Friday, September 24, 2010

Interview With Marc Faber: It Is Not A Matter Of If With Hyperinflation, But When

The Hera Research Newsletter (HRN) is delighted to present the following powerful interview with noted speaker and best selling author Dr. Marc Faber, whose newsletter, The Gloom Boom & Doom Report, highlights unusual investment opportunities. Dr. Faber is a popular speaker at investment seminars and conferences around the world and is best known for his contrarian investment approach.

Born in Zurich, Switzerland, Dr. Faber went to school in Geneva and Zurich and finished high school with the Matura. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics magna cum laude.

Between 1970 and 1978, Dr. Faber worked for White Weld & Company Limited in New York, Zurich and Hong Kong and, since 1973, has lived in Hong Kong. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK) Ltd.

Dr. Faber’s best selling book Tomorrow’s Gold – Asia's Age of Discovery has been translated into Japanese, Chinese, Korean, Thai and German. Dr. Faber is a regular contributor to several leading financial publications around the world. (more)

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Solar-Powered 10-Baggers

TER: You launched the Guinness Atkinson Alternative Energy Fund in 2006 for U.S. investors. Then you launched the Guinness Alternative Energy Fund in 2007 for non-U.S. investors. Do you think European investors' appetites for alternative energy exceed those of U.S. investors? If so, what do you think accounts for that?

EG: I think European investors generally have a greater understanding and enthusiasm for the sector. That's based on the fact that in Europe there is much greater visibility of the actual technology in terms of the huge number of wind and solar projects and the returns that are being generated by those projects.

At the same time, I think investors in Europe are more cautious on investing in funds, whereas American investors are much more sophisticated in recognizing the benefits funds bring to an area like this.

TER: That's noteworthy. So with American investors and alternative energy, is it a case of "out of sight, out of mind?"

EG: Perhaps. I think people in the U.S. are more concerned about the broad market, and if people are worried about the broad market, alternative energy is another area that they're worried about. I don't think investors have returned to thinking this is an area that is actually going to outperform even if the economy goes sideways, which is what I think will be the case. (more)

Markets are at a major turning point – so what's coming next?

There is a chance we are at a turning point in the markets, right here and now. And quite a significant one at that.

We are in one of those periods where everything is rising together – gold, silver, stocks, commodities – as the dollar falls. But virtually every index that I look at is now sitting either at an important level of support (a point where it typically stops falling), or resistance (a point where it finds it difficult to rise further).

So in today's Money Morning I want to take a technical look at the markets and explain why I think we're at a major inflection point.

But I'll warn you in advance, I'm in two minds as to what's coming next...

Markets are at a key point for the inflation-deflation debate

Judging by how often it comes up and how heated people get over it, the great quarrel between the inflationists and deflationists is the most hotly debated subject in finance and economics today. That's no surprise, given how critical it is to your investment strategy.

And everyone involved seems to think that their view is right. And they all think they're being contrarians in holding that view. I was at an investment dinner the other day. The economist I was sitting next to was so rooted in the deflation camp, and became so infuriated at my suggestion that the inflation-deflation debate is hotly and widely contested, that he got up and left the table. (more)

Commodities Are Due For a Pullback

With gold breaking to record highs every day lately, we thought now was as good a time as any to update our commodity snapshot. Below we provide our trading range charts for ten major commodities. In each chart, the green shading represents between two standard deviations above and below the 50-day moving average. Moves above or below the green zone are considered overbought or oversold.

Aside from oil and natural gas, every commodity shown is either at or above the top of its trading range. As shown, gold's recent move has pushed it outside of its range. Moves to similar levels over the last year have been met with pullbacks. Silver and platinum are also just above the top of their trading ranges as well. And if you thought the metals were overbought, check out the charts of corn and orange juice! (more)

Peak Gold Is Upon Us

Peak Gold Is Upon Us. If you had any doubt about what the driver has been for gold’s meteoric rise to $1,300, take a look at the chart below showing the spike right at the Fed’s announcement that QEII was in the cards. With the speed of a mainframe running the latest algorithm, this bid spread to the other precious metals and commodities as well.

Last week, gold ETF’s purchased a staggering 16 tonnes of the yellow metal worth $582 million. The 800 pound gorilla, the (GLD) now owns $38.5 billion of the barbarous relic, making it the sixth largest owner in the world, ahead of Switzerland and China.

These are heady inflows into such a small space. All of the gold mined in human history, from King Solomon’s mines to the bars still in Swiss bank vaults bearing Nazi eagles (I’ve seen them) would only fill 2.5 Olympic sized swimming pools. That amounts to 5.3 billion ounces, about $6.3 trillion at today’s prices. For you trivia freaks out there, that is a cube with 65.5 feet on an edge.

Peak gold may well be upon us. Production has been falling for a decade, although it popped up to 83 million ounces last year worth $108 billion. That would rank gold 17th as a Fortune 500 company, along with Wells Fargo Bank (WFC), IBM (IBM), and drug store CVS Caremark (CVS). It is also only 2.8% of global public debt markets worth $39 trillion (click here for The Economist magazine’s global public debt clock). (more)

Barron's: Why You Need to Own Gold

By: Dan Weil

Millions of investors have caught the gold bug, and for good reason, Barron’s explains.

“Gold prices have tripled since 2004, and more recent worries about global economic health, sovereign risk, inflation and resources demand have given prices a fresh lift,” Barron’s reports. “These worries won't ebb soon, so gold will likely continue to gain.”

Gold keeps climbing to new record highs, with the latest at $1,298 an ounce. Until recently, many investment advisers said you should have about 5 percent of your assets in gold. Now some are suggesting a higher weighting.

"The percentage in gold is a very personal matter,” Felix Zulauf, head of Zulauf Asset Management in Switzerland, told Barron’s.

“Some feel comfortable with 5 percent and some with 50 percent." The 10 percent level is good for many investors.

A key selling point for gold is that it helps diversify your investment portfolio. (more)

The Economic Crisis is Worsening: Dollar Devaluation, Debt Default, Austerity and Growing Inflation

by Bob Chapman / International Forecaster,

As quantitative easing again gets underway the failure of QE1 becomes more obvious. The crisis worsens and the illusion of any recovery is light years away. Over the past three years almost $13 trillion that we know about has been thrown down a rat hole to bail out banking, Wall Street, insurance and selected elitist entities. The dollar figure is probably much higher. We will never know, because the privately owned Federal Reserve makes its own rules. Everything they do is a state secret. The five successful quarters were only a mirage. The funds have been vaporized among lending and financial institutions worldwide. There has been no accounting and there never will be as long as the Fed is not audited and investigated. We are in an inflationary depression and have been since February 2009. Massive injections of liquidity do not work, nor have they worked for centuries under these conditions. You cannot resurrect an insolvent country in a system that is corrupt. The controllers of the US economy are about to lead the American economy and financial structure into a great dark pit. The US and the world is soon to face a global breakdown deliberately engineered by the forces of darkness.

As usual the Fed was late in applying remedial therapy and that will prove costly. The funding of US debt by foreigners has become very costly and some are jumping ship and some are even using their dollars to buy gold. The game is changing, but will other countries risk a worldwide collapse by not rescuing the US economy? We don’t know but it doesn’t look promising. Monetization is coming and most nations are frozen in the headlights. Washington and NYC have applied pressure over and over again, but their arrogance has not gone unnoticed. There is a pretense of control as unemployment climbs and stability comes more into question. Headlining unemployment, U3, at 9-3/4% is dumb, when anyone with any sense can see U6 and the bogus birth/death ratio. Yes, unemployment is 21-5/8% and for those who want to see the truth it is visible worldwide. Real estate continues to descend, as the consumer reduces debt and consumption. (more)

$10 Oil? Mike Maloney Schools Bankers on Deflation, Gold and Silver (Part 2)

Moody's: Commercial Real Estate Prices Dive 3.1% in July

By: Alison Rich

U.S. commercial real estate prices as measured by Moody’s/Real Commercial Property Price Indices (CPPI) tumbled 3.1 percent in July, the second consecutive monthly drop of more than 3 percent.

Across the nation, prices are 43.2 percent under their October 2007 peak and just 0.9 percent higher than the recession trough posted in October 2009.

The CPPI has dipped 7.3 percent in the past year and has fallen 35.9 percent in the past two years.

“Commercial real estate markets were caught in a downdraft as the economy appeared to further weaken in the early part of 2010, resulting in relatively large

declines in the index in the early summer,” said Moody’s Managing Director Nick Levidy.

Levidy added, “The recent performance, while perhaps somewhat discouraging, should not come as a complete surprise. We have noted for several months that markets are likely to remain choppy for some time as property values slowly form a bottom in conjunction with a gradual recovery of the broader economy.” (more)

Jobless Claims Up 1st Time in 5 Weeks

Initial Claims for Unemployment Insurance climbed by 12,000 last week to 465,000. That is the first increase in five weeks.

Since claims can be volatile from week to week, it is better to track the four-week moving average to get a better sense of the trend. It declined by 3,250 to 463,250. After declining sharply in the second half of 2009, the four-week moving average has been stuck in a tight trading range.

Just over a month ago, the weekly number hit 500,000 and threatened to break out to the upside from the range, but the decline over the last month brought us down to 450,000 (before being revised up to 453,000), which brought hopes that we might be breaking out to the downside.

This week's numbers seem to indicate that neither the hope -- nor the fear -- was justified. We seem to be stuck in a pseudo-recovery. The economy is growing, but not at the sort of rate needed to add a significant number of jobs and to put a dent in the huge army of the unemployed. (more)

Chart of the Day