Staggering U.S. Debt Worrying The Fed And Hurting U.S. Economy

I think the US is trying to pull itself up by its bootstraps. The problem is the massive US debt of over $17 trillion. I think the Fed’s idea is to get the economy growing again, start paying off the debt, and all will be well. The key to the strategy is whether the Fed can get the US economy growing again. On this basis, I’ll be watching the stock market for the answer to whether the US economy can be revived.

….read more HERE

“In Europe if you are an institution or a wealthy individual, your choice is to put money in the banking system. It is not very safe either and you will get zero interest rate.”

ET Now: What happens to the equity markets? Do they still stand out on a relative basis as opposed to other emerging markets or do you think they can pick up strength on their own in another quarter or two?

Marc Faber : First of all I would like to say that the Indian markets started to perform well long before Mr Modi was elected. At the end of 2013 the markets already started to rise considerably and this increase in prices has continued. Last year the market was up.

There is difference between various asset classes. In the US we have essentially high valuations by any measurement. In Europe, we have lower valuations and in emerging economies we have the lowest valuations. So from a longer- term perspective, I would rather invest money in emerging economies.

In the case of India, we have a similar situation like in some other markets. There are some blue chip stocks like Nestle. They sell at close to 50 times earnings. On the other hand, you have other sectors, other companies that are selling at maybe only 10 to 15 times earnings and the difference between India and the European markets or the US markets is that India has one of the best central bankers in the world having Mr Rajan. He has kept interest rates relatively high and has the flexibility to bring them down if he wants to.

I do not necessarily advocate low interest rates. I think the zero interest rate policies that Japan, Europe and the US have adopted will lead sooner or later to disaster, but it has led to rising stock prices. In Europe if you are an institution or a wealthy individual, your choice is to put money in the banking system. It is not very safe either and you will get zero interest rate. You can buy government bonds.

The money printing has distorted the price mechanism. Explain to me why Italian government bonds, Spanish government bonds, French government bonds should have a lower yield than the US treasuries. This is what money printing has done. It has created bubbles in different asset classes.

Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.

There are three financial hurricanes hurtling towards our country and most people are oblivious to the coming catastrophe. The time to prepare is now, not when the hurricane warnings are issued.

Hussman makes his usual solid case that stocks and bonds are as overvalued as they have ever been in the history of investing. People are under the false impression that bonds are always a safe investment. The fact that you are already getting a negative real return on bonds doesn’t seem to compute with math challenged Americans. Over the next ten years you will absolutely lose money in bonds.

Liquidity in both the stock and bond markets is thinning considerably. In bonds, quantitative easing by global central banks has resulted in a scarcity of available collateral, a collapse in repo liquidity, and increasing frequency of delivery failures, all of which is shorthand for a bond market that is becoming less liquid and more fragile to any credit event. Meanwhile, risk premiums are minuscule. Avoiding a negative total return on 10-year bonds now requires that interest rates must not rise by even one percentage point over the next three years. Bond yields have historically covered investors against a meaningful change in yields before resulting in negative total returns. On a one-year return horizon, bond yields presently cover investors for a yield change amounting to only about 0.25 standard deviations – matching mid-2012 as the lowest level of yield coverage in history.

The fragility of the economic, financial, and social systems of the U.S. is at extreme levels.

…continue reading HERE

…..Will U.S. Seize Gold?

Richard Russell:  “Subscribers may remember that I thought the stock market would have a melt-up before it settled into a destructive bear market. It occurs to me that the chances of a melt-up are diminishing because the market is losing its upside momentum.

Prepare For Something Worse Than 1929 – 1932

My thinking is that the market is preparing for one of the worst bear markets in history, one that will out do the 1929-32 affair.

…continue reading HERE