Forbes recently reported:
“Multibillionaire hedge fund operator John Paulson, the investment genius who made a killing going short subprime mortgages a few years ago, told a standing room only crowd at New York’s University Club that double-digit inflation is about to rear its ugly head by 2012, killing the bond market, and restoring strength to equities and gold.”
In 2009, Paulson opened up a hedge fund and made some pretty significant bets on gold and gold stocks.
Paulson’s moves have been echoed by China this year. The “communist” nation dumped $33 billion in Treasuries, bringing its total ownership to the lowest level since June of 2009.
More on John Paulson's greatest trade here.
Wednesday, September 29, 2010
Saturday, September 25, 2010
Is a correction coming?
Dow Jones breaking out of symmetrical triangle. More upside ahead?
On my simple indicator, stocks are slightly overbought, and I will not be adding to my current holdings (despite what newsletter writers say).
Thus far, I seem to be finding some consensus. Goola Warden warns of "possible reversing VIX (remember I wrote about very low VIX readings few weeks back), which may cause downward pressure on stocks in the weeks ahead". Guppy says that "GMMA of Shanghai Index has compressed, suggesting that investors are also joining in the selling". UBS says S&P risers/ fallers ratio has risen, signalling concerns of a possible slide in equities into October. Remember, when the majority are bullish, it is time to get bearish.
However, since I am medium-term positive (at least till end 2010), I will leave my stocks untouched. But should there be a slide in equity prices, I will be hitting the Buy button again.
Reasons to be bearish going into 2011
We all know the reasons to be bullish on stocks now: corporate earnings for the third quarter would surprise on the upside; a cloud of investor pessimism still prevails over the market; and stocks are simply attractive compared to U.S. Treasuries that offer little to no return and that may be our next bubble to burst.
Michel Lombardi is bearish on stocks further out in 2011:
"I have great concern towards the U.S. dollar, am concerned about its possible collapse (which would push domestic interest rates up,
sending the stock market down), and see the weight of the U.S.
housing market putting additional pressure on the economy.
The National Bureau of Economic Research said earlier this week
that the worst U.S. recession since the Great Depression ended in
June of 2009. I agree with this. But the U.S. economy is still so
fragile, so very delicate; we could lapse back into recession if the
cards are not played right.
The U.S. brought interest rates down in 2004 to their lowest level in
46 years. And what did Americans do with their access to easy
money? They borrowed and borrowed some more, investing the
borrowed money into real estate. Looking ahead, perhaps the Fed's
actions (of bringing interest rates so low as to entice consumers to
borrow more than they can afford) will one day be regarded as one
of the most costly errors committed by it or any other banking
system in the last 75 years."
On US banks, he has this to say "I don't have any specific statistics to quote, but I believe that U.S. banks have plenty more bad housing loans on their books to eventually deal with and clear out. The banks have been taking
homes back (foreclosing) so much that they have actually slowed
down the foreclosure process, because they do not know what to do
with all the homes they have already repossessed."
Michel Lombardi is bearish on stocks further out in 2011:
"I have great concern towards the U.S. dollar, am concerned about its possible collapse (which would push domestic interest rates up,
sending the stock market down), and see the weight of the U.S.
housing market putting additional pressure on the economy.
The National Bureau of Economic Research said earlier this week
that the worst U.S. recession since the Great Depression ended in
June of 2009. I agree with this. But the U.S. economy is still so
fragile, so very delicate; we could lapse back into recession if the
cards are not played right.
The U.S. brought interest rates down in 2004 to their lowest level in
46 years. And what did Americans do with their access to easy
money? They borrowed and borrowed some more, investing the
borrowed money into real estate. Looking ahead, perhaps the Fed's
actions (of bringing interest rates so low as to entice consumers to
borrow more than they can afford) will one day be regarded as one
of the most costly errors committed by it or any other banking
system in the last 75 years."
On US banks, he has this to say "I don't have any specific statistics to quote, but I believe that U.S. banks have plenty more bad housing loans on their books to eventually deal with and clear out. The banks have been taking
homes back (foreclosing) so much that they have actually slowed
down the foreclosure process, because they do not know what to do
with all the homes they have already repossessed."
Wednesday, September 22, 2010
Newsletter writers are calling for rallies ahead... time to exit stocks?
Richard Band has called for everyone to make sure that we’ve bought all the stocks and funds you’ve been wanting to buy before October 15. Because after that, a powerful rally will drive blue chip indexes back to their April peaks—and higher!
His reasons for buying:
-Since 1995, the S&P has suffered six dismal Augusts—just like the one we experienced—YET in every case, the rest of the year has clocked a gain!
-The double-digit recession crowd is being muted, as industrial-commodity prices hit a new 2010 high in early September.
-Investors are beginning to sense that there’s going to be a big GOP win in the midterm elections.
-Up until a couple weeks ago, investors had left the building. But they are now returning.
P.S. Richard Band called for a buy back in March 2009 in stocks, and he was right on target.
Another newsletter writer, Louis Nevallier wrote that "current market forces have put me in one of the most bullish moods I’ve been in in quite some time". He recorded his reasons in this article.
With so many people turning bullish, is the market due for a correction? I think it may. But if it does, I will add to my current holdings.
His reasons for buying:
-Since 1995, the S&P has suffered six dismal Augusts—just like the one we experienced—YET in every case, the rest of the year has clocked a gain!
-The double-digit recession crowd is being muted, as industrial-commodity prices hit a new 2010 high in early September.
-Investors are beginning to sense that there’s going to be a big GOP win in the midterm elections.
-Up until a couple weeks ago, investors had left the building. But they are now returning.
P.S. Richard Band called for a buy back in March 2009 in stocks, and he was right on target.
Another newsletter writer, Louis Nevallier wrote that "current market forces have put me in one of the most bullish moods I’ve been in in quite some time". He recorded his reasons in this article.
With so many people turning bullish, is the market due for a correction? I think it may. But if it does, I will add to my current holdings.
Saturday, September 18, 2010
Warren Buffett says there will be no double dip recession
Warren Buffett says that based upon all the evidence he is seeing, a double dip recession is out of the question. Given Buffett's track record, and that he was criticized for saying the United States was about to go off a cliff long before others agreed with him, this is a big, big statement. I am definitely paying attention.
Source: Bloomberg, Sept 13 2010
Source: Bloomberg, Sept 13 2010
Friday, September 17, 2010
Dow May Advance 23% by June 2011
Ralph Acampora gained fame for his 1997 prediction that the Dow would reach 10,000, after the index averaged 7,500 that year. It rose to that level in March 1999.
In 2007, he warned investors to avoid equities as strategists at the biggest Wall Street firms forecast gains. We know what happened after that. Now, he has boldly declared that the Dow Jones Industrial Average may climb to 13,000 by next June. This is because investors are too pessimistic about the economic outlook. Read more.
In 2007, he warned investors to avoid equities as strategists at the biggest Wall Street firms forecast gains. We know what happened after that. Now, he has boldly declared that the Dow Jones Industrial Average may climb to 13,000 by next June. This is because investors are too pessimistic about the economic outlook. Read more.
Tuesday, September 14, 2010
What a value hunter is investing today
Peter Langerman is CEO of Mutual Series, whose preoccupation is to hunt for deep-value stocks. Recently, he reveals that his investment team has once again started deploying cash in a big way as buying opportunities arise. Amongst the stocks he is invested in are AP Moller Maersk, Schindler, BAT, Imperial Tobacco, Lorillard Tobacco (Darvas' first big trade), Nestle, Kraft, Carlsberg, Pernod Ricard, Microsoft, Vodafone, Bank of America and Jardine Matheson. This is what he thinks of BOA: The bank has a valuable franchise and is selling near its book value. Confident that it will make it through the rocky period, even if US eonomic growth stalls. Comforting words to me indeed.
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