Commodities Collapsed Just Before The Last Stock Market Crash – So Guess What Is Happening Right Now? – The Economic Collapse 07-22-15

Salient to Investors:

Michael Snyder writes:

  • Global debt is at record highs, too big to fail banks have never been more reckless, and global financial markets have never been more primed for a collapse. Most people lack the patience to wait for long-term trends to play out so if the stock market is not crashing today, they think that everything must be fine.
  • Commodity prices crashed a few months ahead of the financial crisis of 2008, and we are seeing a repeat. The Bloomberg Commodity Index is down 26% over the past 12 months to a 13-year low. Copper, iron ore, aluminum, zinc, nickel, lead, tin and lumber prices are leading indicators and their falling prices are forecasting a global economic meltdown. The FTSE 350 Mining Index dropped to the lowest since 2009 this week. Gold and copper are near the lowest in at least 5 years, and crude oil is down to $50.
  • The Australian and Canadian dollars are at 6-year lows, and the Brazilian real is at a 10-year low all vs. the US dollar – all commodity resource nation currencies. The Indian rupee is at a 17-year low vs. the US dollar because manufacturing is slowing, and if Americans are not buying, the Indians, Chinese, Vietnamese are not making things.
  • The junk bond market collapsed a few months before the last stock market crash and junk bonds are starting to collapse again.

Andy Pfaff at MitonOptimal calls the commodity bear market a train wreck in slow motion.

Marc Faber at The Gloom, Boom & Doom Report sees a stock market decline of easily 20% to 40% and cites the growing number of companies trading below their 200-day moving average, stock declines leading advances, and the high number of new 12-month lows.

Read the full article at http://theeconomiccollapseblog.com/archives/commodities-collapsed-just-before-the-last-stock-market-crash-so-guess-what-is-happening-right-now

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Carl Icahn: BlackRock is an extremely dangerous company – Fortune 07-15-15

Salient to Investors:

Carl Icahn said:

  • BlackRock have fueled a bubble in the high-yield debt market through the sale of ETFs filled with risky bonds, akin to the banks selling billions of dollars of faulty subprime mortgage bonds in 2007. The ETFs offer the appearance of liquidity and make the high-yield bond market seem safer than it is.
  • Credit default swaps in high-yield bond funds make the liquidity problem even worse.
  • The high-yield debt market is overvalued – expect losses in oil and gas high-yield bonds.

Larry Fink at BlackRock said:

  • There could be some losses in high-yield debt but there won’t be a crash. There are no similarities with the market in 2007, not nearly as much leverage in the system as then, particularly at the banks.
  • Icahn’s criticism of Blackrock is baseless. Studies show that ETFs increased liquidity in the markets, not the opposite.

Read the full article at http://fortune.com/2015/07/15/carl-icahn-blackrock-is-an-extremely-dangerous-company/

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Investors Pull $2.3 Billion From Junk-Bond Funds: Lipper – Bloomberg 10-02-14

Salient to Investors:

  • Thomson Reuters said US junk bond funds had the biggest withdrawal last week since a record withdrawal during the first week of August, bringing the net amount redeemed in 2014 to $15.6 billion.
  • Lipper said leveraged loans had their 12th straight week of outflows, bringing the total for 2014 to $6.9 billion.

Read the full article at http://www.bloomberg.com/news/2014-10-02/investors-pull-2-3-billion-from-junk-bond-funds-lipper.html

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Tepper Sees Junk Debt at Fair Value, Equity Prices Not High – Bloomberg 10-01-14

Salient to Investors:

David Tepper at Appaloosa Management said:

  • P/E ratios for US stocks are not high and junk bonds are at the mid-point of fair value.
  • The US economy is good.
  • The end of the bond market rally started last month when the ECB unexpectedly cut interest rates and said it would start QE.
  • Long-term, Bill Gross’s departure from Pimco does not mean anything because the market is a market and is bigger than anybody.
  •  The S&P 500 is at 15.2 x estimated earnings versus the average 13.8 over the past 10 years.

Read the full article at http://www.bloomberg.com/news/2014-10-01/tepper-says-u-s-stocks-interesting-as-junk-bonds-at-fair-value.html

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Complacency Breeds $2 Trillion of Junk as Sewage Funded – Bloomberg 07-08-14

Salient to Investors:

  • Global debt complacency is evidenced by investor enthusiasm for the debt of Ecuador, Clear Channel Communications, China’s Logan Property Holdings, Greece’s Hellenic Petroleum, Florida’s Orange County Industrial Development Authority. Japan’s Government Pension Investment Fund is even considering venturing into junk bonds. Almost any borrower is able to raise debt with few questions asked even as the World Bank cuts its outlook for global economic growth.
  • Fred H. Senft Jr. at Key Private Bank says overexuberancy can last a while but when it turns it will turn quickly and very ugly.
  • The Bank of America Merrill Lynch Global High Yield Index took 12 years from its start at the end of 1997 to get to $1 trillion, but only 4 years to get to $2 trillion. 2015 is on track to top 2014’s record of $477 billion.
  • Moody’s Investors Service said its measure of the strength of junk-bond covenants is the weakest since it started tracking the data in 2011. For the first time, more than half of the junk-rated loans made in the US lack typical lender protections like limits on the amount of debt they can amass relative to earnings. Moody’s said the global default rate fell to 2.3 percent in May versus the historical average of 4.7 percent, but junk-rated borrowers have $737 billion of debt due in the next 5 years.
  • A measure of risk that uses options to forecast volatility in equities, currencies, commodities and bonds has fallen to its lowest level on record.
  • Jason Rosiak at Pacific Asset Management said the market has been picked over.
  • BIS said central bankers should not complain too loudly about complacency because they are responsible.
  • Junk bonds have returned 157 percent since the depths of the 2008 financial crisis versus 123 percent for the MSCI All-Countries World Index.
  • Yields fell to a record low 5.6 percent in June, 2.5 percentage points below the average of the past decade.
  • Martin Fridson at Lehmann, Livian, Fridson Advisors said it is as extreme as it gets and yield spreads are 2 percentage points too tight.

Read the full article at http://www.bloomberg.com/news/2014-07-07/complacency-breeds-2-trillion-of-junk-as-sewage-funded.html

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The 2014 Contrarian Investment Tour, From Rupees to Copper – Bloomberg 12-10-13

Salient to Investors:

Lewis Braham writes:

Contrarian funds can be a hedge of sorts, though a potentially volatile one as out-of-favor sectors tend to be cyclical and prone to booms and busts. Shorting is inherently dangerous as markets have been trending higher.

Brian Singer at William Blair Macro Allocation Fund said currencies help diversify portfolios because they behave very differently from stocks and bonds. Singer recently put 19 percent of the fund in the Indian rupee which he says is undervalued by as much as 70 percent and India’s new central bank governor has already taken actions to stabilize it by raising interest rates. Singer uses financial derivatives to earn a 6 percent yield on the equivalent of a bank deposit. Individual investors can buy currency CDs – a 3-month FDIC-insured rupee CD from Everbank yields 7.25 percent. Singer is short the iShares Russell 1000 Growth ETF and long the iShares Russell 1000 Value ETF  and says people believe the US is the only source of growth and stability in the world but will be surprised in 2014 at how volatile growth stocks can be.

Don Hodges at the Hodges Pure Contrarian Fund is betting on coal, iron and copper mining stocks and said a recovery in the sector will begin when the Chinese work off their commodity inventories and begin buying again.

Jason Hsu at Research Affiliates said emerging market stocks are at a tremendous discount to US stocks. Hsu said the Shiller PE ratio for the S&P 500 is 24 versus its 16.5 average, versus 13.5 for emerging markets. Hsu is buying TIPS – TIPS with maturities of more than 20 years are yielding 1.5 percent over inflation, and is betting on a decline in large US stocks as well as on improved prospects for high-yield and emerging market bonds.

The BlackRock Municipal Target Term Trust trades at an 11.5 percent discount to portfolio value and yields 6.73 percent on a tax-free basis.

Rudolph Riad-Younes at RSQ International Equity Fund does not like gold because it trades closer to 20 percent above its cost of production versus 10 percent to 15 percent historically, and that cost will fall in the next 5 years, further driving down gold prices.

Read the full article at http://www.bloomberg.com/news/2013-12-10/the-2014-contrarian-investment-tour-from-rupees-to-copper.html

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Jim Rogers Wary On The U.S. Bull Market — Agriculture Shines But Fracking Could Flop – Financial Advisor 07-25-13

Salient to Investors:

Jim Rogers said:

  • Agriculture will enjoy an extended boom,Very bullish about farmland and other agricultural products.
  • Bearish on Wall Street brokers and Ivy League professors.
  • The central corridor from north Texas up to the Dakotas has the highest growth rates in employment, income growth and savings in the US, and is the only region whose primary limits to growth are supply and capacity constraints.
  • A global shortage of farmers could become serious since most farmers in the US, Japan and elsewhere are in their 60s or older and young people are not entering the business – more Americans are graduating with degrees in public relations than in agriculture.
  • Gold is experiencing a complicated bottoming process.
  • The 30-year bull market in bonds is over and likely to be followed by a bear market of similar duration.
  • No bull market in any asset class goes on forever.
  • The bull market in US equities is getting close to ending in a big mess, worse than 2001 and 2008-2009.
  • Global central bank promiscuity virtually ensures turbulence and tough times will follow.
  • Shorting shorting junk bonds as the riskiest assets will get hurt the most when the central banks’ house of cards collapses.
  • Bullish on Russian stocks, especially because it is the second most hated market after Argentina.
  • Bearish on fracking because rig usage is down 75 percent and pumps are down 50 percent over the last 2 years, and most oil shale well production declines very rapidly after the first year or two.
  • Water is a more attractive commodity, but don’t own it as politicians will hang you in the public square. Better to transport, clean or filtrate it and be a hero in the public square.

Read the full article at  http://www.fa-mag.com/news/jim-rogers-wary-on-the-u-s–bull-market-agriculture-to-shine-while-fracking-could-flop-14984.html

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Gary Shilling position update 2013 – Gary Shilling blog 07-15-13

Salient to Investors:

Gary Shilling writes:

  • The fog remains thick, so reducing long positions in Treasury bonds and Japanese stocks and cut yen shorts, euro shorts and dollar long positions.
  • Maintaining long positions in US defensive stocks like utilities and health care.
  • Increased short position in junk bonds and initiated shorts in emerging market stocks and bonds.

Read the full article at  http://garyshilling.blogspot.com/2013/07/gary-shilling-position-update-2013.html

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Market timing is tough – Jim Rogers Blog 06-20-13

Salient to Investors:

Jim Rogers says:

  • At some point markets won’t take central bank policies anymore, and interest rates will rise regardless of QE.
  • Market timing is tough.
  • Short junk bonds. In any market, the marginal stuff goes first.

Read the full article at  http://www.jimrogers.info/search?updated-max=2013-06-25T04:00:00-05:00&max-results=5&start=5&by-date=false

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