Stocks & Equities

Marc Faber buying stocks in Portugal, Spain, Italy and France on a contrarian play

DownloadedFile

Faber on the eurozone crisis:

In my view the markets are rallying because they were grossly oversold. When markets are grossly oversold, especially markets of Portugal, Spain, Italy, France, then any news that is not disastrous news propels stocks higher.

‘I think that combined with seasonal strength in July, the rally has carried on somewhat. But it is another cosmetic fix, a quick fix that does not solve the long-term fundamental problem of over investment in the euro zone. And what it does, basically, it forces Germans to continue to finance people in Spain and Portugal and Greece that are living beyond their means.’

‘If I were the Germans, if I were running Germany, I would have abandoned the eurozone last week…It is a costly decision, but losses are there and somewhere, somehow, the losses have to be taken. The first loss is the banks. In the case of Greece, one should have kicked out Greece three years ago. It would have been much cheaper.’

On whether he’s picking up European equities:

‘Yes. In Portugal, Spain, Italy, and France, the markets are either at the lows of March 2009, or lower. Along with bad companies and the banks, there are also reasonably good companies. Stellar companies, but they have been dragged down. I see value in equities, regardless of whether the eurozone stays or is abandoned.

‘[I’m buying] anything that has a high yield, or what I perceive to have a relatively safe dividend. In other words, I do not expect the dividends to be slashed by 90%…I am not buying banks, but maybe they could rally. I am just not buying them because I think there will be a lot of equity dilution and recapitalization. I’m not that keen on banks.’

….read more about what currencies he is recommending go HERE or view the entire video below

Markets: Troubles & Solutions

As to Europe’s financial troubles, don’t get caught up in the talk that Europe’s leaders are fixing the massive problem. They are not.

Talk of Eurobonds is conditional upon member countries balancing their budgets, which is not likely to happen. It’s also conditional upon member countries effectively giving up their sovereignty, which is also not likely to happen.

While Europe might be able to buy some time, the European sovereign-debt crisis will not die off until the entire euro region comes crumbling down and the euro breaks up — either via Greece, Spain and/or Italy withdrawing, or perhaps Germany taking the lead and calling it quits on the euro down the road.

Either way, I see more trouble ahead for Europe — a lot more.

And that brings me directly to the markets: They are not in good shape.

Gold is threatening to break critical support at the $1,544 to $1,546 level. It remains under pressure due to fear and panic by investors who want almost nothing but cold, hard cash these days and who don’t want to take much market risk at all.

If gold breaks that $1,544 level, look for gold to plunge much lower.

Ditto for silver, which is on the verge of cratering through the $26 level. If that happens, take it as a leading indicator that both the European Union and the United Sates are plunging deeper into a depression.

I say “depression” and not recession because that’s what it is. Most of Europe is definitely in a depression, with unemployment rates that exceed those seen during the 1930s Great Depression.

Here in the United States, we just don’t know it yet. But all the available evidence that I study tells me that the U.S. economy, when measured in terms of honest money, gold, is already in a depression.

Bottom line: Most asset markets will remain under pressure from …

First, fear and panic that Western economies are melting down, leading to “risk-off” trades and a flight of capital into cold, hard cash.

Second, fear and panic that Western leadership is also heading down the wrong path, mandating and taxing things that really belong in the private sector, and in which the government should not be involved.

Third, fear and panic that there’s almost nowhere to hide your wealth these days, unless you can find another planet to put your money.

And more. I don’t like it one bit at all. But that’s the reality we face now, and will be facing for years to come.

When will it all end? When will there be a better day?

Not for a while. And not until the U.S. wakes up and smells the coffee and realizes it will not be immune to a sovereign-debt crisis and that our leaders are also embarking down the wrong path, trying to socially engineer a solution through tax-and-spend measures, through class warfare, and more.

There is a light at the end of the tunnel; however, it’s a few years off. In the meantime, I maintain my views …

1. Keep most of your liquid funds in cash, ready to be deployed on a moment’s notice, but as safe as can be right now. The best way: A short-term Treasury-only fund in the U.S., or equivalent.

2. Hold on to all long-term gold holdings. You do not want to let go of those. Short term, gold is heading lower. Long term, it’s heading to well over $5,000 an ounce.

3. Consider prudent speculative positions to grow your wealth. Like those I have recommended in myReal Wealth Report, which are doing great right now as silver falls, as the euro struggles, and more.

Most importantly, question everything Washington tells you. Only by doing that will you ever come away with an objective view of what’s really going on in our country. Ditto for Europe and its leaders.

Stay tuned and best wishes,

Larry

stock-market

P.S. My Real Wealth Report subscribers are gearing up for our next online Market Update and Strategy Briefing, which takes place tomorrow, Tuesday, July 3. In this special online presentation, we’ll be looking closely at the markets, what’s coming next and the strategies that make sense right here and now. But you have to be a member to be able to view this exclusive briefing — so //www.gliq.com/cgi-bin/click?weiss_uwd+0109201-1+UWD1092+vgbb@shaw.ca+%20%20%20%20%20%20%20%20++3+4422655++E-Acquisition%20Lead“>click here to start your risk-free Real Wealth Report trial today!

Jim Rogers: Market Surge from Eurozone Debt Crisis Deal Won’t Last

Stock markets around the world soared Friday in reaction to the morning’s Eurozone debt crisis deal, but noted investor Jim Rogers wasn’t impressed.

“This is no more than just another temporary stopgap to make the market feel good for a few hours, days or even weeks,” Rogers, Chairman of Rogers Holdings, told CNBC. “Then everybody’s going to wake up and say, “This doesn’t solve the problem.'”

Meeting in Brussels, European leaders announced a plan early Friday that would provide struggling banks with money directly from the bloc’s bailout fund. 

The leaders also said bailout funds could be used to stabilize European bond markets. But they did not tie such use to additional austerity measures, which have angered citizens in debt-troubled nations like Greece and Spain.

The summit is just the latest in a series of high-level attempts to resolve the 2-year-old Eurozone debt crisis, which has required bailouts of Greece, Portugal, Ireland, and most recently the Spanish banking system. 

Markets around the world surged on the announcement, with some European indexes rising as much as 4%. In the United States, the Dow Jones Industrial Average shot up 200 points at the open. 

Don’t get used to it, Rogers said.

(Take a look at some of these 5 to 6% moves taking place in Europe)

 

Picture 4

 

…read much more HERE

If we see some contagion in EMs, the next leg down could be swift and deep!

Quote 

“Today, we pay tribute to the pagan god of token environmentalism by spending countless hours recycling paper.” –Bjorn Lomborg, Adjunct Professor at the Copenhagen Business School, writing in July/August 2012 Foreign Affairs, “Environmental Alarmism, Then and Now.” 

Headlines & Of Interest 

10 Reasons Countries Fall Apart (Foreign Policy) 

Egypt: O brother, where art thou? (Asia Times; Pepe Escobar) 

Commentary 

We get a sense global liquidity is draining back to the center from the periphery. We know we are not alone in this view, as many have warned about the European banking system’s deleveraging globally i.e. reducing loan exposure. Add in the tepid global growth environment with all three wagon pullers—US, Europe, Asia—now struggling, and we have the recipe for a systemic event. Though the Eurozone is ground zero for triggering such risk, especially now that Chancellor Merkel (rightly so) ruled out debt sharing, it is quite possible the catalyst could be an emerging market economy first, and Eurozone second. Any EM event will likely trigger even faster global deleveraging from the private sector, including those investors who continue to be sold the fantasy that EMs have decoupled. 

Action 

Technically, we think a longer term top is in place; made back in 2007. If we see some contagion in EMs, the next leg down could be swift and deep! 

Picture 2

Only three days for EU to avert financial disaster warns George Soros

Hedge fund supremo George Soros is warning the European Union summit this week that it only has three days to avoid a fiasco that would plunge the world into a new economic crisis.

It is clear that financial markets need the start of a solid plan for a European banking union and euro bonds or else the risk is that markets take fright and sell-off big time…

 

Picture 1

….click on image or go HERE to view interview with George Soros

Stocks fall off a cliff as Moody’s downgrades 15 international banks

Moody’s Investor Service cut the credit rating of the 6 largest US banks with international arms.

In anticipation of this, and on general economic jitters, stocks tanked 251 points June 21st in the second worst day of trading this year.

Picture 1

The downgrade of US banks reflects growing concern about the global economy and the exposore of US companies to the european debt crisis.

Wall Street Journal:

The Moody’s Corp. unit reduced Morgan Stanley’s rating to Baa1, which is three notches above the junk, or noninvestment grade, status that many bond buyers avoid. The move stands to add to the company’s borrowing costs and force it to present billions of dollars in cash or high-grade bonds as collateral.

More important, the downgrade could trim Morgan Stanley’s earnings power by cutting market share in high-margin businesses such as derivatives as traders seek out higher-rated trading partners. Questions about major banks’ earnings power and capacity to withstand market shocks have weighed on financial stocks since early 2011.

Morgan Stanley’s shares fell 24 cents, or 1.7%, to $13.96 in 4 p.m. New York Stock Exchange composite trading on Thursday during a broad market selloff. In after-hours trading, the stock was up 3.6%.

In a statement, the company said, “While Moody’s revised ratings are better than its initial guidance of up to three notches, we believe the ratings still do not fully reflect the key strategic actions we have taken in recent years.”

Over time, a downgrade could mean “the incremental new business could be tougher to win,” said Glenn Schorr, an analyst at Nomura Securities. The company’s shares have fallen 39% over the past year amid questions about its profit outlook.

But the two-notch rating cut saves Morgan Stanley from a blow to its reputation. The company that has labored since the financial crisis to dispel investor fears that it would be the first major financial firm to be rocked in any large market storm.

With many european leaders poised to initiate “growth” strategies by massively increasing government spending, investors are expressing their concern by driving up the cost of borrowing for nations like Spain and Italy. No one wants to be left holding the bag like Greek investors were, who were given 50 cents on the dollar for their government bonds.

The crisis has also affected American banks who have some exposure to bonds in Spain and Italy. A collapse of the Spanish banking sector would probably freeze credit markets worldwide, causing a meltdown similar to the one that occurred in the US in 2008. We won’t know for a few days just how bad is the Spanish situation with its banks as an independent auditor releases results of stress tests performed over the last few months.

Investors want to be optimistic but there is so little good news for the economy that it is becoming harder and harder to see the silver lining. Manufacturing declined last month, as did sales of existing homes. This has affected employment outlook and the possibility of the US sliding back into recession cannot be dismissed.

It’s going to be a long ,hot summer.

….read more American Thinker Articles HERE