Marc Faber Warns "Insiders Are Selling Like Crazy... Short U.S. Stocks, Buy Treasuries & Gold"
Beginning by disavowing Mario Gabelli of any belief that rising stock prices help 'most' people ("Fed data suggests half the US population has seen a 40% drop in wealth since 2007"), Marc Faber discusses his increasingly imminent fears of the markets in this recent Barron's interview.
Quoting Hussman as a caveat, "The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak. There's no calling the top," Faber warns there are a lot of questions about the quality of earnings (from buybacks to unfunded pensions) but "statistics show that company insiders are selling their shares like crazy."
His first recommendation - short the Russell 2000, buy 10-year US Treasuries ("there will be no magnificent US recovery"), and miners and adds "own physical gold because the old system will implode. Those who own paper assets are doomed."
Sinclair . . .
A key element of Chairperson Yellen's intellectual position is that cutting down on stimulation prematurely would be the most serious mistake that can be made economically. She blames the long term desperation of the 1930s on the central bank's then retreat from their form of QE prematurely in the early 1930s. That was before the incipient 1930 recovery had solid legs.
Assuming that Yellen did not follow her well known dictum and tapered seriously now, the emerging markets will implode. Should the emerging markets implode, the US major markets will also implode. The dollar would lead on the downside. She knows this.
The Plunge Protection Team cannot manipulate the entire world equity market so control would be lost. The US markets would tank, and gold would explode on the upside because of the implication on monetary aggregates. The Exchange Stabilization fund would be so busy attempting to hold US market from implosion to pay equal attention to the dollar.
Analysis: Emerging markets as vulnerable to contagion as ever
By Sujata Rao, Daniel Bases and Vidya Ranganathan
London/New York/Singapore Mon Jan 27, 2014 1:51pm EST
(Reuters) - Emerging markets may be unrecognizable from the small and fragile economies that fell like dominoes 15 years ago, but they are just as vulnerable today to the same sort of indiscriminate selling when investor panic sets in.
As even the relatively robust economies of Mexico and Poland now feel the heat from disparate flashpoints from Turkey to Argentina, there are growing doubts that emerging markets have built any immunity to such contagion.
The wildfire engulfing the developing world is starting to look very like the currency runs of the past, such as the Asian, Russian and Latin American collapses that began in 1997.
Dominic Rossi, Global CIO for equities at fund manager Fidelity, likens the current wave of plunging currencies, equities and bonds to watching an old film - one in which some of the biggest emerging markets could feature.
"We've seen this movie before," he said. "One emerging country after another gets left stranded on the shore as the tide goes out. The weakest ones first, Argentina and Turkey, soon to be followed by Brazil, Russia and others."
Emerging markets have been inflated in recent years by huge amounts of cheap cash created by the U.S. Federal Reserve, much if which found its way into developing economies in the hunt for better returns. With the Fed scaling back the program, that flow is reversing and the currencies of countries with the biggest economic and political problems - notably Argentina and Turkey - are diving.
Investors' behavior may not have changed all that much from during the past crises, even though many emerging economies now have more flexible currencies and trillions of dollars in foreign exchange reserves. There are three main reasons why these markets could again suffer the capital flight that plagued them during the 1990s.
Just to blanket stind76 foolishness . . . . Indian gold retailers miffed by sudden rush of pre-2005 notes
The announcement to withdraw pre-2005 currency notes by end-March by the Reserve Bank of India (RBI) triggered jewellery sales in India. People resorted to bulk gold purchases in an attempt to make use of the older banknotes with them. The huge rush by customers to offload their stock of old currency, even led to some retail jewellers stop accepting pre-2005 currency notes.
People in possession of unaccounted cash were seen trying to convert their currencies by buying gold jewelry and bullion in small quantities. This led to a marginal rise in domestic gold prices. According to trade sources, gold sales surged 10 to 15 percent on Tuesday. The drop in gold premiums from $120 to $80 per troy ounce too boosted the sale of yellow metal in the country.
The RBI circular clearly directs all commercial banks to accept and exchange pre-2005 notes. Hence, there is no problem in accepting such notes as of today. Currently, retailers are not charging any commission for accepting old notes. However, the excessive flow of black money is a matter of serious concern, say jewelers. Industry sources stated that in order to stem the huge flow of old currency notes, the retail jewelers at a later stage may even impose commission on accepting currency notes printed before 2005.
Nothing Lasts Forever: World Bank Ex-Chief Economist Calls For End to Dollar as Reserve Currency
In the past we have discussed at length the inevitable demise of the USD as the world's reserve currency noting that nothing lasts forever. However, when former World Bank chief economist Justin Yifu Lin warns that "the dominance of the greenback is the root cause of global financial and economic crises," we suspect the world will begin to listen (especially the Chinese. Lin, now - notably - an adviser to the Chinese government, concludes that internationalizing the Chinese currency is not the answer (preferring a basket approach) but ominously concludes, "the solution to this is to replace the national currency with a global currency," as it will create more stable global financial system.
Emerging Market Meltdown Resumes
Turkey, India, Brazil and a string of emerging market countries are being forced tighten monetary policy to halt capital flight despite crumbling growth, raising the risk of a vicious circle as debt problems mount.
Turkey’s central bank on Tuesday night raised interest rates to 12pc from 7.75pc at an emergency meeting in a bid to defend its currency. The lira strengthened to 2.18 against the dollar after the decision, from 2.25.
The move came as India raised rates a quarter-point to 8pc to choke off inflation and shore up confidence in the battered rupee, the third rate rise since Raghuram Rajan took off in September. South Africa’s central bank is meeting on Wednesday as the rand hovers near a record low at 11.06 to the dollar.
The emerging market bloc makes up half the world economy, far higher than in any previous crisis. The International Monetary Fund warns that the sheer weight of these countries' rate raises could lead to a “blowback” effect that ultimately hits the US, Europe and Japan as well. Jose Vinals, director of the IMF’s Monetary and Capital Markets Department, tried to reassure investors by saying that “this is not a panic situation”.
High Street ‘haircut’: British banks axing thousands to reduce costs
Three of the UK's biggest lenders – Barclays, Lloyds and the Royal Bank of Scotland – plan to massively cut staff and close a large number of branches. British banks are struggling to cut costs, as multi-billion dollar regulatory costs eat their profits.
Barclays is to cut a quarter of its 1,600 branches in the UK and fire hundreds of investment banking division employees under the cost cutting program, as it seeks to reduce spending by $2.8 billion (£1.7 billion) by next year, according to the Financial Times.
Another British lender Lloyds Banking Group also said it would cut 1,080 jobs and outsource more in a bid to decrease costs as part of the restructuring plan announced in 2011. The Royal Bank of Scotland, which is expected to be charged another £3bn for mis-selling, will announce its cost-cutting programme next month, according to the Mirror newspaper.