Sunday, August 11, 2013

Dr. Gloom, Boom & Doom on the Markets

Dissecting the day's major business news, with the "Fast Money" traders; and Marc Faber, "Gloom, Boom & Doom" editor, shares his economic forecast.

what do they call that, a headstone, tombstone? sure. ironman tombstone. that's interesting. which is why they led with iron butterfly. that's a great job by our crack crew. this stock had a nice run. the irs came out and said, we're scrutinizing the decision to try to become a reit. that's when the stock fell out of bed. but it held basically the 2012, mid-2012 low, the 28 level or so. i think it's worth a look here. what if they don't. then you're screwed. a binary trade. it's a binary trade. the risk/reward, back from the dead, i think it's back from the dead. there you go. all right. are alcoa? another name that was priced for the apocalypse. out of russia they're talking about stockpiling aluminum to keep the price up. you're seeing that with a lot of different governments. the u.s. government even talking about that with sugar. i'm not a huge fan of alcoa itself, but if you start to get government stockpiling aluminum, to support the price, this is going to be great. one hell of a warehouse. well, run by -- run by aluminum. it's in detroit, i think. of supply. in the same vein, the mining space, material space, look at the moves they've had over the last couple days. not necessarily inspired by the chinese data over the last two days. it was good. it showed stabilization. but it didn't tell you to run out and buy every mine. you've seen a lot of short covering. if you look at the chart on cleveland clinic, it has a broken trend back to july of 2011. again, you're seeing ore prices move a little bit higher. their cash costs, margins have gone down. they're very, very levered to the price of iron ore. if it goes any higher, you go with that. walter energy had a restructuring of a lot of debt. that is also why you're playing this one, not because they're going to the -- it's been materials this week, miners. nice action this week. newcore s, u.s. steel, all of these up. so would you buy into this? josh and i, we had a street fight a couple weeks ago about u.s. steel. go ahead. trading 17 1/4. we talked about exactly this type of situation coming to pass. josh was right for a little bit of time. now all of sudden it's off to the races. so we started talking this spng about vaw here on the show. this is the etf that gives you the broadest possible exposure to basic materials and chemicals. all in one vehicle. the two most hated groups. there is a second derivative rotation happening right now, both in terms of sentiment, in re-rating. stocks that are now catching fire. we're switching away from this deflation idea. now we're contemplating the possibility of a return to global growth. pmis overseas are helping that. what i would look at here is the vaw, it's a who's who list of stocks nobody's cared about. talk about back from the dead. you're talking about agriculture, freeport mac, and these are the types of stocks that are trading at a much lower multiple than the overall market. some of them pay even higher dividends. very, very depressed in the sales cycle. if they stage a comeback, these stocks can go absolutely wild. if this is your first cycle, your first rodeo, you have no idea what's possible. we need to believe that story is intact. otherwise this whole buy into the materials stocks -- we don't need to believe in it. we need the market to believe in it. same thing. what cane said 100 years ago is we're anticipating the anticipation of others. we're talking about a catch-up trade. if the market falls apart, none of this stuff is going to work. but if the market stays the way it is, what's happening here is -- this is important. this is the problem. a lot of people price these miners as if they were going out of business and as if their balance sheets were blown apart. with a lot of these miners, if their balance sheet stays intact and you can ride through this, yes, it's absolutely a great trade. because the world is growing. i was just trying to break out in a term that i could yell louder than you so i could get my point in. when we look at what's going on here, these are not the trades for the feint of heart. not only trying to stabilize, italian gdp upgraded. a lot of the automakers saying they're turning a profit in rope. if you get that, these things are going to move. you're also starting to see the consensus trade with the dollar. the dollar has been weak all week. if you get that, some of the commodities could get a bit of a tailwind. let's stick with the walking dead theme tonight. are the markets headed to an early great britain. mark faber has been on the latest calls. we could see a situation like '87, when the market rallies very strongly into august 25th. and then settled by 40%. everybody says sell bonds, buy equities. and when everybody is saying it, you have to be careful. we go straight up into high in july/august, from where we could crash. marc faber joins us on the fastline. great to speak with you. thank you very much. you said yesterday you called for a crash similar to 1987. by the end of the year. so that's a long ways to fall between now and december 31st. is it sort of a black swan event or sort of a natural implosion on what you see fundamentally? well, actually, i didn't predict the crash, i said that by year end, the market would be 20% lower than it is now. i don't consider that the crash. i consider a crash a 90% decline. and that is not likely to happen, because the feds will continue to print money. i just overheard the previous discussion about some of the resource and materials stocks. i think they're rallying because people are beginning to realize that with all the money printing, that is going on, commodities may bottom out soon, and that assets may be more desirable to own than paper. shouldn't that have happened ten years ago? marc, why didn't that happen a year and a half ago? why didn't emerging markets and commodities actually start to plunge by the time q-2 was announced and actually not had any benefit for liquidity in the world? correct. they had some benefits. the money flowed to emerging markets, but to a limited group of people. and they bought properties in mayfair and in the complications of new york and san francisco. so what i mean is, basically the money printing restores everything. and it's a huge misallocation of capital whereby most of the capital doesn't flow to the ordinary people, to the middle class, to the working class. it flows essentially to the people closest to the money printing. and -- so, marc -- and of course, also hedge funds. marc, if the market is set to decline in your view by 20% by the end of the year, does that mean there are other equities markets out there that will benefit from that decline, and that money will flow there? we've seen a pickup from brazil, for instance, in the past week. yes. i mean, look, there has been a huge outperformance of the u.s., vis-a-vis emerging markets over the last, say, 18 months. outperformance of, say, roughly 30%. so it's logical that some people say, okay, the u.s. is up there, europe is down, and emerging markets have performed so badly, let's move back into the emerging economy. so i would say this is too early. i think the emerging markets may rebound somewhat, but i think in general, they will head lower. all right. marc, we have to leave it there. thank you so much for phoning in. we appreciate your time. marc faber, gloom, boom and doom report. so marc obviously likes gold. he also likes gold miners. gold miners have been doing well over the past month compared to gold. he also likes -- yeah, go with the gold miners. they've done well. there was a story out last week that the junior miners started to hedge their production again. not a big deal. but one of those signs that it could be the bottom in the gold. if we continue to get a weak dollar, that will certainly help gold. depending how you want to play it, go gdx. i just saw him in every single media outlet in gist existence in the last two days, and he just walked that back. he said 90% is a crash. very significant -- in 1987 it was a crash, and now he's saying, that was not a crash. nobody can predict these things in realtime. the data suggests, the guys that do get them right, they don't get back in anyway, so who cares. most people get one right and miss the next one. if you're investing for retirement, there's 140 million households who currently are, don't worry about that stuff. the other interesting thing he said get long treasuries, the long end of the treasury curve. the one place people do not want to be, if anything, the fed has not anchored the long end and possibly some credit risk there. don't get long on the long end of the curve. it's certainly aggressive.

Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.


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