That means that France is under attack and that’s worrisome. French banks hold a lot of French bonds
The S&P 500, for example, is worth no more than 950 on our estimates –
fter two massive bubbles and two equally massive resurrection programs, the Fed may be out of ammunition.
- For those with a long horizon, I am sure well-managed forestry and farmland will outperform the average of all global assets.
- I think it is likely that resources in the ground, hydrocarbons, metals, and fertilizer will also win on a 10-year horizon. I am not certain, though, because of the remarkable gains in so many of these in the last fi ve years. I would put the odds at 2 to 1. As mentioned last quarter, many commodities have the potential for very sharp declines in the short term. If that occurs, then the odds would, of course, rise.
- On a regular time horizon, I would continue to overweight quality stocks, which may well be on a roll. They are not priced to make a fortune, but they are priced to give approximately 4.5% to 5% real return, which I think is acceptable for low-risk assets. They have also delivered dependable downside – risk off – relative performance for several years, which is a characteristic generally in short supply.
- Emerging markets are hard to evaluate because they are clearly going through many phases of development in a real hurry. So what is normal profi tability? Probably not the old levels. They are moving toward developed status and probably toward our developed world’s level of profi tability. (Yes, James Montier, that would be a change and, therefore, I admit, far from certain.) In a global fi nancial crisis it is also important to remember that their cumulative foreign reserves are remarkable, twice that of the developed countries. But, all things considered, I believe they will outperform other non-high-quality equities for the next seven years and are likely to produce a semi-respectable return for a risky group of about 4% to 5% a year real.
- We at GMO also believe that Japan is likely to “regress,” in the mathematical sense, toward levels of profi tability that would be considered normal in other developed countries. We expect the progress to be very slow and uneven. If it does not happen at all, then Japanese stocks are priced like the average of all other developed equities, or a bit cheaper. If, however, by some chance margins improve quite fast, then Japanese stocks will likely be the best performing stocks around and could hit double-digit real returns for seven years. Japan’s remarkable resilience in the face of electricity shortages gives some inkling of what they are capable of. How quickly we have forgotten their obvious talents of 20 years ago. Can all of those talents really be lost forever?
- As for the rest of global equities, they range from unattractive (August 2) to very unattractive. The S&P 500, for example, is worth no more than 950 on our estimates.
- In general, risk avoidance looks like a good idea. Cash – despite its manipulated low rate, deliberately designed to make us reach for risk – should be seen as a safe haven replete with important optionality: dry powder to take advantage of possible opportunities.
- As mentioned in previous quarterlies, the main long-term risk is that after two massive bubbles and two equally massive resurrection programs, the Fed may be out of ammunition. Should more building blocks fall (government bond downgrade and further market declines have missed my deadline) and a serious global double-dip develop, then the pattern of market behavior this time may be more historically typical. That is, instead of quickly recovering, markets will become cheap and stay below long-term averages for several years as was the case pre-Greenspan. Twenty years is a long time, so most investors think that dipping to fair value for a minute and bouncing is normal. It is, in fact, highly aberrant historically. Markets staying down and washing away a whole generation’s false expectations, high animal spirits, and excessive risk-taking – that would be normal. In the long run, a prolonged period of lower priced assets would lead to a much-improved, less risky, and less bubble-prone environment. In short, a more manageable world. It would also mean much higher returns from investing at lower prices. Long-term benefi ts from short-term pain. Just the kind of trade-off that the children in charge now would never make deliberately. But it may well happen anyway.
Greece’s state budget deficit widened to €15.5 billion in the January to end-July period from €12.5 billion euros in the year earlier period
....
Yes, that thing gushing out of your nose is blood.
maybe we'll have a rebound next week or so, but in general I think we will test the July lows of last year, the S&P at 1,010. After that, probably we'll get probably a QE3 announcement."
Essentially they spent their bullets. It is very difficult to follow through with QE3 right here, because you have gold prices going ballistic, and you have the dollar being very weak, and so there are unintended consequences with implementing QE3 right here."
"What has QE1 and QE2 done for the labor markets? Nothing at all. It's done nothing for the housing markets. It's lifted stocks and it created wider wealth inequality in a sense that people who own assets have done very well, and people that are the lower-income recipients groups, they are hurt by rising energy prices and food prices."
The stock market peaked out on the 2nd of May on the S&P at 1370. So we're now around 1010. For many stocks we're down 20% or so. We're very oversold. I think a rebound is coming but you can forget about a new high. That is out of the question. Because the technical picture is horrible, horrible. "
he problem with the Federal Reserve policy of essentially zero interest rates is that they are essentially throwing money at the system, but they don't control where the money will flow to. It can flow at some point into commodity-related stocks. It can flow into gold, oil, treasuries, but it doesn't flow evenly into these assets. In my opinion, the Treasury, the long-dated Treasuries are essentially the short of the century thing here."
"I don't think it is a bubble, but I think the gold market has exploded to the upside recently and the correction is overdue. But as I have always maintained for the last 12 years, every responsible adult should gradually accumulate gold, because not owning any gold is the trouble with government. I don't understand. People of Bloomberg, I hardly know anyone who owns any gold physically. All of the Bloomberg employees are intelligent people. They listen to the news every day. They make the news every day. Hardly anyone owns any gold.”
n 1988, China avea 100 de kilometri de autostradă. În 2000, ajunsese la 16.300 de kilometri, iar în 2009 a depășit neverosimilul nivel de 65.000 de kilometri. În aceeași perioadă, chinezii au construit 30.000 de kilometri de cale ferată și nu mai puțin de 220.000 de kilometri de șosele. La care se adaugă milioane de clădiri (fie ele birouri, școli, spitale, blocuri de locuințe, magazine, case, fabrici, fie ferme).
Proiectele publice nerentabile au fost finanțate, în majoritatea cazurilor, cu bani împrumutați de la centru. Este vorba de 1.000 de miliarde de euro, potrivit cifrelor oficiale, ori de 2.500 de miliarde de euro,
de maximum 0,75% pe an, cel puţin până la mijlocul anului viitor
he real BRBY, strengthened 1.29 percent to close Tuesday trading at 1.5886 to the dollar after the U.S. Federal Reserve said it would maintain near-zero U.S. interest rates until 2013.
corporate insiders are aggressively buying.
 |
“Insider buying has accelerated dramatically to its highest level since the market bottom of March 2009,
nsiders are typically defined as a board member, executives, and institutions or individuals that own more than 10 percent of any class of the company’s stock.
LONDON—U.K. house prices fell at a slower rate in July than June but the market is unlikely to pick up anytime soon, a poll of surveyors showed Tuesday, while retailers said sales at U.K.
rakash Sakpal, an economist at ING Bank, predicted Friday that central banks in China, India, South Korea, Taiwan and Thailand would hold off from further interest-rate increases and credit tightening, a shift from the anti-inflationary stance that has dominated the agenda all year
Cisco, which depends on government spending for about a fifth of its revenue, said in July it would cut 15 percent of its workforce and sell a set-top box factory in Mexico as part of an effort to slash annual expenses by $1 billion.
Cisco has warned since last year that government spending cuts would include network equipment, and a deal last week to reduce the U.S. federal budget deficit could hurt the San Jose, Calif., company's business more
Cisco will release its fourth-quarter earnings on Wednesday.
China's defense budget has shot up nearly 70 percent over five years, while Japan, struggling with public debt, has cut military outlays by 3 percent over the same period, a Japanese government report said.
The long-awaited debut of the vessel, a refitted former Soviet craft, marked a step forward in China's long-term plan to build a carrier force that can project power into the Asian region, where seas are spanned by busy shipping lanes and thorny territorial disputes.
"Its symbolic significance outweighs its practical significance,
aturally, just like in the case of silver, this will merely embolden the CME to proceed with hike after hike, which in turn will kill speculative elements while merely reinforcing the strong hands. End result: in one month gold will be above $2,000 with almost 100% certainty.
by 2013, it’s highly likely that the US will have over $16tr in debt. If the average rate across the curve in 2013 is only 4%, which is low by any historical standard, then our annual interest payment will be over $600bn, or almost 30% of annual tax revenues. So the Fed faces problems on a number of fronts.
QE1 and QE2 have come and gone and yet unemployment remains sticky above 9%.
e have some tough times ahead that will involve some asset prices falling (commercial/residential real estate and other levered assets), other asset prices rising (agricultural land, commodities, gold/silver) and the façade that the Fed is all-powerful to come crashing to the ground.
gold isn’t in a bubble, but rather is reflecting the largest bubble on the planet, US Treasuries.
many central banks will opt to own precious metals, commodities and commodity based currencies
with most foreign central banks holding over 60% of their reserves in USD, the flight out of dollars and in to other alternatives will cause bottlenecks and price spikes which could cause some assets to see their prices rise exponentially
In fact, given the recent price rise over the last few days, a correction in gold could be forthcoming soo
investors should not view gold as a commodity but as a currency.
ny of SocGen, Intesa, Dexia, BAC are big enough to provide the market with a “Lehman moment”.
I think we should have learned from 2008, that banks in particular take a long time to default.
There are ...... lots of countries in Europe that should be downgraded just as the US has been downgraded. – in
Vanguard Energy Index is an excellent way to add inexpensive energy exposure to your holdings and the ETF offers significant upside potential if the economy does regain steam.
Vanguard Energy Index (NYSE: VDE)
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