Marc Faber, known as “Dr. Doom” by the media, appeared on Bloomberg Television this morning from Bangkok and shared his short-term outlook for stocks and commodities. The editor of The Gloom Boom & Doom Report told Bloomberg viewers:

Global Economy:

For everyone, business is down. And in the U.S., if the statistics were compiled properly, the economy would be in recession also. The same in Europe. I travel extensively around the world. Compared to a year ago, all businesses are down.

Stocks:

I can see that stocks can rally because of psychological reasons. They’ve been oversold.

Crude Oil:

The oil price coming down is precisely a symptom of economic weakness. Not a symptom of strength.

Airlines:

Maybe there is a recovery going. I think one, in investing money, you should not look only at your personal experience. You can buy stocks of companies that are of poor quality. If they’re low enough, they can rebound. It’s like now the financial stocks. They have been hit very hard. Maybe they stabilize around this level and maybe they even rebound by 30 to 40 percent. I don’t think that they’re attractive from a longer-term perspective. I don’t think that stocks are attractive in real terms from a longer-term perspective. But I think that they can rebound somewhat.

U.S. Economy:

We have a tightening of global liquidity, and that tightening comes essentially from a diminishing U.S. trade and current account deficit. And I think that if the oil price continues to go down, as I think it’s very likely in the near-term for the next three to six months, as well as other commodities, then the trade and current account deficit of the U.S. could decline more than is perceived. And that would strengthen the dollar further, and in my opinion, if there is a contraction in consumption in the U.S., it is not a disaster for the U.S. because they don’t produce much anymore, but it would be very bad for the producing countries, the manufacturing centers of the world, that are mostly emerging economies.

Commodities:

The second half of 2008 of this year would not be favorable for commodity prices… As far as I’m concerned, we peaked out in commodity prices, and later on we will have to see whether it’s a longer-term peak or a short-term peak. But we don’t know yet.

You can view 9 minute 14 second Faber segment here.

Source:

Marc Faber Interview
Bloomberg, September 2, 2008

MarketWatch’s Jonathan Burton wrote about well-known money manager Jeremy Grantham back on August 29. Burton had this to say about the chairman of GMO LLC:

Jeremy Grantham is not given to false alarms. The chief investment strategist at GMO, the highly regarded Boston-based manager of institutional and high-net-worth accounts, makes buy and sell decisions with a combination of computerized technical analysis and old-fashioned spadework. But nowadays, his digging for attractively valued stocks is mostly hitting rocks, and that has Grantham deeply concerned.

“The fundamentals have turned out to be worse than I had thought,” Grantham said. “My advice would be, don’t take any risk.”

Burton explained what the famous investor was getting at:

What he means is that in this market, don’t be a hero; live to fight another day. Here’s why: Global economic growth is slowing under the weight of increasingly illiquid credit markets and inflationary pressures. Weaker growth slashes corporate earnings, and since stock prices are tied to earnings, the outlook for equities worldwide, as Grantham sees it, is poor to middling…

One of his biggest fears, he added in an interview, is that “the whole global economy will be weaker than the market expects for quite a considerable time.” How long? “I would guess at least two years of sustained disappointment.”

Did Grantham see any bright spots on the investment landscape? The MarketWatch reporter wrote:

Don’t hide under the mattress just yet. Grantham points out that many of the world’s strongest companies are based in the U.S., which could help the U.S. market’s relative performance. Moreover, he said, the weaker global picture will benefit the U.S. dollar, so the American market could turn out to be “a safe haven.”

Source:

“The four horsemen of the market”
Jonathan Burton
MarketWatch, August 29, 2008

Yesterday, Koh Gui Qing of Reuters India talked about the recent political upheaval in Pakistan and its effects on the domestic financial markets. Qing wrote:

Pakistan’s financial markets will increasingly miss the political stability under Pervez Musharraf as the country’s nascent but turbulent transformation to democracy from dictatorship keeps foreign investors away.

Some analysts said although Pakistan’s transformation into a democracy will get the thumbs-up from investors in the long run, the jostle for power may deter foreign investors in the near term and limit any market recovery…

Pakistan’s stock market is at a new two-year low and the rupee has weakened to a new record low.

Emerging markets veteran Mark Mobius offered his views on the situation in Pakistan to Reuters. According to Qing:

“The departure of Musharraf does not necessarily mean that stability and a guarantee of U.S. aid is out the window,” said Mark Mobius, executive chairman at Templeton Asset Management.

Mobius said Pakistan’s stock market has “probably already discounted the worst case scenario”.

Source:

“Pakistan’s rocky road to democracy deters investors”
Koh Gui Qing
Reuters (India), August 27, 2008

Legendary stock investor Warren Buffett appeared on CNBC’s “Squawk Box” this morning. Reuters’ Jonathan Stempel and Euan Rocha covered the event and wrote:

Warren Buffett said the U.S. economy is unlikely to improve before 2009, and there was a “reasonable chance” that Fannie Mae and Freddie Mac shareholders would be wiped out though the companies themselves are too big to fail.

The “Oracle of Omaha” touched on a number of topics, including:

Credit Crisis

Referring to credit deterioration, Buffett said, “Right now the situation is still getting worse, and I would say that I don’t see any early end to that.”

U.S. Economy

He also said Federal Reserve Chairman Ben Bernanke “does not have any magic wand” to bolster an economy facing weak growth and mounting inflation. “In my judgment it won’t be any better five months from now,” he said.

U.S. Stocks

Buffett said U.S. stocks are broadly “more attractive” than they were a year ago, adding that Berkshire has no currency bets against the U.S. dollar.

U.S. Mortgage Giants

Fannie and Freddie shares have plummeted as speculation grows about a government bailout of the companies, which own or guarantee almost one-half of U.S. mortgages. Shares of both have fallen more than 90 percent in the last year.

“They’re too big to fail,” Buffett said. “That doesn’t mean that the equity can’t get wiped out, and it almost has. In a practical sense, as institutions, they don’t have any net worth.”

Buffett forecast that “you’ll see some action fairly soon” to support the companies, but that he has not been approached to assist in any bailout. He said “nothing is going to happen” to investors in the companies’ insured mortgages or debt, but “the equity and preferred stock is another question.”

Transcripts of his “Squawk Box” appearance can be found here at CNBC’s “Warren Buffett Watch.”

Source:

“Buffett sees economy weak into ‘09”
Euan Rocha, Jonathan Stempel
Reuters, August 22, 2008

Legendary emerging markets investor Mark Mobius, who oversees about $40 billion in emerging-market equities as executive chairman of Templeton Asset Management Ltd. in Singapore, spoke to Bloomberg yesterday from Ho Chi Minh City. From the interview:

BLOOMBERG: Why the slide in emerging markets? Is it overdone?
MOBIUS: I think it is. The market has come down a lot. In fact, in China, in the Asia market, it’s come down far more than that. So, we’ve seen a very, very big correction in many places around the world in emerging markets. And it seems to be overdone, but not necessarily over, because, you know, the sentiment is bad globally so that there’s a tendency for people to sell out, and stay out, until they see an about-face in the market.

Some notable excerpts from the interview included:

Commodities

I think that the demand for these commodities is going to continue at a pretty high level. Of course, much higher than there has been in the past, simply because of the demands from China, India, and these other countries that are growing at the paces I just mentioned. So I think it’s more of a correction, rather than a significant secular downturn in these markets and the commodity markets.

U.S. Dollar

BLOOMBERG: Would you not be particularly bullish on the dollar as well?
MOBIUS: No, I wouldn’t, given the propensity of the U.S. government to spend the way they’re spending and to have new ventures against Russia in Eastern Europe, and so forth and so on. I think, unless these policies change in a new administration, I don’t see how the U.S. dollar can keep at a strong level.

Russia

We’ve been, and have been increasingly comfortable, with our investments in Russia. We’ve made an awful lot of money in Russia, both on the private equity side as well as the public side. And, things are getting better in Russia. I think the situation that we’re seeing with Georgia is an anomaly… I think that this will blow over and Russia will continue to be a very important place for us to be putting our money.

Brazil

Brazil, of course, is at the top of the list in terms of weighting in our funds at this time… But generally speaking, the banks are doing very well, very profitable. Petrobras, Vale do Rio Doce, extremely profitable companies.

India

The Indian market, finally for us value investors, has become more interesting, because of the downturn you just mentioned. So some of these companies are beginning to look quite attractive— some of the pharma companies, some of the software companies, and even some of the commodity companies, because you know India, has iron ore and produces a lot of steel. So, we’re looking at that more carefully, and we think they are good opportunities at this stage of the game. We were quite underweight in India for a long time because of the valuations.

Vietnam

The economy is thriving, and things are moving ahead… and we’re pretty optimistic about the longer-term future of the country.

You can listen to the 14 minute 26 second interview here.

Source:

Mark Mobius Interview
Bloomberg, August 20, 2008

Last Friday, well-known bear Marc Faber spoke to Bloomberg’s Kathleen Hays about the euro’s performance against the U.S. dollar, commodities, and the global economy. Some notable excerpts from the interview included:

The global economy is in recession already…

The U.S. would now outperform for 3 to 6 months…

I think the dollar can continue to rally somewhat to say 1.47 against the euro, then there’s some support there. The Europeans will have to cut interest rates as well, because their economies are most likely much weaker than it’s perceived. The emerging economies are also much weaker than it’s perceived. And so, on a relative basis, if you put a gun on my head and said you had to buy stocks somewhere, I would by U.S…

I think commodities individually, could easily drop 50 percent, as some have already done, like nickel, lead, and zinc, and others will follow. But after that, I think that the bull market in commodities will reassert itself. But, my view was, that, for the second half of 2008 commodities would go down…

Well, let me put it this way, I personally am not buying U.S. stocks, but am long the dollar right now…

Where I’m also long and optimistic is essentially about Japan. And I would be very wary of the favorite trades of the last say, two years, long commodities, long steel stocks, long iron-ore companies, that kind of sector I would avoid…

You can listen to the 5 minute 18 second interview here.

Source:

Marc Faber Interview
Bloomberg, August 8, 2008

This morning I came across an interesting article about legendary investor Jim Rogers on the Internet news site NewsMax. Rogers, who recently moved to Singapore with his family, is the parent of two daughters and had some advice for other parents. From the NewsMax piece earlier today:

Jim Rogers thinks the smartest and best thing parents can do to ensure their childrens’ future economic well-being is to teach them to speak Chinese.

Later on, the CEO of Rogers Holdings gave out another recommendation. According to NewsMax:

Rogers — who no longer holds any funds in U.S. dollars and advises investors to buy strong non-U.S. currencies — says that the second best thing parents can do for their kids’ future is to keep their money in a Swiss bank account.

“My little girl does not have American bank accounts, she has Swiss bank accounts,” Rogers says.

Why no dollars? The fact that the U.S. is now the largest debtor in history means the U.S. dollar won’t be recovering any time soon, Rogers says.

“We owe the rest of the world $13 trillion, rising at the rate of $1 trillion every 15 months,” he says, to illustrate why the dollar’s value is decreasing.

“And the few people who know what is going on, don’t seem to care.”

The staff at NewsMax also noted that the former partner of George Soros is investing in a new area unbeknownst to Investorazzi.com. They wrote:

Rogers, in fact, is so confident in the future of China’s middle-class that he recently began buying shares in companies that produce a commodity that middle-class Chinese are just beginning to use — wine.

Source:

“Rogers: My Kid Learns Chinese, Banks Swiss”
NewsMax, August 6, 2008

—

Offshore Banking Alert
The 10 things you really need to know before opening an offshore bank account. Free Report.

Money managers from around the world gathered in Chicago last week for the CFA Institute’s annual investment seminar. Yesterday, the Chicago Tribune’s Gail MarksJarvis talked about two of the speakers- Jeremy Grantham and Marc Faber. The personal finance columnist wrote:

“I am officially scared,” GMO investment manager Jeremy Grantham told professionals from as far away as Abu Dhabi and Malaysia. “In 2000, we had a technology bubble. But this is massive, a massive credit crisis and a bubble in global housing, global equity and global land.”

Grantham, whose clients have included Vice President Dick Cheney and 2004 presidential candidate John Kerry, warned that the world is working its way through the “first truly global bubble.”

The British money manager shared his investment outlook with seminar participants. MarksJarvis wrote:

When asked by a money manager what he would buy now, Grantham said, “long mattresses” — jesting about the stereotypical nervous behavior of hoarding cash. He seriously suggested: “Put money into something incredibly safe, like a high-quality hedge fund.”

Grantham said rather than buying stocks for the long run now, he would only “short” them, or bet that they will decline in price. He sees “nothing interesting in quality corporate bonds,” and he has been shorting oil. “Commodities had a good run, but that’s over,” he said.

Although downtrodden mortgage-related bonds might be a good deal now because some are selling for 59 cents on the dollar, he said he wonders if the price will seem compelling if home prices fall another 20 percent or 25 percent.

He confessed to the group that “I bought my first gold last week, and I hate gold. It doesn’t pay a dividend. I would only do it if I was desperate.”

MarksJarvis noted:

Generally, when bubbles burst, the asset prices stay down for lengthy periods. Grantham isn’t expecting the stock market to hit its low until 2010.

The Tribune columnist also talked about Marc Faber, who publishes the monthly investment newsletter The Gloom Boom & Doom Report. She quoted the Swiss-born investor as saying:

The Fed has created a bubble in everything — stocks in emerging market, real estate everywhere in the world, commodities, art. The only asset class that is down is the U.S. dollar…

It is quite likely that the current synchronized global economic boom and the universal, all-encompassing asset bubble will lead to a colossal bust.

MarksJarvis also noted:

And with commodity prices so inflated, he expects an “increase in international tensions” over resources.

Source:

“Even the pros may be stuffing the mattresses”
Gail MarksJarvis
Chicago Tribune, July 29, 2008

Last week, Greg Brown of the Internet news site NewsMax.com interviewed legendary investor Jim Rogers. During the conversation, which appeared on the NewsMax site on Friday, Brown pointed out that Rogers “correctly called the horrendous decline in financial stocks, including the Fannie and Freddie mess.” The CEO of Rogers Holdings talked about this issue, and more, saying:

Well, we’ve had a wave of failures, yes. And we’re going to have more, I assure you, they’re going to be more coming over the next few years…

Washington is making mistake after mistake after mistake…

We’re going to have one of the worst decades we’ve had in a long time.

Investment Strategy

I think the stock market is going to be a bad place to be for some time…

These days, I’m more or less watching. I have bought some airline stocks recently. I have bought some agricultural products recently. I have bought some Swiss francs, and some Japanese yen recently. Some Chinese renminbi recently. That’s about all I’ve done to buy in the last few, in the recent past.

U.S. Dollar

The United States dollar is now a terribly flawed currency…

They’re on official record of saying they’re going to debase the U.S. dollar. That’s never been good for any country in history. But our central bank is doing their best to drive the value down.

Inflation & Interest Rates

In my view, there’s more inflation coming. They are debasing the dollar, and that’s going to make the long-term interest rates, and medium-term interest rates, go higher. The central bank might be able to control short-term interest rates for a while, but in my view, all interest rates will be going higher over the next few years, because of inflation, and debasing the currency, and several reasons.

Economic Outlook

Well, these are perilous times, in the economy, in the world economy, quite largely because of mistakes that we’ve made in the United States, unfortunately. Ten years ago we had the Asian crisis which affected the world markets. This time, I’m afraid, it’s going to be the American crisis, which is affecting world markets. So be very, very careful about anything you buy anywhere. Certainly in the U.S. including the currency. I think everybody should learn about international diversification, because, I’m afraid, things are going to be better outside of America than inside America. I don’t particularly like saying that, but one has to accept facts, and face facts, if one’s going to survive.

You can listen to the 7 minute 28 second video here.

Source:

“Jim Rogers Interview: Washington is Making ‘Mistake After Mistake.’”
NewsMax.com, July 18, 2008

I’ve heard that legendary bond investor Bill Gross had become a U.S. dollar bull. However, I wasn’t able to find much out there from “The King of Bonds” on his outlook for the American currency, besides the following from Internet news site Newsmax.com:

While the dollar has dropped to yet another record low against the euro, the greenback will recover in coming months, according to superstar money manager Bill Gross and other heavyweights.

Rising European interest rates have pushed the euro up nearly 35 percent against the dollar over the past three years, to a high of $1.60.

But a growing number of experts believe the economies of Europe will slump even further than the U.S., forcing the European Central Bank to reverse this month’s interest-rate increase.

The euro will slip about 6.5 percent to $1.50 by year-end and then slide further to $1.45 by the middle of next year, according to the median of 37 currency analysts surveyed by Bloomberg News.

Gross, co-CEO of Pacific Investment Management Co. (Pimco), has turned bearish on the euro for the first time since the common European currency was created in 1999. Pimco runs the world’s largest bond fund.

Grapic Art By Yaroslav B, stock.xchng

Source:

“Bill Gross: Euro Overvalued by 30 Percent”
Newsmax.com, July 17, 2008