A proposito di "grandi" un articolo in english di quel incredibile contrarian di Marc Faber:
Short azioni e long bond e dollaro!
My position for the next month or so is to liquidate US equities, and to go long on the US dollar and bonds.
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Short term, commodities including gold, equities and the Euro seem to be somewhat overbought, while the US dollar and bonds are becoming oversold. Therefore, my bet for the next month or so is to liquidate US equities, and to go long on the US dollar and bonds.
What worries me most at present is that even I, a skeptic, can't find any good reason why stock markets around the world would decline significantly.
That's not to say there aren't a lot of issues that concern me and which I shall discuss below. But if central bankers around the world are prepared to print money and to flood the system with unlimited liquidity at the first sign of weakness in the asset markets, then it is difficult to make a very bearish case for either US real estate or US equities in dollar terms.
We know Mr. Bush wants to be re-elected at any cost, and that therefore, over the next 12 months, he and his lackeys at the Fed and the Treasury will only take economic policy measures that are designed to keep the American public happy with 'circus and pane'. This economic policy was practiced for centuries by the Roman emperors and was designed to keep the lower classes of society in good spirits and obedient.
In the US, we no longer have gladiators, taken prisoner from foreign lands, pitted against wild animals in public arenas, but we have Hollywood, which produces movies where the villain is usually a Vietnamese, Chinese, Japanese, Eastern European, Arab, Italian or Latino, and we have the money printing press, which allows individuals to speculate on stock and futures exchanges and in real estate or to gamble in casinos.
Moreover, 'pane' is distributed in the form of rising budget deficits, which boost personal disposable incomes temporarily, but obviously not in the long term. Noteworthy is that the average household tax rate collapsed over the last 18 months as a result of the tax cuts and is now at one of its lowest levels since the Second World War! Therefore, unless the economy can grow strongly over the next few years and boost the government's tax revenues, tax increases in future are only a matter of time.
I have been careful to say that, given the present central bank policies, it is difficult to make an overly bearish case for either US real estate or US equities in dollar terms. The US Federal Reserve Bank can, if it continuously floods the system with liquidity, keep asset markets up, but what it cannot do when it follows such policies is control the value of the US dollar against foreign currencies and its purchasing power.
As was the case in the Roman Empire, 'circus and pane' economic policies undermine the value of a currency and, if pursued long enough, eventually lead to a total loss of its purchasing power. However, and this should be noted, such policies can give the majority of investors the illusion of wealth as asset markets appreciate, while the loss of the currency's purchasing power is hardly noticed.
This is particularly true of a society that has a very large domestic market, where 90% of the people don't have a passport and therefore know little about what is going on outside their own continent, and where the import prices of manufactured goods are in continuous decline because of the entry of China, as a huge new supplier of products with an extremely low cost structure, into the global market economy.
What better economic paradise could a society wish for than an environment in which assets such as stocks and properties appreciate, while consumer goods decline in price?
The basket of goods a household can purchase increases in such an environment, not only because the household's wealth rises every year, but also because of the price declines of the goods that make it up, such as is the case for office and computer equipment, cellular phones, furniture, cars, consumer electronics and household appliances, all of which have steadily declined in price in recent years.
It's no wonder that people feel so optimistic about the future of equities, as is evident from the Investors Intelligence Sentiment Index for Stocks, which has been hovering recently at its highest level since 1987, and that there are more stocks reflecting this widespread optimism, being above their 30-week moving average, than at any time since 1997.
The question is, to what extent is this widespread optimism justified, and how much of this 'bright outlook' for the economy and corporate profits, and the belief that the Fed will continuously support asset markets through liquidity injections, has already been discounted by the surge in stock prices that we have seen over the last 12 months?
As I have explained on numerous occasions in the past, I respect the predictive power of the markets. After major lows, stocks, commodities, and currencies frequently rise strongly while the fundamentals still look horrible. At that juncture, no one understands why the markets are rising; only much later does it become clear why the markets went up, because by then the fundamental conditions have taken a remarkable turn for the better.
Conversely, when prices begin to sell off while the 'news' is still extremely favorable - as was the case in the spring of 2000 for the US stock market - it is usually a signal that conditions are about to deteriorate. Therefore, I personally pay a lot of attention to the 'market's action' because, more often than not, the market is better informed than all the economists, analysts, and strategists combined.
However, there is one exception to this, admittedly very general, rule. If, following a stock market bubble, prices retreat sharply and the monetary authorities (in the case of the US, the Fed) attempt to cushion the decline or to re-ignite the bull market by pumping excess liquidity into the system, then stock prices can shoot up again without any, or with only very little, support from the fundamentals in the real economy.
In such a case, stocks rise strongly, and sometimes even reach new highs in nominal terms, purely due to the excessive liquidity that pours into the system.
Examples of such stock price increases, which were based purely on monetary easing moves by central banks, can be found in the German hyperinflation period of the early 1920s, in Latin America in the 1980s, and, more recently, in Zimbabwe. In all these cases, stocks and real estate rose sharply in nominal terms, while economic conditions remained largely depressed or even deteriorated.
I do concede, however, that in all these cases of excessive money creation, there was at least a temporary - albeit brief - improvement in business conditions because of the illusion of wealth that people had when additional paper money suddenly flooded the system and lifted asset prices in nominal terms.
The reason business conditions only improved temporarily was that while the asset inflation boosted consumption for a while, it also at the same time rendered the production of domestic goods uncompetitive because of the inflated price level. In an environment of rising consumption but uncompetitive domestic industries, imports surge, ant that then leads to soaring trade and current account deficits and a collapse in the currency.
Once currencies collapse, the market imposes some discipline on the system, which manifests itself in tighter monetary conditions and soaring interest rates. This situation, which leads to mini-crises, is then usually remedied by the central banks printing even more money, with the result that the unfortunate cycle of rising asset prices in nominal terms leading to higher consumption, but weak production, low employment, and renewed currency weakness, continues for several years until hyperinflation eventually leads to a total collapse of these systems.
I have been careful above to describe the purely monetary-based stock and real estate inflation as a rise in prices in nominal terms. This is so, because in all these cases (Germany in the 1920s, Latin America in the 1980s, and now Zimbabwe) the asset price increases were more than offset by the weakness in the currency of the country that was pursuing such desperate monetary policies, with the result that, over time, these assets actually deflated - not because of a collapse in the domestic price level, but because of a collapse in the currency against other sounder paper currencies whose supply wasn't increased at the same rate.
Now, I am not suggesting that we have already reached in the United States the economic conditions that plagued Germany during its hyperinflation period in the 1920s or those that prevailed in Latin America in the 1980s, which were characterized, as just explained, by soaring domestic asset prices but collapsing currencies and, over time, by deteriorating economic conditions that were repeatedly interrupted by very brief bouts of strength - namely, when the currency depreciation was so sharp that these countries - competitive positions improved temporarily. But there certainly are, in the US, some symptoms that are pointing in that direction.
What concerns me most going forward is that in the present optimistic atmosphere and amidst very high valuations for US equities any slight disappointment could lead to a sharp market sell-off. The potential reward in holding equities at present does simply not compensate sufficiently for a large number of risk factors.
Interest rates could rise more than is generally perceived, cut short the housing and refinancing boom, and could combined with the end of the stimulative impact of the tax cuts lead to flat or even lower consumer spending.
The recent poor performance of retail stocks such as WalMart and Best Buy seems to support this concern. Another danger for financial markets would be soaring oil and other commodity prices – not a totally unrealistic assumption considering Asia's rising appetite for oil and other resources, and tensions in the Middle East. In fact, increased geopolitical tensions are already apparent in trade disputes and in belligerent comments by China over a proposed referendum about independence in Taiwan.
But my principal concern relates to the Fed' monetary policies should renewed turbulence disturb financial markets at some point in future. For sure the money printing press would be turned on at full speed – as always in times of crises in the past - and therefore, further dollar weakness is only a matter of time.
And while I am not sure that the ECB would wish to have an even stronger Euro, it should be clear that such monetary policies should lead to a loss of purchasing power of the dollar against hard assets such as real estate in countries with current account surpluses (the Asian region), commodities including gold and now especially also silver, as well as oil.
