Tuesday, January 17, 2012

Marc Faber ‘Dr. Doom’ Investor: Prepare for World III

Good news and bad news: Analyst and businessmen Dr. Marc Faber says World War III is near. The good news: He said the same thing last year.

Dr. Marc Faber
Dr. Marc Faber
Israel news photo: Marc Faber website

Dr. Marc Faber, an investor analyst and entrepreneur known as “Dr. Doom” for obvious reasons, predicted this week that World War III will occur in the next five years. His stated concern is China, he told Barron’s financial magazine in its annual roundtable discussion at the beginning of the year.

“On another optimistic note,” Dr. Faber said sarcastically, “World War III will occur in the next five years. That means the Middle East will blow up. New regimes there will be less Western-friendly. The West has also figured out it can't contain China, which is rising rapidly and will have more military and naval power in Southeast Asia. The only way for the West to contain China is to control the oil tap in the Middle East.”

The “good news” in Faber’s eye is that World War III will be good for the stock market. “It is very positive for stocks and negative for bonds, because debt will grow dramatically,” he explained.

Another participant in the discussion, Felix Zulauf, opined that a war will be good for stocks because “unused capacity in an economy can be directed to the defense and war industry. That will be paid for by new government debt, and that keeps the economy growing."

More optimistic was investment manager Scott Black who told Dr. Faber, "If Israel strikes Iran's nuclear facilities, they will use air power. They aren't going to commit ground troops. It won't be the kind of conflagration you're thinking."

In last year’s Barron’s roundtable discussion, Dr. Faber stated that investors should "want to be hedged for complete disaster – World War III…. Eventually, we will have a war, big time. Maybe you don't have divisions of tanks facing each other, but it should be clear that China is an active supporter of North Korea and the Taliban. And now with the US endorsing a seat for India on the UN Security Council, the Chinese are getting closer to Pakistan."

An Even Better Deal than Gold

It's a good time to buy gold and silver. But it's a great time to buy platinum.

Platinum has sold off alongside all the other precious metals recently. It's down nearly 30% in just the past four months. Part of that selloff has to do with fears of a global economic slowdown. Part of it is institutions and individuals liquidating positions to raise cash. And it has pushed the shiny, white metal to its lowest price in two years.

Relative to gold, however, platinum is as cheap as it has been in over two decades.

Take a look at this chart of the gold-to-platinum ratio over the last 20 years...

This chart compares the price of platinum to the price of gold. When the black line rises, platinum is outperforming gold. When the line falls – as it has been since April of last year – platinum is underperforming gold. As you can see, platinum is now at the lowest relative value to gold than it has been in the past 20 years.

Platinum is now cheaper than gold – which doesn't make sense. Platinum is 30 times rarer than gold. Most of the world's supply of platinum comes from the Bushveld geological structure in South Africa – where most of the "easy to get to" metal has already been extracted. There's still plenty of platinum in the structure, but the cost of getting it out of the ground is growing more and more expensive. This will keep pressure on the available supply.

Meanwhile, demand for platinum is increasing. Not only does it represent a store of value as a precious metal, but it also has industrial applications for use in electronics, automobiles, dentistry, and jewelry.

The supply/demand equation is shifting in favor of higher platinum prices. The gold-to-platinum ratio is as low as it has ever been. So anyone looking to invest in precious metals has to consider buying platinum at today's discounted price.

One easy way to get exposure to the metal is though the UBS Long Platinum Exchange Trade Notes (PTM). This exchange-traded note is designed to track the performance of the Bloomberg CMCI Platinum Total Return Index. Basically, as the price of the metal rises and falls, the price of PTM does the same.

Precious metal prices are bouncing off the dramatic lows they reached a couple weeks ago. If you like the idea of buying gold and silver at current prices, you'll love the idea of buying platinum.

Confiscation and Inflation

Louise Yamada: Gold Strong, Bear Market in Stocks to Last Until 2022

from King World News:

With gold trading near the $1,650 level and silver at $30, King World News interviewed legendary technical analyst, Louise Yamada, of LYA Advisors, to see where she sees gold, silver and stocks headed. Louise surprised us when she discussed the bear market in stocks lasting until 2022. Here is what she had to say about the 20 and 40 year cycles: “These cycles do not bottom together again until 2022, technically leaving an outside possibility that this structural bear cycle may become extended and an ultimate beginning of the next structural bull may not manifest until 2022. The overall market, as defined by by the Dow Jones Industrial average, might not get through the 2007 peaks for a significant period of time into the future.”

Louise Yamada continues: Read More @ KingWorldNews.com

BNN: Top Picks

Jason Donville, President & CEO, Donville Kent Asset Management, shares his top picks.

click here for video

Gold Trend Forecast for 1st Quarter of 2012

Over the past five months gold has fallen sharply and is no longer headline news which it once dominated back in 2011 when it was making new highs every day. The shiny metal has been under pressure because traders and investors started to pull some money off the table to lock in gains. Gold prices had surged so fast most advanced traders knew that final high volume surge was not sustainable. But the main reason gold topped out in my opinion was because the US Dollar index had put in a bottom and started to build a base. As we all know a rising dollar typically means lower stocks and commodity prices.

I have posted some charts below covering gold in detail using multiple time frames. The weekly which is long term, daily which is the intermediate trend and the 4 hour chart which shows gold momentum and intraday action. At the very bottom I talk about the US Dollar and what is happening with that.

Gold Weekly Long Term Trend Analysis

The weekly chart is not the most exciting time frame to follow as you will grow old watching it. That being said it is crucial for understanding the long term trend, price and volume analysis.

Below you can see that gold’s recent pullback has been a 3 wave correction, which is a normal pullback for any investment. But taking into account the rally from 2008 – 2011 I feel this pullback will have one more low put in before bottoming out. This would make for a 5 wave correction much like what happened in 2008.

Gold Trend Forecast

Daily Chart of Gold Showing the Intermediate Trend

The daily chart allows us to see gold intra-week price action and use the 150 moving average which is my preferred daily moving average. As you can see we are getting a similar pullback as 2008 with gold now trading under the 150 MA.

I would like to see gold make another lower low in the next 2-3 months. If that happens I feel it complete the correction and trigger a strong multi month or multiyear rally in gold.

Gold Price Forecast

4 Hour Intraday Chart of Gold

The 4 hour chart of gold allows us to see all the intraday price action which would normally not be seen with a daily chart. It also gives us enough data to build our analysis upon.

My preferred setup for gold which I feel if happens will trigger major buying in the yellow metal. If/when we get a rally in gold would also likely mean some more economic uncertainty has entered the market either from within the USA, Europe or China…

Gold Trading Newsletter Forecast

Weekly Dollar Index Long Term Analysis

The dollar has the potential to rally to the 87 – 88 level before putting in a major top. For this to happen we will need to see the Euro crumble (both currency and countries divide) in my opinion.

If you look at the weekly chart of gold and this chart of the dollar index you will notice that gold topped when the dollar bottomed. Over the past couple year’s gold and the dollar have had an inverse relationship to each other.

With all kinds of crap about to hit the fan overseas I think it’s very possible gold will rally with the dollar. Reason being there is way more people overseas who want to unload their euro’s and with all the negative talk and doubt with the US Dollar individuals will naturally want to buy more gold.

Dollar Index Trend

Weekend Trend Trading Conclusion:

In short, I expect a bumpy ride for both stocks and commodities in the first quarter of 2012. With any luck gold will pull back into my price zone shaking the majority of short term traders out just before it bottoms. And we will be positioning ourselves for a strong rally buying into their panic selling.

To just touch base on the general stock market quickly. I have a very bearish outlook for stocks. If the dollar continues to rise it is very likely the stock market will fall into a bear market. So I am VERY cautious with stock at this time.

Skyscrapers 'linked with impending financial crashes'

There is an "unhealthy correlation" between the building of skyscrapers and subsequent financial crashes, according to Barclays Capital.

Examples include the Empire State building, built as the Great Depression was under way, and the current world's tallest, the Burj Khalifa, built just before Dubai almost went bust.

China is currently the biggest builder of skyscrapers, the bank said.

India also has 14 skyscrapers under construction.

"Often the world's tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction," Barclays Capital analysts said.

World's tallest buildings

Name Where Height Use

Source: Council on Tall Buildings and Urban Habitat

Burj Khalifa


828m (2,717ft)

Offices, homes, hotel

Taipei 101


508m (1,667ft)


Shanghai World Financial Center


492m (1,614ft)

Hotel, offices

Int'l Commerce Centre

Hong Kong

484m (1,588ft)

Hotel, offices

Petronas Towers 1&2

Kuala Lumpur

452m (1,483ft)


The bank noted that the world's first skyscraper, the Equitable Life building in New York, was completed in 1873 and coincided with a five-year recession. It was demolished in 1912.

Other examples include Chicago's Willis Tower (which was formerly known as the Sears Tower) in 1974, just as there was an oil shock and the US dollar's peg to gold was abandoned.

And Malaysia's Petronas Towers in 1997, which coincided with the Asian financial crisis.

The findings might be a concern for Londoners, who are currently seeing the construction of what will be Western Europe's tallest building, the Shard.

That will be 1,017ft (310m) tall on completion.

China bubble?

Investors should be most concerned about China, which is currently building 53% of all the tall buildings in the world, the bank said.

A lending boom following the global financial crisis in 2008 pushed prices higher in the world's second largest economy.

In a separate report, JPMorgan Chase said that the Chinese property market could drop by as much as 20% in value in the country's major cities within the next 12 to 18 months.

In India, billionaire Mukesh Ambani built his own skyscraper in Mumbai - a 27-storey residence believed to be the world's most expensive home.

Local newspapers said the house required 600 members of staff to maintain it. Reports suggest the residence is worth more than $1bn (£630m).

"Today India has only two of the world's 276 skyscrapers over 240m in height, yet over the next five years it intends to complete 14 new skyscrapers," according to Barclays Capital.

Barclays Capital's Skyscraper Index has been published every year since 1999.

Have The Homebuilders Bottomed?: LEN, MTH, SPY, TOL, XHB

I'm not sure why no one has been talking about it, but the homebuilders have experienced a spectacular rally over the past several months. Before we go further, I want to clarify that we are discussing homebuilders as a sector and not housing or the real estate industry in this article. Often, market participants have a hard time differentiating the two, and there are several reasons that homebuilders can do well, or at least better than expected, despite the fact that home prices remain depressed. Regardless of the reason, it is clear that the group has been moving.

The recent rally is quite apparent in the chart for the SPDR Series Trust SPDR Homebuilder (NYSE:XHB) ETF as it rose from near $12 to almost $19 per share. Looking at the much longer trend, XHB appears to have broken their downtrend in late 2009 and have been consolidating since then. XHB has been trading in a range roughly between $19 and $13. XHB may not be ready to truly breakout yet, but the recent strength revealed significant strength.

While the general markets have also being going higher for much of the same time, XHB has actually been outperforming them. Notice the relative strength chart below that is displaying a ratio of XHB versus the SPDR S&P 500 (NYSE:SPY) ETF. While XHB and SPY mostly moved together from July 2010 through July 2011, they decoupled last year. After a period of sharp underperformance, the ratio has been skewed in XHB's favor since October of last year. Many individual stocks have been performing even better.

Lennar Corporation (NYSE:LEN), for instance, has almost doubled in that time frame. LEN cleared a significant resistance level near $18 in November and hasn't looked back. The long-term chart looks very similar to XHB and it's quite possible that a long-term bottom has been seen in the stock. That being said, LEN is far too extended for initiating a new position. The stock is likely due for a correction soon, after such a strong rally with only a brief pullback in November 2011.

LEN isn't the only individual name with an outsized move. Toll Brothers Inc. (NYSE:TOL) actually hit a new bear market low last October, but rather than a meltdown, market participants rushed into the stock. TOL then proceeded to almost double in price, much like LEN.

The story is the same for many other homebuilders such as Meritage Homes Corporation (NYSE:MTH). After clearing resistance late in 2011, the stock skyrocketed higher and remains near recent highs.

The Bottom Line
As powerful as these stocks have been, I would recommend traders stay away for now. These stocks are much extended and are likely due for a pullback. However, I don't view them as shorting opportunities either because they have shown great relative strength recently. That can't be ignored and it's possible that this group is finally swinging back into favor. So why bring up a group that I don't think is worth buying or selling? It's possible that after a correction or consolidation, this group will present a great opportunity to buy near support. Something is brewing in this group and so far the signs are very clear that someone is buying up this sector.

China's Collapse 'Will Bring Economic Crisis To Climax In 2012'

Leading City of London analyst says next 12 months will be one of 'pain and disappointment' if Chinese economy crashes

  • Hong Kong financial district
    A hard-landing in the Chinese economy this year will bring five years of economic crisis to a climax, a leading analyst has warned. Photograph: Aaron Tam/AFP/Getty Images

    A looming hard landing in China will bring the financial and economic crisis of the past five years to a climax in 2012, one of the City of London's leading analysts has warned.

    Albert Edwards, head of strategy at Société Générale and one of the UK's leading "bears", said the next 12 months would be the "final year of pain and disappointment".

    Predicting a sharp slowdown in activity in the world's fastest-growing emerging economy, Edwards said: "There is a likelihood of a China hard landing this year. It is hard to think 2013 and onwards will be any worse than this year if China hard-lands."

    Although China emerged rapidly from the downturn of 2008-09, Edwards said the recovery had been the result of a massive reflationary package by the Chinese government. Beijing, he added, could not afford another big stimulus to offset a weakening of the economy. Falling imports have led to a widening of China's trade surplus, but Edwards said exports were set to slow and a trade deficit was looming.

    He added that despite the recent run of more upbeat economic news from the United States, the risk of another recession in the world's biggest economy was "very high". Growth had slowed to an annual rate of 1.5% in the second and third quarters of 2011, below the "stall speed" that historically led to recession. It was unlikely that the economy would muddle through, Edwards said.

    China has grown by around 10% a year on average over the past two decades, making it the world's second-biggest economy, but the threat of a double-dip recession in the west, coupled with signs of over-heating in the Chinese property market, have caused some analysts to predict severe problems ahead.

    Edwards's view was supported by the historian Edward Chancellor, who said China's recent economic performance conformed to the pattern of previous manias and bubbles in history. These included an uncritically assumed growth story, easy money and credit expansion, investment booms and the misallocation of capital, and conspicuous consumption.

    The warning of fresh trouble ahead came as the World Economic Forum said rising youth unemployment, pressure on pensions and a growing gulf between rich and poor were sowing the "seeds of dystopia" that were putting at risk the gains from globalisation.

    In its annual assessment of the outlook for the global economy before its meeting in Davos later this month, the WEF expressed concern at the possibility of economic and social upheaval caused by the inability of the young to find work and the dependency of elderly people on states deeply in debt.

    "For the first time in generations, many people no longer believe that their children will grow up to enjoy a higher standard of living than theirs," said Lee Howell, the WEF managing director responsible for the report. "This new malaise is particularly acute in the industrialised countries that historically have been a source of great confidence and bold ideas."

    The survey of 469 global experts identified chronic problems with government finances and severe income inequality as the most prevalent risks over the next decade.

    "These risks in tandem threaten global growth as they are drivers of nationalism, populism and protectionism at a time when the world remains vulnerable to systemic financial shocks, as well as possible food and water crises," the report said.

    The study said early hopes that closer global integration would inevitably lead to higher living standards for all were at risk of being dashed by trends that left large numbers of people fearful about the future.

    "Individuals are increasingly being asked to bear risks previously assumed by governments and companies to obtain a secure retirement and access to quality healthcare. This report is a wake-up call to both the public and private sectors to come up with constructive ways to realign the expectations of an increasingly anxious global community," said John Drzik, chief executive of management consultants the Oliver Wyman Group .

    The study said the policies and institutions of the 20th century no longer offered protection in a more complex and integrated global economy. "The weakness of existing safeguards is exposed by risks related to emerging technologies, financial interdependence, resource depletion and climate change, leaving society vulnerable."

    It also warned that there was a "dark side of connectivity", with societies vulnerable to "malicious" and "devastating" cyber attacks.

    "The Arab spring demonstrated the power of interconnected communications services to drive personal freedom, yet the same technology facilitated riots in London. Governments, societies and businesses need to better understand the interconnectivity of risk in today's technologies if we are truly to reap the benefits they offer," said Steve Wilson, chief risk officer for general insurance at Zurich.

    Today's Big Stock Trade: ADSK

    Autodesk, Inc. is a design software and services company. Autodesk serves customers in the architecture, engineering and construction; manufacturing, and digital media and entertainment industries. It operates in four segments: Platform Solutions and Emerging Business, Architecture, Engineering and Construction, Manufacturing and Media and Entertainment. Its PSEB, AEC and MFG segments derive revenue from the sale of licenses for software products and services to customers who design, build, manage or own building, manufacturing and infrastructure projects. The principal software products of these segments include the general design software, including AutoCAD and AutoCAD LT; design software, including AutoCAD-based products, model-based design software, including Autodesk Inventor products, Autodesk Revit products, AutoCAD Civil 3D, and Autodesk Moldflow.

    To analyze the stock of Autodesk, please take a look at the 1-year chart of ADSK (Autodesk, Inc.) below with my added notations:

    Over the last (6) months, the stock has seemed to find support or resistance on or at the increments of $5. First, notice the $35 topside resistance (navy), which was also previous support. Next, you can see the common $30 level (red, green) and the bottom level of $25 (blue). The great thing about ADSK is that it shows you how to trade it no matter what direction the market moves. If you like the short side of the market, you could either short ADSK on rallies up to a $5 level or on any breakdowns of them. If you want a long play instead, you could buy ADSK on a pullback to a $5 level or on any breakout through one of those levels.

    The Tale of the Tape: ADSK finds the levels of $5 important. These price points always appear to act as either support or resistance and sometimes both. If ADSK rallies back up to $35, you could enter a short play. If it breaks back above $35, you could enter a long play. You could also buy ADSK if it comes down to $30, or short the stock if it breaks that $30 support. Etc., etc., etc!

    Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500.

    Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

    No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

    James Turk: 2012 to See Much Deeper Banking & Currency Collapse

    from King World News:

    Today James Turk informed King World News that we are now headed into a vortex, and the Lehman event was a warm-up to a much deeper, widespread crisis and collapse which lies ahead. Here is how Turk described the warning signs and what to expect: “There are all of these warning signs out there and few people are paying attention. For example, hardly anyone cares that the US has lost its AAA rating and most dismiss it as a non-event. But even a cursory look at the US government’s financial position should raise investors concerns that it will not be able to meet all of its obligations.”

    James Turk continues: Read More @ KingWorldNews.com