By: Lee Brodie Producer
Are chances of a major correction growing? Two widely followed market strategists are both concerned that the market is over-extended. Richard Bernstein who called the tech bubble and veteran trader Gary Kaminksy are both ringing bells of caution.
http://www.cnbc.com/id/34960310
China Losing to U.S. Among Investments of Choice in Global Poll
(Bloomberg) -- Investors have turned bullish on the U.S. while tempering their enthusiasm for China as they worry about a market bubble there, according to a Bloomberg survey.
An overwhelming majority also see a government debt default on the horizon this year, according to a quarterly poll of investors and analysts who are Bloomberg subscribers. Greece is considered the riskiest government, followed by Argentina, Russia, Ireland, Portugal, Italy, Spain and Mexico.Sentiment toward the U.S. investment climate has flipped in just three months. Almost six of 10 respondents are now optimistic about the U.S. while a majority held a pessimistic outlook in an October poll. A nine-month rally in U.S. stocks has pushed up the Standard & Poor’s 500 Index 68 percent through yesterday’s close.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=asETTCYSxjfA
Marc Faber’s 2010 Outlook: Go For Gold, Oil & Agriculture, But Watch Out For PIIGS & US Stocks
By Dian L. Chu on January 21, 2010 | More Posts By Dian L. Chu | Author's Website
Here is the summary and my thoughts on a trio of Dr. Marc Faber’s latest interview where he discussed his 2010 outlook on China bubble, sovereign default risk, stocks and commodities.
Faber is most famous for advising his clients to get out of the stock market one week before the October 1987 crash. News just broke that Faber, a famed contrarian investor often known as Dr. Doom, has joined Sprott Inc. SII-T as director and member of the money management firm’s audit committee.
Euro Death By PIIGS
Faber believes the countries most likely to blow up are the “PIIGS”: Portugal, Ireland, Italy, Greece, and Spain. One or more of them will likely default in the next couple of years, which could mean the death of Euro.
Debt Interest Costs to Triple
According to Faber, the U.S. annual interest costs, currently around 12% of the government’s tax revenue, will soar to 35% of tax revenue within five years. This will force the government to cut spending (an unlikely scenario), and/or frantically print more money
U.S. & Japan - Default in 5 to 10 Years
Excessive money printing and debasing of the Dollar would most likely result in the United States defaulting on its debt within 5 -10 years Japan could face the same fate as well. (See more U.S. debt crisis charts from Faber here.)
Note: Jim Rogers sees U.K as in danger of an implosion as well.
U.S. Stocks - Correction Coming
After noting in his January 2010 newsletter that he was bullish on U.S. stocks, Faber changed his mind after participating in Barron’s round-table discussion. Faber says the overly bullish consensus worries him. He now believes a correction in U.S. stocks could come much sooner than most expect as momentum players could “pull the trigger relatively quickly.” Faber is now looking at a 5%-10% rate of return for global investors.
Bonds
Bonds could be in for a rebound near term, but longer term, investors should look for exit opportunities in Treasuries.
Note: Jim Rogers also sees the U.S. government bond as overpriced and “in a bubble”.
Asia
Asia is likely to have longer term favorable growth. Faber favors India and Japan. In a December 2009 interview with Economic Times, Faber liked Japan as a contrarian play for 2010.
China Bubble
Faber indicated it is difficult to pinpoint a day when China will implode. But he does not think it will happen right away. However, when it does happen, investors can expect a hit on commodities and emerging markets.
Gold
Gold is going through a correction phase and probably will test the lows of $1,050 or $1,100 levels, but is still a long term buy through exploration companies and physical gold holdings.
Crude Oil
Prices may come off somewhat. Marginal cost of finding oil is around $70. Longer term, prices are expected to continue rising as demand increases from the developing world.
Agriculture Commodities
In the short term, Faber likes wheat as it is “very, very cheap”. But he advises against buying the wheat ETFs because they’re “very expensive” due to the rollover costs. Instead, he suggests play it through companies with farm land and plantations or potash companies.
China Bubble? Views from Rogers & Mobius
“China Bubble” has been in the media headline a lot lately; whereas in fact, the liquidity bubble created by the central banks’ loose money policy could easily trump China as the biggest bubble in the world likely to burst first.Investment guru Jim Rogers, while acknowledging Shanghai and Hong Kong property is in bubble during a Bloomberg interview today, debunked James Chanos yesterday, as quoted by China Daily, saying:
“It is absurd to say China is in a bubble when the stock market is 50 to 60 percent below its all-time high….After 300 years of decline everything is coming together for China in the 21st century”Meanwhile, Dr. Mark Mobius, who oversees $34 billion of developing-nation assets at Templeton Asset Management Ltd., said Jan. 7 the bubble in China’s property market isn’t about to burst, and that
“The Chinese will act rationally and they’re not going to kill the market…There’s still a lot of savings in China. Prices are high but I don’t see a crash.”
My Take on The China Bubble
As stated in my article - China Is No Dubai or Enron.
“Overinvestment and overbuilding is sometimes a prerequisite of an anticipated mass urban migration such as the one China is destined to experience.”Beijing is taking measures to prevent a bubble-burst predicament ahead of the U.S. and most of the industrialized countries. Unlike Dubai or Enron, the country is in a better position, with tremendous resource at its disposal that could power through a bubble or two.Moreover, whether there is a bubble in China, as cited here, is still a matter of great debate among market pundits.
My Thoughts on U.S. Equities
The CBOE Volatility Index (VIX) of S&P 500 options fear gauge has crashed more than 63% over the last 12 months and down 18% this month alone, retreating to pre-Lehman levels. Though the VIX index roared 6.14% to 18.66 today, it has trended consistently lower since late 2008. This is causing a great deal of consternation among some investors that the higher investor complacency level is a signal that equity prices are peaking.The equity market, particularly tech and financials, is quite vulnerable as the current valuation suggests a high earnings expectation, which will most likely disappoint this year in the context of a still hazy global recovery picture, and weak consumer spending. The earnings release and outlook from Citigroup, Inc. (C: 3.46 -0.08 -2.26%) & JP Morgan Chase (JPM: 43.40 +0.12 +0.28%) and IBM Corp. (IBM: 130.25 -3.89 -2.90%), etc. this week do not seem to have suggested otherwise.So, it is quite sufficient to say when complacency and speculation has returned en masse, commodities and emerging markets will likely to be better bets than U.S. stocks and bonds.And as the famous Wall Street adage goes, “VIX low, time to go”.
Singapore Stock Market Update For Thursday 21 January
By Vivien Chia on January 21, 2010 | More Posts By Vivien Chia | Author's Website
Singapore market eased in opening trade after US stocks posted a drop on concerns that China’s moves to curb lending will slow the global economic recovery.The STI opened lower at 2888.36, down 4.77 points. A slew of data due to be released on the mainland kept many investors sidelined.Reference to The Edge, in the short term, the STI has moved into a sideways range and is likely to stay there until stochastic and RSI turn up, probably sometime in next week. Support is at the rising 50-day moving average at 2821. Resistance is being established at the twice tested mark at 2940.
News Updates:
1.
Bank of America loses $5.2 billion in fourth quarter after repaying TARP.
2.
December housing starts fall 4%; 2009 starts drop 39% to record-low 554,000.
3.
Starbucks shares up after coffee retailer posts jump in operating income, same-store sales.
4.
EBay profit more than triples on improving payments and marketplace business.
Quick Picks: Here is a quick pick screen that we have designed to pick out potential stocks, both Bullish and Bearish. These are measured with emphasis on larger changes in price and volume.
Bullish Stocks (Singapore)
Symbol Name Entry SL TSL TP Remarks
1 MIIF Macquarie International Infrastructure Fund Ltd 0.53 0.475 0.585
2 TIAN Tianjin Zhong Xin Pharmaceutical 1.25 1.14 1.36
3 HIAP.SI Hiap Hoe Limited 0.63 0.57 0.69
4 SHDS Sing Holdings 0.455 0.385 0.525
5 CATL Capitaland Ltd 4.45 4.27 4.63
6 CHOF CH Offshore Ltd 0.745 0.70 0.79
7 SNSR Sinostar PEC Holdings 0.295 0.21 0.38
8 TWCH Time Watch Investments 0.215 0.15 0.28
Here’s Our Mid Term Holding Opportunities:
Symbol Name Entry SL TSL TP Remarks
1 OCBC Overseas Chinese Banking Corp 8.83 8.15 8.55 9.51 Overnight, Current Price at 8.62
2 DBSM DBS Group 15.48 14.34 14.40 16.96 Overnight, Current Price at 15.10
3 STEG Singapore Technologies Engineering 3.27 3.00 3.12 3.54 Overnight, Current Price at 3.25
4 PARM Parkway Holdings 3.02 2.74 3.30 Overnight, Current Price at 2.91
5 HYFL Hyflux 3.81 3.42 4.20
6 SIAT Singapore Airport Terminal Services 2.80 2.53 3.07
7 OCGL Oceanus Group 0.475 0.34 0.61
8 GENS Genting Singapore 1.32 1.05 1.20 1.59 Overnight, Current Price at 1.25
Now Is the Time To Buy Tech Stocks: Strategist
By: JeeYeon Park CNBC News Associate
IBM [IBM Loading... () ] reported fourth-quarter earnings that topped expectations on Tuesday, but shares fell more than 3 percent—the biggest drag on the Dow. What’s ahead for the firm? Peter Misek, global technology strategist at Canaccord Adams, shared his analysis.“There were some expectations that they would boost the numbers even more,” Misek told CNBC.“If you look at why the beat was so big, there were some tax helps in there that goosed the numbers a little bit. If you adjust that out, the beat wasn’t that strong.”
http://www.cnbc.com/id/34955869
World Bank Sees Risk of Recovery Losing Steam
By: Reuters
The global economic crisis is largely over and a modest recovery is under way but it could quickly lose steam as governments pull back some of the extraordinary liquidity they pumped into markets, the World Bank said on Wednesday.The World Bank's annual Global Economic Prospects report for 2010 said the fragile recovery posed special risks for developing countries including stiffer borrowing costs, reduced credit and capital flows. To deal with tighter financial conditions, which could impede investment, the World Bank said there was "considerable scope" for countries to cut domestic borrowing costs and promote local capital markets.The report said trend growth in developing countries may be reduced by between 0.2 and 0.7 percentage points over the next five to seven years as economies adjust to tighter financial conditions.
http://www.cnbc.com/id/34964659
Halftime Report: Will S&P Hold These Key Levels?
By: Lee Brodie Producer
The Fast Money traders spent Wednesday navigating the Dow's worst triple digit tailspin [.DJIA Loading... () ] since October after overseas action dragged down sentiment here in the US.Specifically, investors worried that China may hamper economic growth after Beijing authorities instructed some major banks to curb lending over the rest of this month after an early burst of credit.
http://www.cnbc.com/id/34945899
China Growth Quickens, Pointing to Tighter Policy
By: Reuters
China easily beat its 2009 growth target after ablistering performance in the fourth quarter that forms a powerful springboard for it to jump over Japan this year to become the world's second-largest economy. Gross domestic product expanded 10.7 percent between October and December, compared with a year earlier, below market expectations of 10.9 percent but up sharply from 8.9 percent in the third quarter.
http://www.cnbc.com/id/34964315
Canada’s Currency May Slide If It Exceeds Key Level, RBC Says
(Bloomberg) -- Canada’s dollar will likely end a month-long rally against its U.S. counterpart if it closes weaker than C$1.0473 to the greenback, according to Royal Bank of Canada, citing technical patterns.“A daily close above this level would produce a bullish medium-term trend reversal that would highlight C$1.0578 and C$1.0732 on the top side,” George Davis, chief technical analyst at RBC in Toronto, wrote in a note to clients today, referring to a gain in the greenback versus the Canadian currency. RBC is the nation’s biggest bank.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=adZ4pCkMmqfA
Crude Oil to Extend Gains, $80 ‘In the Bag’: Technical Analysis
(Bloomberg) -- Crude oil, which snapped a five-day decline yesterday, is set to extend gains because technical support in the mid-$70 level has proven resilient, according to National Australia Bank Ltd. Oil’s rebound from below $77 a barrel yesterday kept intact a “constructive-looking” uptrend that started in February 2009, when prices slipped below $34, said Gordon Manning, a Sydney- based technical analyst at Australia’s fourth-largest bank. With traders taking their cues from rising stock markets, a move past $80 this week may already be “in the bag,” he said.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ammFM9.SDIQU
Oil Heading for $70.92, Commerzbank Says: Technical Analysis
(Bloomberg) -- Crude oil may plunge toward $70 a barrel after failing to break resistance around $84 last week, according to technical analysts at Commerzbank AG.Oil futures in New York have lost almost 7 percent since reaching a one-year high of $83.95 a barrel on Jan. 11. Prices have peaked in the short-term and will extend their slide until reaching a trend line linking price lows in 2009, according to analysts at Commerzbank, last year’s third most-accurate oil forecaster in a survey by Bloomberg.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aih77g_kwD3E
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