April 4, 2012
By Jeff Cox
Runaway government debts have triggered uncontrolled money printing that in turn will lead to inflation that will decimate portfolios, according to the latest forecast from “Dr. Doom” Marc Faber.
Investors, particularly those in the “well-to-do” category, could lose about half their total wealth in the next few years as the consequences pile up from global government debt problems, Faber, the author of the Gloom Boom & Doom Report, said on CNBC.
Efforts to stem the debt problems have seen the Federal Reserve expand its balance sheet to nearly $3 trillion and other central banks implement aggressive liquidity programs as well, which Faber sees producing devastating inflation as well as other consequences.
“Somewhere down the line we will have a massive wealth destruction that usually happens either through very high inflation or through social unrest or through war or credit market collapse,” he said. “Maybe all of it will happen, but at different times.”
February 9, 2012
By Julia La Roche
Rochdale’s Dick Bove went on a tirade this morning on CNBC’s “Squawk on the Street” claiming the joint state-federal mortgage settlement, which he dubbed in a note earlier as “the mortgage deal from hell,” unfairly impacts those homeowners who pay their bills.
“If you’re going to do something which is going to reduce the value of existing homes where people are making payments then every American should stop making payments on his mortgages and send a letter to the Attorney General in his state and say ‘I qualify to have my principal reduced because I’m not going to make any more payments on my house,” Bove said.
The banking analyst also said the agreement, which is expected to be around $26 billion and could increase if more banks join, will hurt the U.S. economy rather than stimulate it.
“These people were not making payments on these houses in the first place and, therefore, they’re not getting the new flow of cash…they were not getting anything other the government has decided to pay everyone who cheated on their mortgages 2,000 bucks. The second thing is you are going to reduce the price of houses in the United States where payments were being made because the house next store is seeing the principal balance taken down,” he explained.
September 23, 2011
By: Reporting Maria Bartiromo, Writing Antonya Allen
Billionaire investor George Soros said he believed the United States was already experiencing the pain of a double dip recession and that Republican opposition to Obama’s fiscal stimulus plans was to blame for sluggish growth.
Asked by CNBC if he believed the US risks falling into a double-dip recession , Soror said: “I think we are in it already.”
“We have a slowdown and basically a conflict about whether the rich ought to pay taxes to create jobs or not and there was a deal in the making which would have balanced the budget over the long term, but would have allowed short-term fiscal stimulus, which would have been the right policy,” Soros said in an interview late Wednesday.
“That was rejected, it fell apart… so it will come to the electorate next year to decide what they want,” he added.
Euro zone policymakers have repeatedly followed the wrong policy shifts, creating a situation in Europe “more dangerous” to the global financial system than the collapse of Lehman Brothers in 2008, Soros said.
“It is a more dangerous situation [than Lehman Bros] and I think that the authorities, when push comes to shove, will do whatever it takes to hold the system together, because the alternative is just too terrible to contemplate,” he added.
A number of smaller euro zone nations could default and leave the single currency area, Soros said, but he warned if it happened on an ad hoc basis, there would be considerable risk to the global economy.
“I think that you could have two or three of the small countries default or leave the euro provided it is prepared and done in an orderly way,” Soros said.
“If it were to happen unprepared it could actually disrupt the global financial system, but that’s why it’s important to allow for it to happen and then those countries have a genuine choice it doesn’t mean they are being pushed out.”
Soros said he believed the so-called ‘Troika’ of the EU, ECB and IMF would release the next tranche of aid to heavily indebted Greece, but he stressed the creation of a European bailout fund would determine whether Greece received another bailout in December.
October 12th, 2010
By: Daniel Solin
Jim Cramer has a new investment strategy for you: short-term trading. According to Cramer’s Mad Money show last week, summarized on the show’s CNBC blog, short-term trading can be a good way to make money.
Here’s his recipe: Identify stocks in your portfolio that have “flown too high” and “take a little bit off the table,” investing that money elsewhere and letting the hot stocks cool off before buying them back at lower prices. Cramer pointed to Chipotle (CMG), Netflix (NFLX) and Salesforce.com (CRM) as examples of stocks that have soared too high,and assured his viewers that short-term trading is a “tested strategy.”
In my view, this idea is errant nonsense. How would an investor implement this strategy? Stock prices move in a random pattern, and there’s no way to determine with certainty when they have “flown too high” and when to buy them back.
Who Knows the Future?
Take Chipotle as one example: The stock closed at $97.90 on July 30, 2007, marking a big gain from its price of $42.22 on Jan. 26, 2006. Was that time to sell and “take a little off the table”?
If you thought so, you’d have been disappointed when the stock reached $151.88 on Dec. 24, 2007. The shares did fall then, to a low of $39.90 on Nov. 17, 2008, only to surpass their December level to close at $178.60 on Oct 11.
But that’s exactly the problem. Future events affect stock prices, and no one knows what those events will be or how they’ll affect the price of a stock.
How difficult is it to guess? According to a summary of seven studies on day trading, 70% to 80% of day traders lose money. Another analysis, by investment consultant Ronald Johnson, concludes that 70% of the short-term public traders included in the study “will not only lose, but almost certainly lose everything they invest.” As he puts it: “Numerous market studies have concluded that accurate market timing is not possible, even for professional money managers.”
So Cramer’s claim that short-term trading is “tested” is disingenuous. But consider the source: Cramer’s employer, CNBC, derives substantial revenue from sponsors — such as purveyors of trading systems and the securities industry — that make money when you trade.
Don’t be fooled. Cramer’s trading advice really is “mad.”
I’d encourage investors to heed the admonition of Vanguard founder John Bogle instead. As he told Bankrate.com during an interview about exchange-traded funds last year: “Trading is your enemy, because it’s based on emotion.”
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July 19, 2010
By: Daryl Guppy
Seeing there’s been quite a bit of interest in my recent comments on CNBC about the historical parallels between the Great Depression and the recent financial crisis, I thought it may be appropriate to elaborate further on the chart technicals behind the observation.
The causes may have been different, but the collapse of the U.S. markets in early 2008 followed the same behavioral patterns as the collapse in 1929. The recovery pattern seen in 2010, is also very similar to that developed in 1930.
The crash of the Dow Jones Industrials in 1929 was signaled by the development of a well defined head and shoulder pattern, seen most clearly in its monthly chart. It is a reliable pattern that captures the behavior of investors who are becoming increasingly disillusioned about the future prospects for economic growth.
The downside pattern targets in the 1929 Dow were exceeded with a fall of around 49% before the market recovered in 1930. The 2008 dow pattern targets were also exceeded with a market fall of around 52%.
In 1930, the market developed an inverted head and shoulder rebound pattern recovery that led to a 46% rise in the market. The Dow rebound in 2009 also developed from an inverted head and shoulder pattern. This was a powerful rise of around 69%.
The historical development of the recovery in the DOW in 1930 ended with a new head and shoulder pattern. This was followed by a rapid market decline that created the first part of a long term double dip pattern. This retreat also exceeded the pattern projection targets with a fall of 28%.
Fast forward to today, we’re seeing the Dow is developing a new head and shoulder pattern which indicates a beginning of a bear market. The rally peaks in the Dow appear in January and May and June. The downside projection taken from the neckline of the pattern sets a target at 8,400, or a 25% decline.
A very bearish analysis using the pattern of retreat behavior in 1930 suggests the Dow could retreat to around 7,500 in 2010.
The head and shoulder pattern in the Dow and its downside targets, are invalidated with a sustainable rise above 10,600. A move above this level does not signal a resumption of the uptrend, but it does reduce the probability of a double dip.
It must be noted that while the behavioral patterns in 1930 and 2010 are similar, they don’t necessary point to the same result. But it does sound a warning that markets could continue to stand on the edge of a precipice.
Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com . He is a regular guest on CNBCAsia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.
If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com. We welcome all questions, comments and requests.
CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk.
June 21, 2010
By: Dennis Kneale
For almost two decades the U.S. government has kept its meddlesome mudhooks off the Internet, freeing it to spread its kudzu-like tendrils into the global economy. And it worked.
The FCC took a big step this week to end all of that. For the first time, the Federal Communications Commission proposes using a set of 75-year-old phone regulations to oversee the Net of the 21st century and have a say in the prices that companies like AT&T and Comcast can charge. And set rules for what traffic they must carry. (Comcast is acquiring a 51 percent stake in NBC Universal’ CNBC’s parent company. The deal is awaiting regulatory approval.)
Some telecom execs say the FCC’s agenda is downright radical. It could thwart high hopes for the wireless Internet, centerstage of the next digital revolution. The agency assault could restack the pecking order of winners and losers and reshape their stock prices, affecting the portfolios of millions of retirees and investors. It would impose new burdens on big carriers, while granting new power to content purveyors like Google and Yahoo .
At stake is billions of dollars that carriers like Verizon and AT&T spend each year to spruce up their networks to carry more digital bits. They will slash their spending if the feds restrain their upside; that could hurts jobs growth in high-tech, which employs well over two million people in the U.S.
If the FCC foray is imminent, “We have to re-evaluate whether we put shovels in the ground,” is how AT&T’s chief executive, Randall Stephenson, put it this week.
The last time the FCC tried such a major incursion, in the mid-1990s, Stephenson, then the company’s chief financial officer, cut annual capital spending by more than half, from $12 billion to $5 billion dollars a year. That cut lasted for four years, until the courts threw out the FCC overreach.
This time around, the agency’s push is in direct contradiction to a ruling in April from the U.S. Court of Appeals in Washington. The backstory: In 2008 the FCC had chastised Comcast for slowing traffic from one particular website—BitTorrent, used for massive video downloads of movies and TV shows. Comcast sued, arguing the FCC had legal standing to dictate how the company handles its Internet traffic.
Two months ago the DC appeals court unanimously agreed: the FCC had no such authority.
What to do? Make it up!
To do that, the FCC proposes a nifty little change in definitions. It wants to re-classify the Internet and say it no longer is an “information service”—which gets a light hand. Now the Net shall be called a “telecommunications service”—a phone service, basically, that gets subjected (and subjugated) to a lot more government oversight.
Four feet good. Two feet better!
Technically, the FCC wants to take Title II of the Communications Act—first adopted when the agency was formed 75 years ago to regulate phone service—and slap it on the Internet.
“It’s so archaic. It’s a regulation that was written for the old rotary dial telephone back in 1934,” AT&T’s Stephenson said on CNBC’s new show, “The Strategy Session,” earlier this week. (Watch video of the interview here.)
It is “a terrible idea,” Verizon’s regulatory chief, Tom Tauke, says in a company statement, predicting “severe . . . ramifications for decades. It is difficult to understand why the FCC continues to consider this option.”
Google played a key role in sparking this spat, under the well-crafted buzzwords “net neutrality.” The search behemoth basically wants the FCC to guarantee that a big carrier can’t refuse to deliver Google’s content on its network.
But wait a minute—why does Google, a preternaturally fearsome, multibillion-dollar profit machine, need special protection from a feeble and backward-looking government bureaucracy? If Comcast blocked access to a hotspot like Google, millions of customers could quit and force the company to cave in. Free-market enforcement, guys.
The FCC, prodded by Google, wants to ban giant carriers from differentiating the way they handle various kinds of traffic, requiring them to treat all content—whether it’s a fat video downloaded from YouTube or a slender little photo zapped from your cell phone—”in a nondiscriminatory manner.” Some telecom execs fear this would lead to de facto price controls.
Wouldn’t Hugo Chavez in Venezuela be proud? The shareholders of AT&T and Verizon and Comcast and
Time Warner Cable
paid to build those fat pipes—not government. And the carriers made that investment without monopoly protection, unlike the phone networks erected over a century ago.
Some telecom execs privately have signaled to the FCC that they may accept some new FCC rules on wireline service into homes, if the FCC would back off and let the mobile Internet remain unfettered and footloose.
Don’t bet on it. The Obama Adminstration’s FCC, backing off an opportunity to expand its regulatory hegemony over a trillion-dollar industry? Why would we ever believe this FCC is capable of doing a wise thing like that?