Marc Faber Says Fed `Like a Bartender' Cutting Rates (Update3)
By Pimm Fox and Eric Martin
Oct. 23 (Bloomberg) -- The Federal Reserve acted ``like a bartender'' in lowering interest rates and its actions are contributing to a stock market bubble in the U.S., investor Marc Faber said.
``Each time you bail out, it becomes bigger and bigger, and the credit problems become much, much larger,'' said Faber, managing director of Marc Faber Ltd. and publisher of the Gloom, Boom & Doom Report. The Fed ``feeds its customers with booze, and when they get totally drunk and are about to fall off their chairs, the bartender gives them more booze to keep them going. One day, it will lead to the ultimate breakdown.''
The Standard & Poor's 500 Index has risen 2.9 percent since the Fed cut its benchmark rate by half a percentage point on Sept. 18 to keep credit market losses from spurring a recession. Faber said the action spared U.S. financial companies such as Citigroup Inc. from the consequences of bad lending decisions.
``If Citigroup made a mistake, let them be penalized, let the shareholders of Citigroup be penalized,'' Faber said in an interview in New York. ``Then the shareholders will eventually put pressure on the board of directors not to do continuously stupid things.''
The biggest U.S. bank dropped 12 percent last week after saying credit defaults will plague the financial industry for the rest of the year. Citigroup spokeswoman Shannon Bell declined to comment.
``The best for the system would be if a major player would go bust,'' Faber said. ``Then there would be an example for investors and for the players, the Wall Street establishment, the banks, to be more prudent.''
China, India
Faber said this year's rally in Chinese assets, including the 171 percent gain in the CSI 300 Index, will end by the August 2008 start of the Olympic Games in Beijing. He predicted India's gains will end by the same time. The Bombay Stock Exchange's Sensitive Index has climbed 34 percent this year.
``We still have the emerging markets going ballistic,'' Faber said. ``The Chinese market could double here, but it doesn't change the fact we are already in bubble stage.''
Faber said if bubbles in emerging markets deflate, the dollar may rebound from all-time lows against the euro as fund managers who have invested in emerging markets invest in the U.S.
The European Central Bank has raised its key interest rate eight times to 4 percent from 2 percent in November 2005, a ``more responsible'' policy than the Fed's, Faber said.
Track Record
Faber told investors to bail out of U.S. stocks a week before 1987's so-called Black Monday crash, according to his Web site. He correctly predicted in May 2005 that stocks would make little headway that year. The S&P 500 gained 3 percent. He also told investors to buy gold in 2001, before it more than doubled.
On March 29, Faber said the emergence of home loan concerns meant the U.S. stock market was unlikely to benefit from the conditions that supported its rally since June 2006. The S&P 500 climbed 10 percent between then and July 19, when it reached a record, and again reached new highs on Oct. 5 and Oct. 9.
In February 2004, he said stocks in Brazil and Argentina were expensive because investors were overestimating China's demand for commodities. Brazil's Bovespa index has since more than doubled while Argentina's Merval Index has gained about 90 percent.
To contact the reporters on this story: Eric Martin in New York at emartin21@bloomberg.net ; Pimm Fox in New York at Pfox11@bloomberg.net . Last Updated: October 23, 2007 16:55 EDT
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Showing posts with label Marc Faber. Show all posts
Showing posts with label Marc Faber. Show all posts
Thursday, October 25, 2007
Wednesday, September 19, 2007
Rogers, Faber Say Fed Rate Cuts Will Spur a Recession
Rogers, Faber Say Fed Rate Cuts Will Spur a Recession (Update4)
By Carol Massar and Michael Patterson
Sept. 18 (Bloomberg) -- Interest rate cuts by Federal Reserve Chairman Ben S. Bernanke will spur inflation, cause the U.S. dollar to collapse and push the world's largest economy into recession, investors Jim Rogers and Marc Faber said.
``Every time the Fed turns around to save its friends on Wall Street, it makes the situation worse,'' Rogers said in an interview from Shanghai. ``If Bernanke starts running those printing presses even faster than he's doing already, yes we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems in the U.S.''
Defaults on subprime home loans have spurred a rise in worldwide borrowing costs and caused losses at investment funds and banks that made bad bets on stocks and debt securities. The Fed today lowered its benchmark interest rate by a half point to 4.75 percent, the first cut in four years. The dollar fell to a record low against the euro, while U.S. stocks surged the most in four years and Treasury two-year notes gained.
Faber and Rogers, who both spoke today before the Fed decision on rates, said the central bank should raise borrowing costs to quell inflation and support the U.S. currency.
``The cause of the problems we have today, they are due to artificially low interest rates, expansionary monetary policies and extremely rapid credit growth that was fueled by a totally irresponsible Fed,'' said Faber, who oversees about $300 million as managing director of Hong Kong-based investment advisory company Marc Faber Ltd. ``It's suicidal to cut interest rates.''
`Stop Inflation'
``They should do something to stop inflation as soon as they can,'' said Rogers, the 64-year-old chairman of Beeland Interests Inc. ``If you don't do something now, if you don't nip it in the bud, it gets much worse down the road.''
Today's rate decision ``is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets,'' the rate-setting Federal Open Market Committee said in a statement. The Fed will ``act as needed to foster price stability and sustainable economic growth.''
Fed officials have said the central bank doesn't want to be seen as caving in to funds that piled into the market for securities linked to subprime mortgages, those made to borrowers with poor or limited credit histories.
Sell Dollars, Bonds
``It is not the responsibility of the Federal Reserve -- nor would it be appropriate -- to protect lenders and investors from the consequences of their financial decisions,'' Bernanke said in an Aug. 31 speech in Jackson Hole, Wyoming.
Rogers, who predicted the start of the global commodities rally in 1999, said investors should sell U.S. dollars and bonds. He said he's selling short shares of investment banks and expects them to fall further. The Amex Securities Broker/Dealer Index rose 4.8 percent today, trimming its loss for 2007 to 2.8 percent.
Short selling is the sale of stock borrowed from shareholders in the hope of profiting by repurchasing the securities later at a lower price.
The Standard & Poor's 500 Index advanced the most since March 2003 following the Fed's rate cut, surging 2.9 percent to 1,519.78. The measure has gained 7.2 percent gain this year. The yield on two-year notes fell 0.08 percentage point to 3.99 percent at 3:23 p.m. in New York, according to bond broker Cantor Fitzgerald LP.
Rogers said he is buying agricultural commodities and recommended investors purchase Asian currencies including the Chinese renminbi and the Japanese yen.
Faber, publisher of the Gloom, Boom & Doom Report, said he is buying gold.
`Ballistic' Gold
``Gold is very cheap even at over $700 compared to many other commodities and also compared to many other assets in the world,'' he said in an interview from Hong Kong. ``If the Fed cuts interest rates by a half a point, I think it will go ballistic, I think it will go up a lot.''
Gold rose to a 27-year high today. December futures climbed 1.6 percent to $735.50 an ounce in New York, the highest since Feb. 11, 1980.
The dollar fell 0.8 percent, the most since Aug. 24, to $1.3972 per euro at 4:04 p.m. in New York and touched an all-time low of $1.3981.
Rogers co-founded the Quantum Hedge Fund with George Soros in the 1970s. He traveled the world by motorcycle and car in the 1990s researching investment ideas for his books, which include ``Adventure Capitalist'' and ``Hot Commodities.''
Faber told investors to bail out of U.S. stocks a week before the 1987 Black Monday crash, according to his Web site. He also told investors to buy gold in 2001, before it more than doubled.
Last month, Faber said U.S. stocks are at the beginning of a bear market in which benchmark indexes may fall more than 30 percent. The Dow Jones Industrial Average has since gained 3.8 percent.
To contact the reporters on this story: Carol Massar in New York at cmassar@bloomberg.net ; Michael Patterson in New York at mpatterson10@bloomberg.net .
Last Updated: September 18, 2007 17:09 EDT
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By Carol Massar and Michael Patterson
Sept. 18 (Bloomberg) -- Interest rate cuts by Federal Reserve Chairman Ben S. Bernanke will spur inflation, cause the U.S. dollar to collapse and push the world's largest economy into recession, investors Jim Rogers and Marc Faber said.
``Every time the Fed turns around to save its friends on Wall Street, it makes the situation worse,'' Rogers said in an interview from Shanghai. ``If Bernanke starts running those printing presses even faster than he's doing already, yes we are going to have a serious recession. The dollar's going to collapse, the bond market's going to collapse. There's going to be a lot of problems in the U.S.''
Defaults on subprime home loans have spurred a rise in worldwide borrowing costs and caused losses at investment funds and banks that made bad bets on stocks and debt securities. The Fed today lowered its benchmark interest rate by a half point to 4.75 percent, the first cut in four years. The dollar fell to a record low against the euro, while U.S. stocks surged the most in four years and Treasury two-year notes gained.
Faber and Rogers, who both spoke today before the Fed decision on rates, said the central bank should raise borrowing costs to quell inflation and support the U.S. currency.
``The cause of the problems we have today, they are due to artificially low interest rates, expansionary monetary policies and extremely rapid credit growth that was fueled by a totally irresponsible Fed,'' said Faber, who oversees about $300 million as managing director of Hong Kong-based investment advisory company Marc Faber Ltd. ``It's suicidal to cut interest rates.''
`Stop Inflation'
``They should do something to stop inflation as soon as they can,'' said Rogers, the 64-year-old chairman of Beeland Interests Inc. ``If you don't do something now, if you don't nip it in the bud, it gets much worse down the road.''
Today's rate decision ``is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets,'' the rate-setting Federal Open Market Committee said in a statement. The Fed will ``act as needed to foster price stability and sustainable economic growth.''
Fed officials have said the central bank doesn't want to be seen as caving in to funds that piled into the market for securities linked to subprime mortgages, those made to borrowers with poor or limited credit histories.
Sell Dollars, Bonds
``It is not the responsibility of the Federal Reserve -- nor would it be appropriate -- to protect lenders and investors from the consequences of their financial decisions,'' Bernanke said in an Aug. 31 speech in Jackson Hole, Wyoming.
Rogers, who predicted the start of the global commodities rally in 1999, said investors should sell U.S. dollars and bonds. He said he's selling short shares of investment banks and expects them to fall further. The Amex Securities Broker/Dealer Index rose 4.8 percent today, trimming its loss for 2007 to 2.8 percent.
Short selling is the sale of stock borrowed from shareholders in the hope of profiting by repurchasing the securities later at a lower price.
The Standard & Poor's 500 Index advanced the most since March 2003 following the Fed's rate cut, surging 2.9 percent to 1,519.78. The measure has gained 7.2 percent gain this year. The yield on two-year notes fell 0.08 percentage point to 3.99 percent at 3:23 p.m. in New York, according to bond broker Cantor Fitzgerald LP.
Rogers said he is buying agricultural commodities and recommended investors purchase Asian currencies including the Chinese renminbi and the Japanese yen.
Faber, publisher of the Gloom, Boom & Doom Report, said he is buying gold.
`Ballistic' Gold
``Gold is very cheap even at over $700 compared to many other commodities and also compared to many other assets in the world,'' he said in an interview from Hong Kong. ``If the Fed cuts interest rates by a half a point, I think it will go ballistic, I think it will go up a lot.''
Gold rose to a 27-year high today. December futures climbed 1.6 percent to $735.50 an ounce in New York, the highest since Feb. 11, 1980.
The dollar fell 0.8 percent, the most since Aug. 24, to $1.3972 per euro at 4:04 p.m. in New York and touched an all-time low of $1.3981.
Rogers co-founded the Quantum Hedge Fund with George Soros in the 1970s. He traveled the world by motorcycle and car in the 1990s researching investment ideas for his books, which include ``Adventure Capitalist'' and ``Hot Commodities.''
Faber told investors to bail out of U.S. stocks a week before the 1987 Black Monday crash, according to his Web site. He also told investors to buy gold in 2001, before it more than doubled.
Last month, Faber said U.S. stocks are at the beginning of a bear market in which benchmark indexes may fall more than 30 percent. The Dow Jones Industrial Average has since gained 3.8 percent.
To contact the reporters on this story: Carol Massar in New York at cmassar@bloomberg.net ; Michael Patterson in New York at mpatterson10@bloomberg.net .
Last Updated: September 18, 2007 17:09 EDT
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Wednesday, August 22, 2007
Fed's Cut Not Justified, Creates Problems, Faber Says
Fed's Cut Not Justified, Creates Problems, Faber Says (Update4)
By Dominic G. Diongson and Catherine Yang
Aug. 20 (Bloomberg) -- The U.S. Federal Reserve's cut of the interest rate it charges banks was ``not justified'' and will create more problems, investor Marc Faber said.
In an effort to restore confidence in the wake of a credit crunch sparked by U.S. subprime mortgage losses, the Fed reduced the discount rate to 5.75 percent from 6.25 percent on Aug. 17. That was the first cut between scheduled meetings since 2001.
``I think it's an intervention into the marketplace that is not justified,'' said Faber, in an interview from Danang, Vietnam today. Injecting more money into the system will ``create an additional set of problems at a later date.''
Faber, founder and managing director of Hong Kong-based investment advisory company Marc Faber Ltd., correctly predicted the U.S. stock market crash in 1987. He also advised investors to buy gold in 2001, which has since more than doubled.
Global stock markets rallied as the Fed's move eased concern a rout in the U.S. mortgage market will spread and dry up access to capital. The global equities sell-off had erased more than $5.5 trillion of market value from a July 23 peak, according to data compiled by Bloomberg.
Asian stocks jumped the most in a year today, while U.S. shares posted their biggest gain in four years on Aug. 17 and Europe's Dow Jones Stoxx 600 Index was up 2.4 percent within 15 minutes of the Fed's announcement that it was taking action.
`Prepared to Act'
``The rate cut was pretty effective in curtailing panic in the markets which have no direct link to the subprime loan problem,'' said Masayuki Kubota, who helps oversee $2.1 billion in assets at Daiwa SB Investments Ltd. in Tokyo. ``Global growth won't be hampered by the subprime issue.''
The Fed left its benchmark fund rate target for overnight loans between banks unchanged at 5.25 percent.
In the statement, the Fed committee said it is ``prepared to act as needed to mitigate the adverse effects on the economy arising from disruptions in financial markets.'' Policy makers, who last held a scheduled meeting on Aug. 7, convene on Sept. 18.
Should the Standard and Poor's 500 Index drop below 1,400 the Fed is likely to reduce the overnight lending rate, Faber said. If the S&P rises above 1,500 it won't cut the rate, he said. The S&P 500 climbed 2.5 percent to 1,445.94 on Aug. 17. Still, it's down 6.9 percent from a record close set on July 19.
S&P 500 futures expiring in September rose 4.6 to 1,454.5 as of 11:42 a.m. in London.
No Dollar Collapse
``They're driven by asset markets, their policies, which is a mistake in the first place,'' said Faber, publisher of the monthly newsletter the Gloom, Boom & Doom Report. The housing problems arose in the first place ``because of easy monetary policies.''
Faber said that the dollar isn't likely to ``collapse'' as money flows to U.S. currency and yen assets.
``I believe that U.S assets, while they will not make a new high, they will outperform assets in emerging markets for a while,'' he said. ``There's a capital outflow from emerging markets into the U.S. and into the yen.''
To contact the reporter on this story: Dominic G. Diongson in Bangkok at ddiongson@bloomberg.net ; Catherine Yang in Hong Kong at cyyang@bloomberg.net
Last Updated: August 20, 2007 07:14 EDT
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By Dominic G. Diongson and Catherine Yang
Aug. 20 (Bloomberg) -- The U.S. Federal Reserve's cut of the interest rate it charges banks was ``not justified'' and will create more problems, investor Marc Faber said.
In an effort to restore confidence in the wake of a credit crunch sparked by U.S. subprime mortgage losses, the Fed reduced the discount rate to 5.75 percent from 6.25 percent on Aug. 17. That was the first cut between scheduled meetings since 2001.
``I think it's an intervention into the marketplace that is not justified,'' said Faber, in an interview from Danang, Vietnam today. Injecting more money into the system will ``create an additional set of problems at a later date.''
Faber, founder and managing director of Hong Kong-based investment advisory company Marc Faber Ltd., correctly predicted the U.S. stock market crash in 1987. He also advised investors to buy gold in 2001, which has since more than doubled.
Global stock markets rallied as the Fed's move eased concern a rout in the U.S. mortgage market will spread and dry up access to capital. The global equities sell-off had erased more than $5.5 trillion of market value from a July 23 peak, according to data compiled by Bloomberg.
Asian stocks jumped the most in a year today, while U.S. shares posted their biggest gain in four years on Aug. 17 and Europe's Dow Jones Stoxx 600 Index was up 2.4 percent within 15 minutes of the Fed's announcement that it was taking action.
`Prepared to Act'
``The rate cut was pretty effective in curtailing panic in the markets which have no direct link to the subprime loan problem,'' said Masayuki Kubota, who helps oversee $2.1 billion in assets at Daiwa SB Investments Ltd. in Tokyo. ``Global growth won't be hampered by the subprime issue.''
The Fed left its benchmark fund rate target for overnight loans between banks unchanged at 5.25 percent.
In the statement, the Fed committee said it is ``prepared to act as needed to mitigate the adverse effects on the economy arising from disruptions in financial markets.'' Policy makers, who last held a scheduled meeting on Aug. 7, convene on Sept. 18.
Should the Standard and Poor's 500 Index drop below 1,400 the Fed is likely to reduce the overnight lending rate, Faber said. If the S&P rises above 1,500 it won't cut the rate, he said. The S&P 500 climbed 2.5 percent to 1,445.94 on Aug. 17. Still, it's down 6.9 percent from a record close set on July 19.
S&P 500 futures expiring in September rose 4.6 to 1,454.5 as of 11:42 a.m. in London.
No Dollar Collapse
``They're driven by asset markets, their policies, which is a mistake in the first place,'' said Faber, publisher of the monthly newsletter the Gloom, Boom & Doom Report. The housing problems arose in the first place ``because of easy monetary policies.''
Faber said that the dollar isn't likely to ``collapse'' as money flows to U.S. currency and yen assets.
``I believe that U.S assets, while they will not make a new high, they will outperform assets in emerging markets for a while,'' he said. ``There's a capital outflow from emerging markets into the U.S. and into the yen.''
To contact the reporter on this story: Dominic G. Diongson in Bangkok at ddiongson@bloomberg.net ; Catherine Yang in Hong Kong at cyyang@bloomberg.net
Last Updated: August 20, 2007 07:14 EDT
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Sunday, August 12, 2007
U.S. Stocks Recover From Rout; S&P 500 Gains, Led by Oil Shares
U.S. Stocks Recover From Rout; S&P 500 Gains, Led by Oil Shares
By Michael Patterson
Trader Michael Naples in the S&P 500 pit in Chicago Aug. 10 (Bloomberg) -- U.S. stocks recovered from a global sell-off, erasing most of the Dow Jones Industrial Average's 213- point drop, after the Federal Reserve added $38 billion to banks to stem a crisis of confidence in credit markets.
Viacom Inc., Nike Inc. and Gap Inc. led a late-session turnaround in consumer shares. Exxon Mobil Corp. and Chevron Corp. paced gains in energy companies that helped the Standard & Poor's 500 Index bounce back from a 1.6 percent decline to complete its first weekly advance in a month.
The S&P 500 and Dow initially tumbled, following markets in Europe and Asia lower on concern widening losses for banks and hedge funds may hurt economic growth and earnings. The Fed made its biggest injection to the financial system since the 2001 terrorist attacks, joining central banks in Europe, Japan, Australia and Canada in attempting to avert a credit crunch.
The S&P 500 rose 0.55 to 1453.64 after a 3 percent retreat yesterday. The Dow lost 31.14, or 0.2 percent, to 13,239.54. The Nasdaq Composite Index slipped 11.6, or 0.5 percent, to 2544.89.
``One thing that's on your side as an investor is that the two largest printing presses on earth for money, the central bank of Europe and the Fed here, are stepping into the system,'' said James Swanson, chief investment strategist at MFS Investment Management in Boston, which oversees $190 billion.
For the week, the S&P 500 climbed 1.4 percent and the Dow average gained 0.4 percent. The Nasdaq increased 1.3 percent.
Viacom, the owner of MTV and Paramount Pictures, added $1.87 to $38.92. Nike Inc., the world's largest athletic-shoe maker, advanced $1.88 to $55.78. Gap Inc., the biggest U.S. clothing retailer, rose $1.09 to $16.75.
Energy Rally
A gauge of energy shares in the S&P 500 increased 1.2 percent today. Exxon, the world's biggest oil company, added 91 cents to $84.51. Chevron, the No. 2 U.S. oil company, climbed $2.31 to $83.42.
Marathon Oil rose $2.62 to $51.86. Citi Investment Research raised its recommendation on the refiner to ``buy'' from ``hold,'' saying the company's oil and gas reserves may double. Analysts including Doug Leggate also upgraded shares of refiners Tesoro Corp. and Valero Energy Corp., saying the ``sell-off in refining stocks has brought risk-reward back into balance.''
Tesoro, down 14 percent since June, added $2.30 to $49.30. Valero, down 6.7 percent during the same period, gained $1.35 to $68.90.
Rate-Cut Speculation
The Fed said it provided the $38 billion in reserves and pledged further funds ``as necessary'' to ``facilitate the orderly functioning'' of markets. The European Central Bank loaned 61.05 billion euros ($83.6 billion). Central banks in Japan and Australia also added funds as money-market rates rose around the world.
Fed funds futures indicate traders are betting on a quarter percentage point rate cut at policy makers' next meeting on Sept. 18. JPMorgan Chase & Co., one of the 21 securities firms that trades directly with the Fed, said there's a ``genuine possibility'' the central bank will lower interest rates between meetings if financial markets worsen.
``The stress generated by a repricing of credit risk is testing the resiliency of the global financial system,'' JPMorgan Chief Economist Bruce Kasman wrote in a report today. The third- largest U.S. bank's shares added 8 cents to $44.25.
Fannie Mae climbed 53 cents to $66.46. The biggest U.S. mortgage-finance company requested permission to increase its investments in home loans and mortgage bonds by as much as $72 billion to help provide liquidity in the credit markets, Chief Executive Officer Daniel Mudd said.
After the close of U.S. exchanges, the Office of Federal Housing Enterprise Oversight issued a statement, rejecting the request. Fannie Mae fell $1.46 to $65 in extended trading.
UnitedHealth Gains
Shares of U.S. managed-health companies, led by UnitedHealth Group Inc., gained after an analyst said the stocks were ``undervalued.'' Carl McDonald, an analyst with CIBC World Markets in New York, said that industry shares hadn't traded at so low a multiple of projected earnings since 2004.
UnitedHealth gained $1.15 to $47.48. Aetna Inc. rose $1.74 to $48.69. Cigna Corp. climbed $2.29 to $47.40.
Stocks opened the day lower after Countrywide Financial Corp., the biggest U.S. mortgage lender, said mortgage-market disruptions may crimp profit and it may have difficulty obtaining financing from creditors. Countrywide's shares sank 80 cents to $27.86 after falling as much as $3.95.
Washington Mutual Inc. dropped 81 cents to $35.95. The biggest U.S. savings and loan said in its own filing that liquidity in the market for mortgages made to borrowers below the top credit grade had ``diminished significantly.''
``People are unsure how deep all this goes,'' said Kurt Brunner, who helps manage $1.5 billion at Swarthmore Group Inc. in Philadelphia. ``It's shoot first and ask questions later.''
Brokerages Decline
Goldman Sachs Group Inc., the world's largest securities firm, dropped $1.75 to $180.50. Merrill Lynch & Co., the third- biggest U.S. securities firm, retreated 56 cents to $74.12.
The U.S. Securities and Exchange Commission, concerned that Wall Street firms may have concealed the extent of the subprime- mortgage rout, will examine how the brokerages accounted for the securities as they plummeted, a person with direct knowledge of the inquiry said. Lori Richards, director of the SEC inspections office, didn't reply to a phone call and e-mail seeking comment.
A gauge of U.S. stock market volatility climbed to the highest since April 2003. The Chicago Board Options Exchange Volatility Index gained 6.9 percent to 28.30. Higher readings in the so-called VIX, derived from prices paid for S&P 500 options, indicate traders expect bigger share-price swings in the next 30 days.
Investors said the drop in some shares early in the day may have been exacerbated as hedge funds that borrowed money to fund investments were forced to raise cash to meet margin requirements or repay investors and lenders.
`Forced to Sell'
``We're going to find out that several hedge funds were forced to sell their highest-quality positions,'' said Dan Veru, who helps manage $3 billion at Palisade Capital Management in Fort Lee, New Jersey. ``These funds aren't selling for fundamental reasons, they're selling because they have to.''
James Simons, whose computer-driven $29 billion Renaissance Institutional Equities Fund has fallen 8.7 percent so far in August, said in a letter to investors that other hedge funds have been forced to sell positions, short-circuiting statistical models based on the relationships among securities.
Global Alpha
After the close of U.S. exchanges, people familiar with Goldman Sachs' $8 billion Global Alpha hedge fund said it has fallen 26 percent so far this year. Goldman's shares fell 50 cents to $180 in extended trading.
State Street Corp. declined $2.53 to $68.03. Punk Ziegel & Co. lowered its recommendation on the world's biggest institutional money manager to ``market perform'' from ``buy.'' Analyst Richard Bove said declines in stock, bond and ``alternative investment'' markets will slow earnings growth through 2009.
MGIC Investment Corp. tumbled $5.58, or 13 percent, to $36.21 for the largest drop in the S&P 500. JPMorgan recommended selling shares of the largest U.S. mortgage insurer amid uncertainty over prospects for its purchase of Radian Group Inc, the third-biggest mortgage insurer.
Ambac Financial Group Inc. declined $3.36 to $66.14. The world's second-largest bond insurer said its holdings of collateralized debt obligations, or securities backed by pools of debt, are about $71.1 billion. CDOs package pools of securities backed by collateral that can include mortgages. The value of subprime mortgage assets has slumped in the past two months after defaults on home loans rose to a 10-year high.
Economy Watch
In economic reports, prices of goods imported into the U.S. climbed more than forecast in July on higher oil costs. The 1.5 percent increase, the biggest since March, compares with a rise of 1 percent forecast by economists in a Bloomberg survey. Prices excluding petroleum gained 0.2 percent, the fifth straight advance.
Nvidia Corp. fell $2.14 to $43.99 after the world's second- largest producer of computer-graphics chips said third-quarter sales will increase between 5 percent and 7 percent, with an inventory shortage and limited manufacturing constraining growth. Investors were looking for a forecast of at least 10 percent sales growth, Caris & Co. analyst Nicholas Aberle said.
Wyeth lost $2.99 to $46.59 after U.S. regulators rejected the drugmaker's experimental antipsychotic bifeprunox for schizophrenia. The Food and Drug Administration needs a study showing the drug works before the agency will consider approving the pill, Wyeth said.
Some 2.5 billion shares changed hands on the New York Stock Exchange, 48 percent more than the three-month daily average.
The Russell 2000 Index, a benchmark for companies with a median market value of $639 million, gained 0.5 percent to 788.78. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, was little changed at 14,641.03.
Aetna Inc. (AET US)Ambac Financial Group Inc. (ABK US)Chevron Corp. (CVX US)Cigna Corp. (CI US)Countrywide Financial Corp. (CFC US)Exxon Mobil Corp. (XOM US)Fannie Mae (FNM US)Gap Inc. (GPS US)Goldman Sachs Group Inc. (GS US)Marathon Oil Corp. (MRO US)Merrill Lynch & Co. (MER US)MGIC Investment Corp. (MTG US)Nike Inc. (NKE US)Nvidia Corp. (NVDA US)State Street Corp. (STT US)Tesoro Corp. (TSO US)UnitedHealth Group Inc. (UNH US)Valero Energy Corp. (VLO US)Viacom Inc. (VIA/B US)Washington Mutual Inc. (WM US)Wyeth (WYE US)
To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net .
Last Updated: August 10, 2007 18:14 EDT
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By Michael Patterson
Trader Michael Naples in the S&P 500 pit in Chicago Aug. 10 (Bloomberg) -- U.S. stocks recovered from a global sell-off, erasing most of the Dow Jones Industrial Average's 213- point drop, after the Federal Reserve added $38 billion to banks to stem a crisis of confidence in credit markets.
Viacom Inc., Nike Inc. and Gap Inc. led a late-session turnaround in consumer shares. Exxon Mobil Corp. and Chevron Corp. paced gains in energy companies that helped the Standard & Poor's 500 Index bounce back from a 1.6 percent decline to complete its first weekly advance in a month.
The S&P 500 and Dow initially tumbled, following markets in Europe and Asia lower on concern widening losses for banks and hedge funds may hurt economic growth and earnings. The Fed made its biggest injection to the financial system since the 2001 terrorist attacks, joining central banks in Europe, Japan, Australia and Canada in attempting to avert a credit crunch.
The S&P 500 rose 0.55 to 1453.64 after a 3 percent retreat yesterday. The Dow lost 31.14, or 0.2 percent, to 13,239.54. The Nasdaq Composite Index slipped 11.6, or 0.5 percent, to 2544.89.
``One thing that's on your side as an investor is that the two largest printing presses on earth for money, the central bank of Europe and the Fed here, are stepping into the system,'' said James Swanson, chief investment strategist at MFS Investment Management in Boston, which oversees $190 billion.
For the week, the S&P 500 climbed 1.4 percent and the Dow average gained 0.4 percent. The Nasdaq increased 1.3 percent.
Viacom, the owner of MTV and Paramount Pictures, added $1.87 to $38.92. Nike Inc., the world's largest athletic-shoe maker, advanced $1.88 to $55.78. Gap Inc., the biggest U.S. clothing retailer, rose $1.09 to $16.75.
Energy Rally
A gauge of energy shares in the S&P 500 increased 1.2 percent today. Exxon, the world's biggest oil company, added 91 cents to $84.51. Chevron, the No. 2 U.S. oil company, climbed $2.31 to $83.42.
Marathon Oil rose $2.62 to $51.86. Citi Investment Research raised its recommendation on the refiner to ``buy'' from ``hold,'' saying the company's oil and gas reserves may double. Analysts including Doug Leggate also upgraded shares of refiners Tesoro Corp. and Valero Energy Corp., saying the ``sell-off in refining stocks has brought risk-reward back into balance.''
Tesoro, down 14 percent since June, added $2.30 to $49.30. Valero, down 6.7 percent during the same period, gained $1.35 to $68.90.
Rate-Cut Speculation
The Fed said it provided the $38 billion in reserves and pledged further funds ``as necessary'' to ``facilitate the orderly functioning'' of markets. The European Central Bank loaned 61.05 billion euros ($83.6 billion). Central banks in Japan and Australia also added funds as money-market rates rose around the world.
Fed funds futures indicate traders are betting on a quarter percentage point rate cut at policy makers' next meeting on Sept. 18. JPMorgan Chase & Co., one of the 21 securities firms that trades directly with the Fed, said there's a ``genuine possibility'' the central bank will lower interest rates between meetings if financial markets worsen.
``The stress generated by a repricing of credit risk is testing the resiliency of the global financial system,'' JPMorgan Chief Economist Bruce Kasman wrote in a report today. The third- largest U.S. bank's shares added 8 cents to $44.25.
Fannie Mae climbed 53 cents to $66.46. The biggest U.S. mortgage-finance company requested permission to increase its investments in home loans and mortgage bonds by as much as $72 billion to help provide liquidity in the credit markets, Chief Executive Officer Daniel Mudd said.
After the close of U.S. exchanges, the Office of Federal Housing Enterprise Oversight issued a statement, rejecting the request. Fannie Mae fell $1.46 to $65 in extended trading.
UnitedHealth Gains
Shares of U.S. managed-health companies, led by UnitedHealth Group Inc., gained after an analyst said the stocks were ``undervalued.'' Carl McDonald, an analyst with CIBC World Markets in New York, said that industry shares hadn't traded at so low a multiple of projected earnings since 2004.
UnitedHealth gained $1.15 to $47.48. Aetna Inc. rose $1.74 to $48.69. Cigna Corp. climbed $2.29 to $47.40.
Stocks opened the day lower after Countrywide Financial Corp., the biggest U.S. mortgage lender, said mortgage-market disruptions may crimp profit and it may have difficulty obtaining financing from creditors. Countrywide's shares sank 80 cents to $27.86 after falling as much as $3.95.
Washington Mutual Inc. dropped 81 cents to $35.95. The biggest U.S. savings and loan said in its own filing that liquidity in the market for mortgages made to borrowers below the top credit grade had ``diminished significantly.''
``People are unsure how deep all this goes,'' said Kurt Brunner, who helps manage $1.5 billion at Swarthmore Group Inc. in Philadelphia. ``It's shoot first and ask questions later.''
Brokerages Decline
Goldman Sachs Group Inc., the world's largest securities firm, dropped $1.75 to $180.50. Merrill Lynch & Co., the third- biggest U.S. securities firm, retreated 56 cents to $74.12.
The U.S. Securities and Exchange Commission, concerned that Wall Street firms may have concealed the extent of the subprime- mortgage rout, will examine how the brokerages accounted for the securities as they plummeted, a person with direct knowledge of the inquiry said. Lori Richards, director of the SEC inspections office, didn't reply to a phone call and e-mail seeking comment.
A gauge of U.S. stock market volatility climbed to the highest since April 2003. The Chicago Board Options Exchange Volatility Index gained 6.9 percent to 28.30. Higher readings in the so-called VIX, derived from prices paid for S&P 500 options, indicate traders expect bigger share-price swings in the next 30 days.
Investors said the drop in some shares early in the day may have been exacerbated as hedge funds that borrowed money to fund investments were forced to raise cash to meet margin requirements or repay investors and lenders.
`Forced to Sell'
``We're going to find out that several hedge funds were forced to sell their highest-quality positions,'' said Dan Veru, who helps manage $3 billion at Palisade Capital Management in Fort Lee, New Jersey. ``These funds aren't selling for fundamental reasons, they're selling because they have to.''
James Simons, whose computer-driven $29 billion Renaissance Institutional Equities Fund has fallen 8.7 percent so far in August, said in a letter to investors that other hedge funds have been forced to sell positions, short-circuiting statistical models based on the relationships among securities.
Global Alpha
After the close of U.S. exchanges, people familiar with Goldman Sachs' $8 billion Global Alpha hedge fund said it has fallen 26 percent so far this year. Goldman's shares fell 50 cents to $180 in extended trading.
State Street Corp. declined $2.53 to $68.03. Punk Ziegel & Co. lowered its recommendation on the world's biggest institutional money manager to ``market perform'' from ``buy.'' Analyst Richard Bove said declines in stock, bond and ``alternative investment'' markets will slow earnings growth through 2009.
MGIC Investment Corp. tumbled $5.58, or 13 percent, to $36.21 for the largest drop in the S&P 500. JPMorgan recommended selling shares of the largest U.S. mortgage insurer amid uncertainty over prospects for its purchase of Radian Group Inc, the third-biggest mortgage insurer.
Ambac Financial Group Inc. declined $3.36 to $66.14. The world's second-largest bond insurer said its holdings of collateralized debt obligations, or securities backed by pools of debt, are about $71.1 billion. CDOs package pools of securities backed by collateral that can include mortgages. The value of subprime mortgage assets has slumped in the past two months after defaults on home loans rose to a 10-year high.
Economy Watch
In economic reports, prices of goods imported into the U.S. climbed more than forecast in July on higher oil costs. The 1.5 percent increase, the biggest since March, compares with a rise of 1 percent forecast by economists in a Bloomberg survey. Prices excluding petroleum gained 0.2 percent, the fifth straight advance.
Nvidia Corp. fell $2.14 to $43.99 after the world's second- largest producer of computer-graphics chips said third-quarter sales will increase between 5 percent and 7 percent, with an inventory shortage and limited manufacturing constraining growth. Investors were looking for a forecast of at least 10 percent sales growth, Caris & Co. analyst Nicholas Aberle said.
Wyeth lost $2.99 to $46.59 after U.S. regulators rejected the drugmaker's experimental antipsychotic bifeprunox for schizophrenia. The Food and Drug Administration needs a study showing the drug works before the agency will consider approving the pill, Wyeth said.
Some 2.5 billion shares changed hands on the New York Stock Exchange, 48 percent more than the three-month daily average.
The Russell 2000 Index, a benchmark for companies with a median market value of $639 million, gained 0.5 percent to 788.78. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, was little changed at 14,641.03.
Aetna Inc. (AET US)Ambac Financial Group Inc. (ABK US)Chevron Corp. (CVX US)Cigna Corp. (CI US)Countrywide Financial Corp. (CFC US)Exxon Mobil Corp. (XOM US)Fannie Mae (FNM US)Gap Inc. (GPS US)Goldman Sachs Group Inc. (GS US)Marathon Oil Corp. (MRO US)Merrill Lynch & Co. (MER US)MGIC Investment Corp. (MTG US)Nike Inc. (NKE US)Nvidia Corp. (NVDA US)State Street Corp. (STT US)Tesoro Corp. (TSO US)UnitedHealth Group Inc. (UNH US)Valero Energy Corp. (VLO US)Viacom Inc. (VIA/B US)Washington Mutual Inc. (WM US)Wyeth (WYE US)
To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net .
Last Updated: August 10, 2007 18:14 EDT
http://www.bloomberg.com/apps/news?pid=20601087&sid=aeYtlAQSOkSk&refer=home#
mms://media2.bloomberg.com/cache/vINDOL2pjWeI.asf
Friday, July 20, 2007
Sub-Prime Shockwave (2007)
Bloomberg show on US subprime mortgage problem in 2007
Marc Faber and Jim Rogers are interviewed (@34 minutes mark)
mms://media2.bloomberg.com/cache/v0OR3iFv14lg.asf
Marc Faber and Jim Rogers are interviewed (@34 minutes mark)
mms://media2.bloomberg.com/cache/v0OR3iFv14lg.asf
Tuesday, July 10, 2007
Marc Faber Bloomberg (Video)Interview “Bubbles everywhere, Fed will cut this year”
Marc Faber Bloomberg (Video)Interview “Bubbles everywhere, Fed will cut this year”
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vVYbMUXzXOBg.asf
http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vVYbMUXzXOBg.asf
Wednesday, May 23, 2007
Faber Says U.S. Stocks Are More `Reasonably Priced' Than Others
Faber Says U.S. Stocks Are More `Reasonably Priced' Than Others
By Adria Cimino and Naga Munchetty
May 21 (Bloomberg) -- U.S. stocks are more ``reasonably priced'' than other markets following the dollar's decline, according to Marc Faber, who oversees $300 million at Hong Kong- based Marc Faber Ltd.
``U.S. stocks are not the biggest bubble,'' Faber said in an interview. Emerging markets and the Spanish property market reflect larger bubbles, he said.
Faber predicted on March 29 that the U.S. Standard & Poor's 500 Index was more likely to fall than rise above a six-year high reached the previous month, citing prospects for slowing economic growth. The index has climbed more than 7 percent since then amid a record run of takeovers.
There are bubbles across asset classes, but it's difficult to predict when they will deflate, Faber said.
``We're in the final stages, but the bubble can be very steep,'' the investor said. China's equity market could still double again from this level, he said.
Faber recommended investing in ``depressed assets,'' citing the Middle East market and the Detroit property market. He also said farmland in Argentina and Brazil is a good value and property in New Zealand and Australia may be a sound investment because of their proximity to China.
Faber said he has large positions in real estate and equities in Vietnam.
The publisher of the Gloom, Boom and Doom Report advised investors in 2001 to buy gold, which has since more than doubled. A Zurich native who learned English while picking potatoes in the U.K. countryside at the age of 13, Faber started his own firm in 1990.
To contact the reporter on this story: Adria Cimino in Paris at
acimino1@bloomberg.net .
http://www.bloomberg.com/apps/news?pid=20601086&sid=aq1iGt2GNOlM&refer=latin_america
mms://media2.bloomberg.com/cache/v5x2LlWTC524.asf
By Adria Cimino and Naga Munchetty
May 21 (Bloomberg) -- U.S. stocks are more ``reasonably priced'' than other markets following the dollar's decline, according to Marc Faber, who oversees $300 million at Hong Kong- based Marc Faber Ltd.
``U.S. stocks are not the biggest bubble,'' Faber said in an interview. Emerging markets and the Spanish property market reflect larger bubbles, he said.
Faber predicted on March 29 that the U.S. Standard & Poor's 500 Index was more likely to fall than rise above a six-year high reached the previous month, citing prospects for slowing economic growth. The index has climbed more than 7 percent since then amid a record run of takeovers.
There are bubbles across asset classes, but it's difficult to predict when they will deflate, Faber said.
``We're in the final stages, but the bubble can be very steep,'' the investor said. China's equity market could still double again from this level, he said.
Faber recommended investing in ``depressed assets,'' citing the Middle East market and the Detroit property market. He also said farmland in Argentina and Brazil is a good value and property in New Zealand and Australia may be a sound investment because of their proximity to China.
Faber said he has large positions in real estate and equities in Vietnam.
The publisher of the Gloom, Boom and Doom Report advised investors in 2001 to buy gold, which has since more than doubled. A Zurich native who learned English while picking potatoes in the U.K. countryside at the age of 13, Faber started his own firm in 1990.
To contact the reporter on this story: Adria Cimino in Paris at
acimino1@bloomberg.net .
http://www.bloomberg.com/apps/news?pid=20601086&sid=aq1iGt2GNOlM&refer=latin_america
mms://media2.bloomberg.com/cache/v5x2LlWTC524.asf
Tuesday, April 3, 2007
Faber Says U.S. Stocks Suggest `Start of Bear Market'
Faber Says U.S. Stocks Suggest `Start of Bear Market' (Update1)
By Eric Martin and Ellen Braitman
March 29 (Bloomberg) -- The Standard & Poor's 500 Index is more likely to fall than rise above its six-year-high reached Feb. 20 because the threat of faster inflation and slower growth persists, said Marc Faber, an investor who predicted the stock market crash in 1987.
``We're right where the market would usually be at the start of a bear market,'' Faber said in an interview from Copenhagen. ``Financial stocks are not performing well and this is usually a bad indicator for the market.''
A measure of financial shares has retreated 5.9 percent since Feb. 20. Countrywide Financial Corp., the biggest U.S. mortgage lender, and Lehman Brothers Holdings Inc., the fourth- biggest U.S. securities firm by market value, led the losses.
Inflation and rising oil prices may restrain economic growth and keep stocks from completing a rebound from the Feb. 27 rout that sent the S&P 500 to its worst plunge in four years, Faber said.
``What the government publishes as inflation isn't the cost- of-living increase for the average household in America,'' said Faber, who oversees $300 million at Hong Kong-based Marc Faber Ltd. Increases in corn, wheat, soybean and meat prices have driven food costs up for most Americans, he said.
Emerging markets, including China, may fall more than the U.S., according to Faber. Rising oil prices and defaults on mortgages by the riskiest borrowers in the U.S. reduce the cash available for investments in those markets, he said. Growth in the U.S. current account deficit has boosted global equities, he added.
`Excess Liquidity'
``In an environment where global liquidity is tightening, emerging markets that benefited from excess liquidity would be the most vulnerable,'' he said.
A sell-off in Chinese shares on Feb. 27 sparked the global rout. China's CSI 300 Index of yuan-denominated A-shares, previously known as the Shanghai and Shenzhen 300 Index, has since erased its losses and yesterday climbed to a record. The S&P 500, by contrast, is still down 1.8 percent.
Faber said a 10 percent slide in U.S. stocks from their Feb. 20 peak, a common definition of a correction, and a decline of 20 percent for brokerage firms including Goldman Sachs and Morgan Stanley would increase pressure on the Federal Reserve to reduce interest rates, bolstering stock prices while weakening the dollar.
``The Wall Street managing directors would be on the phone with the Fed to cut interest rates and to flood the system with liquidity,'' he said.
Home Loans
The emergence of home loan concerns means the stock market is unlikely to benefit from the conditions which supported its eight-month rally since last June, according to Faber. Oil prices fell 34 percent from a record $77.03 on July 14 to a 19-month low of $50.48 on Jan. 18. Over that period, the S&P 500 has gained 15 percent.
Since its January low, crude has rebounded 28 percent to $64.62 a barrel at 11:43 a.m. in New York.
``Part of the rally was supported by a sharp drop of oil prices,'' he said. ``I don't think this will happen again.''
The U.S. stock market yesterday extended this week's losses after Fed Chairman Ben S. Bernanke said inflation remains his main concern even amid growing evidence the economy is slowing.
Core personal consumption, a price gauge tied to spending patterns and excluding food and energy costs, increased at a 1.8 percent rate in the fourth quarter, down from the initial estimate of 1.9 percent. The Fed's preferred measure of inflation rose at a 2.2 percent rate in the third quarter.
mms://media2.bloomberg.com/cache/vVQaYH9J7zgM.asf
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net .
Last Updated: March 29, 2007 11:54 EDT
By Eric Martin and Ellen Braitman
March 29 (Bloomberg) -- The Standard & Poor's 500 Index is more likely to fall than rise above its six-year-high reached Feb. 20 because the threat of faster inflation and slower growth persists, said Marc Faber, an investor who predicted the stock market crash in 1987.
``We're right where the market would usually be at the start of a bear market,'' Faber said in an interview from Copenhagen. ``Financial stocks are not performing well and this is usually a bad indicator for the market.''
A measure of financial shares has retreated 5.9 percent since Feb. 20. Countrywide Financial Corp., the biggest U.S. mortgage lender, and Lehman Brothers Holdings Inc., the fourth- biggest U.S. securities firm by market value, led the losses.
Inflation and rising oil prices may restrain economic growth and keep stocks from completing a rebound from the Feb. 27 rout that sent the S&P 500 to its worst plunge in four years, Faber said.
``What the government publishes as inflation isn't the cost- of-living increase for the average household in America,'' said Faber, who oversees $300 million at Hong Kong-based Marc Faber Ltd. Increases in corn, wheat, soybean and meat prices have driven food costs up for most Americans, he said.
Emerging markets, including China, may fall more than the U.S., according to Faber. Rising oil prices and defaults on mortgages by the riskiest borrowers in the U.S. reduce the cash available for investments in those markets, he said. Growth in the U.S. current account deficit has boosted global equities, he added.
`Excess Liquidity'
``In an environment where global liquidity is tightening, emerging markets that benefited from excess liquidity would be the most vulnerable,'' he said.
A sell-off in Chinese shares on Feb. 27 sparked the global rout. China's CSI 300 Index of yuan-denominated A-shares, previously known as the Shanghai and Shenzhen 300 Index, has since erased its losses and yesterday climbed to a record. The S&P 500, by contrast, is still down 1.8 percent.
Faber said a 10 percent slide in U.S. stocks from their Feb. 20 peak, a common definition of a correction, and a decline of 20 percent for brokerage firms including Goldman Sachs and Morgan Stanley would increase pressure on the Federal Reserve to reduce interest rates, bolstering stock prices while weakening the dollar.
``The Wall Street managing directors would be on the phone with the Fed to cut interest rates and to flood the system with liquidity,'' he said.
Home Loans
The emergence of home loan concerns means the stock market is unlikely to benefit from the conditions which supported its eight-month rally since last June, according to Faber. Oil prices fell 34 percent from a record $77.03 on July 14 to a 19-month low of $50.48 on Jan. 18. Over that period, the S&P 500 has gained 15 percent.
Since its January low, crude has rebounded 28 percent to $64.62 a barrel at 11:43 a.m. in New York.
``Part of the rally was supported by a sharp drop of oil prices,'' he said. ``I don't think this will happen again.''
The U.S. stock market yesterday extended this week's losses after Fed Chairman Ben S. Bernanke said inflation remains his main concern even amid growing evidence the economy is slowing.
Core personal consumption, a price gauge tied to spending patterns and excluding food and energy costs, increased at a 1.8 percent rate in the fourth quarter, down from the initial estimate of 1.9 percent. The Fed's preferred measure of inflation rose at a 2.2 percent rate in the third quarter.
mms://media2.bloomberg.com/cache/vVQaYH9J7zgM.asf
To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net .
Last Updated: March 29, 2007 11:54 EDT
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