Posts Tagged ‘inflation’
Face-to face with the bears: Marc Faber and Mish Shedlock
Monday, March 15th, 2010
In the three-part interview below, Aaron Task and Henry Blodget of Yahoo Finance - Tech Ticker interview Marck Faber, publisher of the Gloom, Boom and Doom Report, and Mish Shedlock, investment advisor at Sitka Pacific Capital and author of the economics blog, Mish’s Global Economic Trend Analysis. They discuss, among others, the economic outlook, inflation vs deflation, and the prospects for stock markets.
These are admittedly two of the most bearish commentators around, but well worth listening to.
Part 1: Economic outlook
Source: Yahoo Finance - Tech Ticker, March 12, 2010.
Part 2: Inflation vs deflation
Source: Yahoo Finance - Tech Ticker, March 12, 2010.
Part 3: Prospects for stock markets
Source: Yahoo Finance - Tech Ticker, March 12, 2010.
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Tags: Advertisement, Bears, Boom, Commentators, Deflation, Doom, Economic Outlook, Economic Trend, Economics, Face To Face, Gloom Boom And Doom Report, Henry Blodget, inflation, Investment Advisor, Marc Faber, Marck, Prospects, Stock Markets, Trend Analysis, Yahoo Finance
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Why Gold is Declining (The King Report)
Friday, March 12th, 2010
We received several inquiries about why gold is declining. Our view is gold is retrenching because:
• UK QE has ended (for now)
• US QE will end in three weeks (for now)
• The ECB did a massive €295B drain (can you imagine the market reaction if Bennie Mae drained $500B in one shot?]
• China is signaling that it wants to rein in inflation by tightening credit, hiking real estate down payments to 50% and allowing the yuan to appreciate
• Europe’s sovereign debt crisis has ebbed (for now)
• Food commodities have broken down
• Gold stocks have greatly underperformed gold since mid-January (gold stocks tend to lead) S&P
S&P 500 Index, Gold and Gold Stocks (GDX) – Gold stocks out-performed gold until late October. Then they traded together until mid-January. Since then gold stocks have under-performed gold.
Source: The Big Picture, March 12, 2010
Tags: Advertisement, Amp, Big 12, Big Picture, China, Debt Crisis, ECB, Europe, Food Commodities, Gold Source, gold stocks, Imagine, Index Stocks, inflation, Inquiries, Lead, Mae, Qe, Real Estate, Sovereign Debt, Yuan
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Mark Mobius: Q&A on Emerging Markets
Thursday, March 11th, 2010
A recent Q&A with Mark Mobius, Templeton Asset Management’s emerging markets guru, follows below, courtesy of the company’s Market Views newsletter.
What are the pros and cons of investing directly in emerging market equities and bonds as opposed to companies based in developed markets with emerging markets operations?
By directly investing in emerging market equities you obtain full exposure to emerging markets while with investing in developed market companies with emerging market operations, you don’t get that full exposure and you also get slow moving markets with lower growth potential mixed in. One advantage of some developed market companies is that they could have a global coverage thus giving the investor a more diversified coverage. Of course, there are also some emerging market companies that have that kind of coverage as well.
How probable is further tightening of monetary policy in China within the near future - and what would that step look like?
It is highly probable that there will be tightening of monetary policy in specific areas and not as a general policy. The Chinese have made it clear that they want to ensure that economic growth continues at a high pace and that means that they would want to keep liquidity and money supply at a high level with the proviso that if inflation increases then they would restrict lending and money supply to some degree. They will try their best to avoid taking any measures which would jeopardize the country’s growth and therefore any tightening will be specific and targeted to inflation in certain areas.
What is your outlook for Africa?
We believe that the outlook for Africa is very good for three main reasons: (1) abundant natural resources, (2) a young population, and (3) heightened interest from rich emerging market countries. Africa has some of the world’s greatest deposits of natural resources, and only a fraction of those resources have been tapped. In addition, it has a young and growing population who could improve their education and skills to become a major asset to expanded manufacturing and mining enterprises. These factors have stimulated the interest of countries like China and India, who require more natural resources for their growing economies, as well as countries like Russia and Brazil, who look to expand their enterprises into global operations. Countries around the world are showing growing interest in manufacturing within Africa for the African market, particularly emerging countries that have the capabilities to operate in challenging political and economic environments.
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Africa is an interesting region. In South Africa, efforts by local companies to expand their international market share, as well as the presence of capable management teams, can assure investors of finding bargains here. Higher global demand for commodities, a recovery in domestic demand and the preparations for and hosting of the 2010 World Cup should further support economic growth this year.
In addition to South Africa, we have been taking a look at the lesser-known frontier markets in Africa, some of which are very large countries, such as Nigeria. Regional markets such as Egypt and Kenya are also beginning to look attractive, and we are seeing the growth of new markets in this region. Libya, for example, already has a stock market and is encouraging the privatization of state-owned enterprises - a development being repeated in a number of African countries.
Some commentators are saying that frontier markets represent some of the best contrarian investments at the moment - do you agree with this and why?
Yes, that is certainly the case. For example, many people would never invest in Nigeria or even might not even visit the country for fear of confronting violence but actually there are excellent investment opportunities. So there are opportunities simply because those opportunities are not attractive to other investors since they are not familiar with the possibilities.
Qatar, Kazakhstan and Nigeria are among those countries being cited as ones to watch this year - why do you think this is?
Those are some countries that are citied as being watched but we should add a number of others such as Vietnam, Romania and a number of others. Qatar, Kazakhstan and Nigeria are all being watched because of their natural resources: Qatar - gas, Kazakhstan - oil, and Nigeria - oil.
Are there any particular sectors within frontier markets that you think will perform better than others?
We employ a bottom-up, value oriented, long-term approach. As we look for investments, we focus on specific companies rather than sectors or regions. However, during our analysis, we also consider the company’s position in its sector, the economic framework and the political environment.
Our focus continues to be on two key themes: consumers and commodities. With rising per capita income and strong demand for consumer goods, the earnings growth outlook for these stocks is positive. Commodity stocks also look good because we believe commodity prices will trend upwards, partly because of weakness in the U.S. dollar, and also because we expect the global demand for commodities to outgrow supply over the long term.
Source: Mark Mobius, Franklin Templeton Investments - Emerging Markets Overview, March 10, 2010.
Tags: Abundant Natural Resources, Bonds, Diversified Coverage, Economic Growth, Emerging Market Companies, Emerging Market Countries, Emerging Markets, Full Exposure, Global Coverage, Guru, inflation, liquidity, Mark Mobius, Market Operations, Monetary Policy, Money Supply, Pros And Cons, Proviso, S Market, Templeton Asset Management
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Deleveraging Through… Deflation? Has Ending QE Been The Ulterior Motive All Along? Andrew Smithers Thinks So
Wednesday, February 17th, 2010
This article is a guest contribution by Tyler Durden, ZeroHedge.com.
Confused by recent proclamations by Hoenig, Plosser, and other unnamed Fed members, who want an end to QE? Even more confused that this could actually happen? Andrew Smithers, former head of SG Warburg asset management before starting Smithers & Co., may have some iconoclastic insight into this development, which at its core is fundamentally deflationary, and a stark refutation to everything the Fed (presumably) stands for. A paradox? Smithers breaks the “Econ 101″ mold in this fascinating interview with Kate Welling. The most provocative perspective: Smithers goes against the grain of every economic textbook which says the only way to inflate debt away (deleverage) is by, well, inflation. Instead, what Smithers suggests is a slow, gradual process of deflation, in which incremental cash flow is converted into equity, and pushes debt out. Indeed, this is precisely what we have been seeing especially in the REIT sector where numerous names, courtesy of BofA, have raised equity on the basis of imaginary valuations, which may just become a self-fulfilling prophecy if enough people buy into them, and by throwing cash at these companies, allow them to lower their debt-to-capitalization ratios. Then again, with another half a trillion in equity needed for the REIT sector to fund itself out of a mid-term funding crisis, that’s purely a pipe dream. However the bigger picture of the Smithers perspective is that this deflationary approach is exactly what the Fed may be engaged in. By distracting the increasingly more vocal inflation hawks, who anticipate that inflation is and always will be the driving motive of the Chairman, Bernanke could very well be pursuing just the opposite: a slow-bleeding deflationary trend.
The clincher from the interview which took place in November 2009:
I think that you will find that several economists over the next few weeks and months will be expressing concern about quantitative easing…Because the most damaging thing that could happen to the world economy would be a third asset bubble collapse…Probably the best way of ensuring that is by making sure that asset prices simply don’t go up much more. What we need over time is a rebalancing of the economy in which we get deleveraging going on. And there are only two ways to delever: One is by generating cash flow and the other is by replacing debt with equity, either through bankruptcy, via the banking system, or directly, through the corporate sector. Now if you have deleveraging as the main driving force, you can only achieve that goal, really, if you switch the debt from the private sector to the public sector. Otherwise, you get the attempt for everybody to save more and everybody to invest less and you fall clearly into one of those problems that Keynes identified, where the adjustment process, rational on the individual level, just digs the economy, as a whole, deeper into a recession… [For this plan to be effective] we now want a period of slow contained growth, in which we can get a lot of deleveraging going on - without it having to burden the public sector debt by too much. For that, you need time and helpful markets. The sort of ideal market is one that down a bit - that has periodic bounces. So people can take advantage of the bounces to issue a great deal of equity, which also, of course means that the market is more likely to go down thereafter?
Is the entire equity market merely a plaything in one giant Fed-controlled deleveraging ploy? Are equity prices indicative of anything besides what the Fed wants them to be? Some day, when all the Fed’s secrets are revealed, we will know for sure. For now, all we can do, is to continue speculating and pointing out the obvious and ever more increasing irregularities in what was formerly at least passable for an efficient equity market.
Full Smithers interview.
Source: ZeroHedge.com, February 17,2010
Tags: Andrew Smithers, Asset Management, Bofa, Capitalization, Clincher, Deflation, Economists, Hawks, Incremental Cash Flow, inflation, Pipe Dream, Proclamations, Provocative Perspective, Qe, Refutation, Self Fulfilling Prophecy, Sg Warburg, Trillion, Tyler Durden, Ulterior Motive, Valuations
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David Rosenberg: How to Play Inflation
Thursday, February 11th, 2010
Here is a reprise of David Rosenberg’s thoughts on how to prepare for inflation, from Breakfast with Dave, December 15, 2010.
HOW TO PLAY INFLATION?
There is no sense in being dogmatic. But just in case inflation were to stage a comeback, this is how one would prepare for it:
- Precious metals (while gold grabs the spotlight, silver has surged 52% this year and has far outpaced the 27% runup in gold; and the gold/silver ratio, while down from a peak of 84 to 66, is still above the average of 54 over the past three decades).
- An even steeper U.S. yield curve!
- TIPS (or real return bonds) - the 5-year TIPS breakevens right now point to an inflation expectation of just over 1.7%, whereas consumer expectations are closer to 2.6%.
- Short-term duration corporate bonds (and go out the credit curve).
- Commodity currencies - Canadian Loonie, New Zealand Kiwi, Aussie dollar, Brazilian Real, and Norwegian Kroner.
- Basic material stocks (including energy) as well as consumer staples (tobacco, food/beverage).
We don’t have a big inflation view, but you never score brownie points by being dogmatic. If (when?) the massive amounts of fiscal and monetary stimulus ever do show through in final inflation (this will hinge on a renewed expansion in household balance sheets and a fresh credit-creation cycle), these are the areas that would likely garner the most investor interest.
Source: Breakfast with Dave, December 15, 2010
Tags: Balance Sheets, Brownie Points, Canada, Commodities, Consumer Expectations, Consumer Staples, Corporate Bonds, Credit Creation, David Rosenberg, Food Beverage, Gold, inflation, Investor Interest, Massive Amounts, New Zealand Kiwi, Norwegian Kroner, precious metals, Real Return Bonds, Runup, Stimulus, Term Duration, Three Decades, Yield Curve
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Hugh Hendry and Joseph Stiglitz Duke it Out Over Greece and the Euro
Wednesday, February 10th, 2010
This article is a guest contribution from The Business Insider.
Joe Stiglitz and Hugh Hendry duked it out last night on BBC’s Newsnight.
Stiglitz says that betting on a default is absurd. Hendry is betting on exactly that happening in Greece.
From Hendry’s opening line you can tell this is going to be a good fight:
“Um hello? Can I tell you about the real world?”
Then the BBC anchor asks (at 7:28): “So you would see Greece tumble and the Euro currency tumble?”
Hendry: “Absolutely.”
He goes on to say that it’s recognizing the unsustainable debt and then Stiglitz cuts him off:
“That’s absurd.”
Watch the video after the jump. Here’s a bit more transcribed:
BBC anchor (around 5:00): “But isn’t the truth, Hugh Hendry, that if Greece defaults, that you, that hedge funds like you, make millions?”
“…Some hedge funds make millions. Yeah, the hedge funds who - hedge funds, speculators, and independent central banks are what stands between an economy and hyper-inflation.
“It’s very hard to create inflation when you have free markets. When you have the discourse and dissemination of information.
“Look what happens - you get into difficulty and these guys over here [pointing at Stiglitz and Spanish Ambassador to the UK, Carles Casajuana] say, “hey we don’t like it.”
“Suddenly the truth hurts! Suddenly we want to abandon the truth. Suddenly speculation becomes a pejorative term!”
Casajuana: “No no no, we don’t want to abandon the truth. We admit we have a problem…”
Video:
Tags: Anchor, Bbc, Business Insider, Carles, Central Banks, Discourse, Dissemination Of Information, Duke, Euro Currency, Free Markets, Good Fight, Hedge Funds, Hugh Hendry, inflation, Joe Stiglitz, Joseph Stiglitz, Newsnight, Spanish Ambassador, Speculation, Speculators
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Howard Marks: Investing for Inflation (January 2010)
Monday, January 25th, 2010
Howard Marks, founder of California based Oaktree Capital, manager of $67-billion in fixed income funds, has just released his latest letter to investors, provides his in-depth case for inflation and how to invest for it. Marks’ letters have a strong following on Wall Street, and he is considered a bond market genius. You can full-page the document in your browser from the slidedeck below, and if you like you may download the letter here.
Read Howard Marks complete newsletter in the slidedeck below:
Tags: Bond Market, Capital Manager, Fixed Income, Genius, Income Funds, inflation, Investing, Investors, Newsletter, Oaktree Capital, Wall Street
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Economic Threats and Investment Opportunities
Monday, December 14th, 2009
In an article, published today at GlobeAdvisor.com, Pierre Daillie, Managing Editor, AdvisorAnalyst.com discusses how economic threats translate into different investment opportunities.
Confused about what’s in store for the economy? The long-in-the-teeth rally in equities, falling U.S. treasury bond yields, and record gold prices reflect both the uncertainty, and the conflicting wagers on inflation and deflation. It appears we’re at an inflection point, the outcome of which will depend on how economic policy makers act. The debate as to what happens next rages on.
To read the story, please visit http://www.globeadvisor.com/advisoranalyst/aa200912132.html
Tags: Act, Advertisement, Amp, Avw, Cb, Ck, Economic Policy Makers, Economic Threats, Economy, Gold, Gold Prices, Img Src, inflation, Inflection Point, Investment Opportunities, Lt, Managing Editor, Openx, Policy Debate, Rages, Rally, Random Number, Teeth, Translate, Treasury Bond Yields, Treasury Yields, U S Treasury, Uncertainty, Wagers
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Paul Kasriel: Waking Up In Recovery
Thursday, December 10th, 2009
“What happens after the stimulus spending wears off?,” asks Paul Kasriel, chief economist of Northern Trust. In this video clip, he shares his prognosis on inflation, the US dollar and the year ahead.
Click here or on the image below to view the video clip.
Click here for the first part of “Waking up in recovery”.
Source: Northern Trust, December 2009.
Tags: Advertisement, Chief Economist, inflation, Northern Trust, Paul Kasriel, Prognosis, Shares, Stimulus, US Dollar, Video Clip
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John Paulson’s Big New Bet on Gold
Friday, November 20th, 2009
Gold is getting a great deal of sponsorship, in general, but it is even more notable, when some of that sponsorship is coming from the likes of this era’s new contrarians. John Paulson, who personally made $4-billion betting against subprime mortgages in 2007, has shifted his focus to gold during the last 9 months, and now he is ramping it up yet another notch. On another note we’ve also covered in the recent past, David Einhorn’s now well-known accumulation of gold bullion, as well as S&P500 Puts.
Yesterday’s Wall Street Journal discusses Paulson’s latest plans:
John Paulson, who scored about $20 billion of profits between 2007 and early 2009 wagering against the housing market and financial companies, is launching a hedge fund dedicated to buying up shares of gold miners and other bullion-related investments, according to investors.
He is starting a new fund with his own money:
Mr. Paulson told his investors he personally would invest between $200 million and $250 million in the new fund, which he said will begin on Jan. 1, according to an investor at the meeting.
His theory on gold differs, in that Paulson seems to have recognized quite rapidly that central banks’ appetite has shifted in favour of the shiny stuff, and that their appetite is not strictly based on concerns of inflation. If you read between the lines, Paulson is suggesting that will be the gravy (when it indeed happens), and the real impetus is the constrained supply:
He noted that central banks around the globe have gone from sellers of gold to buyers, and that the global supply of gold is constrained.
While harmful inflation isn’t on the horizon, he said, Mr. Paulson argued that there is a risk of a burst of inflation down the road. That’s because in the past there’s been a lag between a surge in money supply and higher inflation. Gold often does well when inflation rises.
Mr. Paulson told investors that the Federal Reserve will prove reluctant to raise interest rates, given the weakness in the economy, which also could pave the way for higher inflation, at least at some point, another reason for his growing conviction about gold.
This is an interesting development for the stocks of gold producers. At the very least Paulson and other investors who are devoted to this theme will add key support to the market’s appetite for gold equities and bullion.
John Paulson Making Big New Bet on Gold
Tags: 9 Months, Central Banks, Contrarians, David Einhorn, Global Supply, Gold, Gold Bullion, Gold Gold, Gold Miners, Gravy, Hedge Fund, Housing Market, Impetus, inflation, John Paulson, Money Supply, New Bet, P500, Shiny Stuff, Subprime Mortgages, Wall Street Journal, Wea
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Doug Kass: Market Has Blinders On
Monday, November 16th, 2009
Doug Kass, of Seabreeze Partners, who called the generational low in the market in March 2009, says the market is complacent about bad news now.
I do believe with some certainty that the market’s vulnerability to disappointment and/or exogenous events has been elevated and that many apparent warning signs — for instance, a 17.5% underemployment rate, weak consumer and small business (National Federation of Independent Business) sentiment, the unrelenting increase in the price of gold, a steadily declining U.S. dollar, the specter of cost-push inflation from higher commodity prices and so forth — are too comfortably being ignored or are being rationalized away in a tide of rising world stock prices.
These days bad news is what is keeping interest rates at zero, and the stimulus flowing, so as long as bad news is good news, market ignorance is bliss.
Read the whole article here.
Tags: Bad News, Business Sentiment, Commodities, Commodity Prices, Disappointment, Doug Kass, Exogenous Events, Federation Of Independent Business, Gold, Ignorance Is Bliss, inflation, interest rates, National Federation Of Independent Business, Price Of Gold, Seabreeze Partners, Specter, Stimulus, Stock Prices, Tide, Vulnerability, Warning Signs, World Stock
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Rogers vs. Roubini - Inflation vs. Deflation
Tuesday, November 10th, 2009
Bloomberg’s William Pesek discusses the ongoing debate between inflationists represented by Jim Rogers’ views, and deflationists represented by Nouriel Roubini.
It’s a, well, golden opportunity.
Investor Jim Rogers thinks gold will double to at least $2,000 an ounce. Economist Nouriel Roubini says that’s “utter nonsense.” As these well-known market personalities duke it out, they’re doing us a favor by highlighting a critical debate: Which is the bigger threat — inflation or deflation?
…
The risk is that policy makers go overboard looking for exit strategies. That, in a nutshell, is Roubini’s shtick and it’s hard to refute the views of the New York University professor. Yes, inflation must be contained, but so must the forces of deflation in the short run.
Read the whole article here.
Tags: Bloomberg, Critical Debate, Duke, Economist Nouriel Roubini, ETF, Exit Strategies, Gold, Golden Opportunity, inflation, Investor, Jim Rogers, New York University, Nutshell, Ounce, Personalities, risk, Shtick, Utter Nonsense, William Pesek, York University Professor
Posted in Gold, Markets | No Comments »
