why household wealth increased far less than the total return of the stock market. The main component of household wealth is pension fund assets (approximately US$22 trillion). Since pension funds hold a diversified portfolio of assets consisting of stocks, bonds, cash, real estate, alternative investments, etc., they underperformed the total return of
a stock portfolio. Households also have large real estate holdings in
the form of owner-occupied homes. Owner-occupied homes are a cash-flow negative asset (taxes, maintenance costs, mortgage payments, etc.). The value of these (cash-flow negative) homes has appreciated since 1970; however, they have appreciated (with few exceptions) far less than have stocks whose dividends were reinvested. The same goes for households’ holdings of bonds and cash, and their own businesses. The value of households’ direct ownership of equities increased at about the same rate as household wealth, but at a far lower rate than the total return of equities because households tended to be net sellers of equities. I assume that households felt increasingly comfortable holding the bulk of their wealth in pension fund assets and, therefore, reduced their direct ownership of equities.

Still, there is no question that 
US household wealth has increased significantly since the 1970's. But can we say that the record US$89 trillion wealth of the household sector is an indication of how well the economy is performing? Furthermore, can we conclude that when a part of this household wealth is liquidated, a huge consumption
and economic boom will follow? The answer to the first question is simple. Most of the increase in household wealth accrued to a tiny percentage
 of the population.
 In fact, following the Trump rally,
the top 0.1% of households own
 more than the bottom 90%. Also, 
as I explained above, the increase in value of my Beverly Hills house is of limited utility if I wish to continue living in an equivalent house in an equivalent area somewhere else. We then need to consider the increase in the US population, which in 1970 was 205 million and is now 318 million.

Therefore, a better indication of American wealth than total household wealth would be per-capita wealth. Lastly, as I explained above, the largest component of US household wealth
is pension fund reserves, currently valued at US$22 trillion. But there are some question marks over these assets and whether they are really worth this amount. Last October, my friend Fred Sheehan explained just how underfunded pension funds were, citing the Commonwealth of Massachusetts Funded Ratios.

In this respect, it’s interesting to note that The New York Daily News recently carried an article about
 the Teamster Local 707’s pension fund (see February 26, 2017), which has encountered serious financial problems. According to the Daily News, one trucker reported: “It’s a nightmare, it has just devastated all of our lives. I’ve gone from having $48,000 a year to less than half that.” Again according to the Daily News, another Teamster pensioner, Narvaez, explained that:

...like 4,000 other retired Teamster truckers, [he] got a letter from Local 707 in February of last year. It said monthly pensions had to be slashed by more than a third. It was an emergency move to try to keep the dying fund solvent. That dropped Narvaez from nearly $3,500 to about $2,000. 

The stopgap measure didn’t work – and after years of dangling over the precipice, Local 707’s pension fund fell off the financial cliff this month. With no money left, it turned to Pension Benefit Guaranty Corp., a government insurance company that covers pensions.
Pension Benefit Guaranty Corp. picked up Local 707’s retiree payouts – but the maximum benefit it gives a year is roughly $12,000, for workers who racked up at least 30 years. For those with less time on the job, the payouts are smaller. 

Narvaez now gets $1,170 a month – before taxes. Ex-trucker Edward Hernandez, 67, went from $2,422 a month to $1,465 last year. As of this month, his gross check is $902. After federal taxes, it’s $721 – but he still has to pay state and city taxes. 

“We have guys on Long Island who are losing their houses,
the taxes are so high out there,” Hernandez said. Milton Acosta, 75, was a dockworker in Local 707. He retired at age 62, figuring his union pension of $2,300, coupled with his Social Security, would keep him and his wife afloat. Now his pension is $760 a month after taxes, he said.
As heartbreaking as their stories are, they are not new to Thomas Nyhan, executive director and general counsel of the Central States Pension Fund. 

The same crisis now hitting Local 707 has been stewing among numerous Teamster locals around the country for the past decade, he said, and that includes in upstate New York. The trucking industry
– almost uniformly organized by Teamsters – has suffered enormous financial losses in its pension and welfare funds due to a crippling combination of deregulation and stock market crashes, Nyhan said. 

“This is a quiet crisis, but it’s very real. There are currently 200 other plans on track for insolvency – that’s going to affect anywhere from 1.5 to 2 million people,” said Nyhan. “The prognosis is bleak minus some new legislative help.” And it’s not just private-sector industries that are suffering, he added. 

“Municipal and state plans 
are the next to go down – that’s a pension tsunami that’s coming,” he said. “In many states, those defined benefit plans are seriously underfunded – and at the end
of the day, math trumps the statutes.” [Emphasis added in each instance.]
(As an aside, Illinois is facing the worst pension crisis of any US state, with unfunded obligations totalling US$130 billion, according to the state’s Commission on Government Forecasting and Accountability. That amounts to about US$10,000 in debt for each resident.)

I urge my readers to peruse once again Fred Sheehan’s report, entitled “Public Pension Recipients: Start Saving. You Are on Your Own”, in the October 2016 GBD report. I explained at the time that the shocking funding level and its deterioration (see
Table 2), about which Sheehan writes, is also evident in the corporate sector and in Europe. So, whereas prior
to the 2008/2009 crisis S&P 1500 companies were fully funded, today funding has dropped below 80% (see Figure 7 of the October 2016 GBD report). I also noted that I found the deteriorating funding levels of pension funds remarkable because, post-March 2009 (S&P 500 at 666), stocks around the world rebounded strongly and many markets (including the US stock market) made new highs. Furthermore, government bonds were rallying strongly after 2006 as interest rates continued to decline.
My point was that if, despite truly mouth-watering returns of financial assets over the last ten years, unfunded liabilities have increased, what will happen once these returns diminish or disappear completely? After all, it’s almost certain that the returns of pension funds (as well as of other financial institutions) will diminish given the current level of interest rates and the lofty US stock market valuations.

The Road to Perdition

The next time an economist tells you that the US economy is rock solid because household wealth keeps going up and is now almost US$93 trillion (following the Trump rally), keep in mind that this wealth is unevenly distributed (see Figure 2) and that the US$22 trillion in the form of pension funds is completely inadequate to meet those funds’ obligations to pensioners. Either contributions will have to increase massively, or benefits will have to be cut, as we have seen in the case of the Teamster Local 707’s pension fund. I should also like my readers to reflect on the hardships that have to be endured by retirees if their benefits are cut by more than 50%, as we have seen in the examples quoted above by the Daily News. Furthermore, if, as Thomas Nyhan states, there is a quiet but very real crisis “that’s going to affect anywhere from 1.5 to 2 million people” (probably far more than that number nationwide), consider what the impact on consumption and the US economy will be.

There is another point I need to explain. Let us assume that I belong
to the 0.1% and that I have assets
of US$100 million. Because of the Trump rally, I make a profit of
US$5 million within a month. Will
 it change my consumption? Maybe at the margin (the trickle-down effect), but very little overall, compared to a thousand lower middle-class people suddenly making an additional US$1,000 each. In that case, it’s
likely that the 1,000 people who
 enjoy a sudden “monetary” windfall of US$1,000 will spend most of it. Therefore, if wealth is concentrated
in the hands of very few people, as
it is now, the economic impact of household wealth rising is minimal. In other words, the level of household wealth is a very poor indicator of how the economy is really performing. This is especially true in a money-printing environment.

In this context, I need to clarify another matter. Most economist s
have argued that inflation is low and growth is anaemic because the velocity of money has been declining since
the late 1990's. These economists will argue that when the velocity of money picks up, inflation and growth will accelerate. But how can velocity accelerate? The top 0.1% of asset holders (the super-rich) will unlikely spend their wealth if they liquidate some assets. Let’s say that Warren Buffett makes another US$1 billion because of the Trump rally. Will he spend that money? It’s unlikely. He might reduce his equity exposure and build up his cash holdings or buy some other assets, but his billion- dollar capital gain isn’t going to cause him to go out and buy another 50 tailor-made suits, neckties and sets of silk pajamas. In other words, the Fed and other central banks can further increase their balance sheets, which will boost asset prices still higher. However, it will only worsen the wealth inequality because only the existing asset holders will benefit, and it will further deflate the velocity of money.

There are, however, three ways in which the velocity of money could be increased. A complete collapse of asset markets would bring about deflation and improve the affordability of goods, services and assets for the median household – certainly relative to the 0.1%. In this scenario, the velocity of money will increase, but I very much doubt that the increase in velocity would bring about stronger growth and higher inflation.

A massive dose of helicopter money dropped on the 50% of Americans who are struggling and have no assets would probably be the most potent tool for boosting the velocity of money, inflation and economic growth – that is, temporarily. I say “probably” and “temporarily” because it is far from certain that this intervention would improve “real” economic activity and “real” growth. Also, “Helicopter Money One” would have to be followed by “Helicopter Money Two”, and so on, which
would have numerous very negative consequences (a collapse in the dollar, very high consumer price inflation rates, further increase in wealth inequality, etc.). The third option
for boosting the velocity of money would be to expropriate a significant share of the wealth of the top 0.1%
of wealth owners and distribute it to the 50% who are the lowest-income recipients. Again, this would boost consumption only temporarily and it would be a complete disaster for the overall economy. Disturbingly, this
is what will be the ultimate outcome unless an authoritarian dictator seizes power, in which case the outcome could be even worse.

Let me explain. Should the economy weaken and enter another recession (which is inevitable, sooner or later), QE4 will be a given. The result of QE4 would be more of
the same: rising wealth inequality
as asset prices continue to increase (this time, very selectively) whereby the median household is left further behind. Therefore, the next step 
by the interventionists will be – possibly simultaneously with QE4
– helicopter money. However, make no mistake. Helicopter money whose objective would be to kick-start the economy would be almost instantly captured by the powerful corporate sector and the asset owners, because the increased consumption would increase consumer prices and boost corporate profits. In other words, unless the interventionists with
their fiscal and monetary policies engineer an asset price collapse (about the last thing they will do intentionally), the top 0.1% will continue to gain at the expense of just about everybody else. Don’t misunderstand me. I am not blaming the 0.1% for snatching an increased share of the income and wealth pie. They were in a better position and more able to take advantage of globalization and monetary inflation than the vast majority of Americans. Moreover, their wealth allowed them to manipulate governments, their agencies, the lawmakers and regulators, etc. (especially central banks and treasury departments) for implementing policies that would greatly benefit them. Thus, their share of the wealth and income pie exploded.

I admit that the statistics compiled by Thomas Piketty and Emmanuel Saez should be taken with a grain
of salt, but the expansion of CEOs’ salaries relative to the salaries of workers does support the fact that the 0.1% have done very well compared to workers (see Figure 7). According to the Bureau of Economic Analysis, CEOs of the largest US companies now earn more than 300 times
 what workers earn, compared to
CEO salaries of less than 30 times what workers earned in the 1970s. (The Bureau of Economic Analysis computes CEO annual compensation by using the “option realised” compensation series, which includes salary, bonus, restricted stock grants, options exercised, and long-term incentive payouts for CEOs at the top 350 US firms ranked by sales.)

Above, I mentioned that wealthy people, including the CEOs of major companies, were in a better position and more skillful at taking advantage of globalization and monetary inflation than the vast majority of Americans. Monetary inflation, the secular decline of interest rates after 1981, the process of outsourcing, clever lobbying, etc. all contributed to rising corporate profits, which in turn allowed executives to boost their compensation without any objection from shareholders. In fact, we can see that CEOs’ compensation increases mirror the increase in the S&P 500. I want to stress that I have no idea whether CEOs should earn 30 times more than workers or 500 times more. (I also earn more than 500 times the salaries of my housekeepers in Chiang Mai, which difference can be partly explained by them earning a Thai local salary whereas I have an international income.) The fact is that, in a market economy, the market will determine the “price” of CEOs and of labor. But, as I said above, I suppose that wealthy people and corporate leaders (especially in the financial sector) were in a position to manipulate the system, which enabled them to heist a dis-proportionally large share of the economic pie. When money printing began to accelerate in and after the late 1990s, the financial sector managed to raid almost all the central banks’ newly printed money and some more ... with impunity. (According to the organisation Americans for Financial Reform, “in the 2015–16 election cycle, Wall Street banks and financial interests reported spending over $2.0 billion to influence decision- making in Washington. That total — of officially reported expenditures on campaign contributions and lobbying — comes to more than $2.7 million a day. It also works out to over $3.7 million per member of Congress.”

We have a system in place that is based on fiscal and monetary policies, and laws and regulations, that favour the corporate elite, the largest corporations, the captains of finance, and the 0.1% in general, because they are the asset holders. This moneyed class will not give up its privileges voluntarily. The privileged class will 
do everything in their power to keep these favourable conditions in place, which would include money printing in one or another form if there is a recession or if asset markets decline meaningfully (say, to the February 2016 low of 1,810 for the S&P 500). 

As I said, I’m not discussing these issues because I have some rancour about these “conditions” from which
 I actually profiteered greatly. I am discussing them because I believe
 that an unstable system in which 
the majority of people lose out to 
the privileged few is simply not sustainable and will end either with a Bernie Sanders-type socialist gaining power or with the establishment of a dictatorship. Democracies promised a level playing field in society, but that certainly does not seem to be in place nowadays. I suspect that we have never yet had a level playing field, but I feel that we are reaching a tipping point where something is likely to give, and I am afraid that this “something” could be the inflated asset markets.

via newsmax

Weakness in Euro currency will increase foreign investment in European companies

The Euro having declined so much against the U.S. dollar, if there is further weakness in the Euro; European stocks will adjust on the upside and foreign companies from Asia… China, Japan and the U.S. will increasingly acquire European companies and European assets.

Buying Stocks near market peaks could end badly

Some people say that the central banks are out of bullets. This is not my impression. They can keep on printing money and boost asset prices where by not all asset prices will go up, some will go up and some will go down. 

But the point I want to make is the central banks are not really out of bullets.
The economy, if it weakens some stocks will outperform others, in other words recently you’ve seen the weaker in automobile stocks, so there is still a selective process in the market. The stocks that have gone up the most recently are actually mostly companies with very little earnings, very high evaluations, Tesla, Amazon, Netflix and so forth and we’ll have to see.

All I can say is when I look around the world, I don’t see any particularly good values in the U.S. except in mining companies and I think some of the interest rate sensitive stocks are again relatively attractive because I expect the economy to disappoint, especially if the Fed continues to increase interest rates and so a short increase in interest rates could mean some further weakness in bond prices but eventually bond prices could rally again and this is my view that the U.S. by any standards compared to historical evaluations, compared to Europe, compared to Asia, compared to emerging markets the U.S. is very expensive. Now, can it go up another ten percent? Maybe 20 percent? Yes, between December 1999 and 2000 March 21 when the stock markets peaked out the Nasdaq was up more than 30 percent, but was it a good buy? No, everybody who bought at the time in the first three months of 2000 lost money.

So, my sense is that yeah people can buy stocks here but most of them are going to lose money with the exception in my view, that mining stocks will perform reasonably well.