Investments

Dr Marc Faber

The renowned expert on economies’ & markets’ downfall, Dr Marc Faber, has recently made his views on the state of the world economies known in an interview with CNBC and he is not all that optimistic either :

The new bank bailouts are not likely to work because they are run by the same people who prolonged the economic agony by throwing money at weak companies rather than allowing them to fail and encouraging the strong ones, Marc Faber, the publisher of the Gloom, Doom and Boom Report, told CNBC Monday.

Britain threw its troubled banks another multi-billion pound lifeline Monday by allowing them to insure against steep losses and guaranteeing their debt, while an adviser for U.S. President Elect Barack Obama said the rest of the TART money will be used to clean out bad assets from the financial system.

“The financial crisis has occurred because of government interventions,” Faber told “Squawk Box Europe.”

It is not all bad news, however, says the man who dislikes bail-out packages :

“The contractions actually serve to build for the future growth, because the weak competitors are eliminated. If you support the weak competitors you essentially penalize the strong competitors and therefore I am very much against these bailout packages.”

Not surprisingly Faber predicts a tough 2009 with a possibility that the second half could prove even worse than the first half and he seems not to share some of the optimism expressed by many experts that the world economies and markets are set for a recovery in the 2nd half of 2009 :

Investors counting on the fact that stock prices are very low for long-term growth should bear in mind the Japan lesson, where prices are virtually at the same level they were in 1981, Faber noted.

Commodities may be a better play as some time, when the global economy picks up, prices will rise because investment in new exploration or mining has all but stopped, he said.

“I have shares in Asia, mining stock, exploration companies, physical gold,” Faber said.

“As far as currencies are concerned, I think the dollar is a disastrous currency but the others are even worse. I am leaning more towards the view that the dollar could strengthen even more.”

Watch and listen to the entire interview here

Asian Investments, Equity Investment, Gold Investment, How it all works, Investment opportunities Gold vs Equity, Marc Faber, US Dollar

With a very troubled 2008 soon behind us and many private as well as institutional investors breathing a short sigh of relief, the big question facing the world is of course: will 2009 be a year of recovery or will the crisis worsen and prolong the Recession or even, as some fear, slide further into a full blown Recession ?

This post looks into what some of the analysts have to say about 2009 and whether to world economies and all its dependants are in for a recovery or if indeed we shall have another very tough year to face up to.

MarketWatchpoints out that whilst the downturn is gathering pace in Europe and The US, the same crisis has now also spread in full to The Far East and Asia with the pace of the economic downturn in China being the most surprising factor to economists and experts.

Quoting experts on the development of the economic downturn in Asia, the article says:

Experts painted a grim picture for the Asian region in 2009.

“Asia is not doing well at all,” said Son Won Sohn, an economist at the Martin Smith School of Business at California State University, Channel Islands.

“Decoupling, which looked for a while like it was going to work — turned out to be a myth.”

Japan is mired in a recession, South Korea will be lucky to reach 2% growth this year and Chinese growth could fall below 6%.

The downturn in global trade has just begun to have a negative impact on China’s economy, but it is pressure that will last for most of 2009, according to Brad Setser, an expert on China at the Council of Foreign Relations in New York.

“The latest data for November was off-the-charts bad,” Setser said.

In addition, China’s own domestic cycle looks to have turned, he said.

“The pace of the downturn has been a little bit of a surprise,” he said.

Asian Investments, How it all works, Investment Management, Investment News, Investment opportunities, UK Investment, US Investments 2009 Recovery, China, Depression, Europe, Recession, US Economy

This posts provides an overview of what some of the leading experts and sources list and recommend as Hot Stocks given their recent performance and value so have a read through !

Forbes has a good overview of movers and shakers from The Far East:

The China Enterprise Index of top locally listed mainland Chinese firms was up 1.87 percent to 7,362.09.

Here are some of the stocks on the move:

Financial stocks remained strong after China said it planned to stabilise its stock market and ensure liquidity in the banking system.

China’s biggest lender, ICBC, and smaller rival China Construction Bank gained about 1 percent on hopes China will further cut the reserve requirement on deposits to spur lending.

The nation’s No. 1 insurer, China Life Insurance, rose 3.7 percent, while smaller rivals Ping An Insurance soared 6 percent and PICC P&C surged 3.2 percent.

 * Properties remained in focus with investors hunting for bargains after their recent weakness amid the gloomy outlook for the real estate sector.

Developer Sun Hung Kai Properties rose as much as 1.5 percent on Friday morning despite revising downward its apartment sales target by 20 percent to HK$16 billion for this fiscal year ending in June 2009 from HK$20 billion as the global financial crisis hits Hong Kong’s property market, but it expects a market pick-up in early 2009.

And the article ends up with a round up some other Asian giants and how they are performing :

* Chinese telecom shares rose on renewed speculation that 3G licences will be issued by the end of the year. The nation’s biggest cellular phone network China Mobile rose 2.9 percent, while smaller rival China Unicom gained 2 percent.

 * Hutchison Whampoa rose 2.4 percent after Shenzhen Yantian Port Group said on Thursday that Hutchison, the world’s biggest container terminal operator, had agreed to invest in a container terminal in the city’s Yantian East area.

 * Shanghai Electric Group’s H-shares surged 3.4 percent, marking the trading debut of domestic A shares of the heavy equipment maker in Shanghai on Friday. The company said it has secured more than 80 billion yuan worth of orders in 2008, with outstanding orders in power equipment, heavy machinery and transportation equipment divisions valued at over 180 billion yuan as of Sept 30.

Jim Jubak of MSN Money is hot on Commodity Stocks and explains why:

We’re building the foundation for the next boom in commodity prices — and commodity stocks.

I can’t give you any guarantee that commodity prices won’t tumble further in the short term. In fact, I think that’s very likely to happen as the U.S. economy slips into recession (possibly along with the economies of Japan and the European Union).

But right now commodity stocks are factoring in huge declines in demand and tumbling commodity prices over the long term that just aren’t going to occur. A patient investor who can put up with the pain of the next six, nine or 12 months can now buy a very reasonably priced option on the shares of the strongest commodity producers for the next leg up in commodity prices. I peg the beginning of the next boom at late 2009 or early 2010.

Mr Jubak goes on to explain why even the current financial crisis could impact the commodity stocks postively :

The economic laws of supply and demand don’t care if we’re reluctant to revisit a stock market sector that has delivered so much pain. And as hard as it may be to believe right now, it looks like the current meltdown in global financial markets isn’t going to have much effect on the trends that made commodity stocks big winners until mid-2008.

Growing demand from the rising economies (and the increasingly wealthy consumers) of China, India, Brazil and the Middle East is still going to drive up the long-term price of everything from oil to zinc. In fact, the current global financial crisis could make the commodity boom that much stronger when it does return.

Marketwatch.com has some predictions for Monday trade which are worth noting:

Among the companies whose shares are expected to see active trade in Monday’s session are National Semiconductor Corp., H&R Block Inc., and Worthington Industries Inc.

Click here for their full recommendations and insights.

Finally, Richard Gibbons of The Motley Fool talks about stocks you should avoid at present:

The amazing thing about this market is that there are so many cheap stocks. The problem with this market is that there are so many companies that could really blow up on investors.

Your investing success in the next year will be largely determined by your ability to sniff out and avoid losers. With that in mind, here are some suggestions for stocks you should avoid.

Speculative companies
Right now, you should avoid money-losing businesses, companies that need high growth to justify their high earnings multiples, start-up companies that are dependent on the growth of new markets, and other speculative stocks.

Right now, you can find solid, blue-chip stocks that are undervalued by unprecedented amounts. If you can buy a stock that should be trading at double or triple the price, why would you want to risk your money on a stock with less probable gains? In such an environment, speculative bets just don’t make sense.

For instance, right now General Motors (NYSE: GM) is trading at 66-year lows — and the stock still isn’t cheap. The company is projected to lose money as far as the eye can see, and it’s begging for government assistance. Why would you even consider buying GM when you can get Microsoft (Nasdaq: MSFT) — arguably the strongest company in the world with $18 billion in yearly income — at less than nine times its forward earnings multiple? GM simply doesn’t make sense.

When even established, well-capitalized companies are seeing strong headwinds, stay away from the companies that aren’t well-positioned.

To read this rest of his article on things to consider before you buy shares click here - and you should also consider getting their Motley Fool Inside Value report - worth a read for sure !

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Traditionally, real estate has been a rock solid investment during most times and one that consumers and investors alike can relate well too. Recently, however, prices on properties world wide have dropped significantly and apart from the distress it gives homeowners, who find themselves unable to meet their mortgages and/or sell their houses, it has thrown into doubt to investors, private as well as institutional, the validity of real estate as an investment.

This post looks into what the experts say and expect moving forward.

Eric Ames from Seeking Alpha has this to say :

…..real estate appreciation is not a reliable wealth builder. No one can predict which way prices will go next, and people should not rely on appreciation estimates when evaluating the worth of an investment opportunity. Investors should look instead at the cash flow numbers. Cash flow is something tangible, and it doesn’t require a call into the psychic hotline to predict.

In addition, properties that command better cash flow typically do not drop in price as much during market fluctuations. Dramatic price drops happen when people sell in desperation. They have to get out from under the house, so they drop the price until it sells. What motivation does an investor have to drop the price on their rental house if it is bringing in money every month? The answer is that they have very little motivation to do so, and so they probably won’t.

So while I agree that property appreciation shouldn’t be counted on anymore, that doesn’t make real estate a bad investment. Primary residences and rental properties are two entirely different animals and should be looked at independently when evaluating the merit of real estate as an investment. Investors can still make great money in the real estate market if they focus on the right things.

Mr Ames concludes vis-a-vis the US Housing Market that:

Is it the best path to wealth for Americans? I think the answer to that question is yes and no. I think it can be for the right person, who is willing to put in the time and energy. For the person who tries to cut corners, real estate investing is likely to be a painful and costly experience.

Bloomberg has an updated view and insight into Dubai’s troubled real estate scene which paints a very dark picture and perhaps future for Dubai itself, far beyond its real estate investments:

The property bubble in the desert emirate, home to the world’s tallest building, most expensive hotel suite and largest manmade islands, is bursting as scarce credit and slumping oil prices have international investors scurrying to dump assets. That may shatter Dubai’s goal of creating a sustainable economy by building the Persian Gulf hub for finance and tourism, forcing it to depend on oil-rich neighbor Abu Dhabi for financing.

“Dubai is more precarious than it has ever been,” said Christopher Davidson, author of “Dubai: The Vulnerability of Success” (2008, Columbia University Press). “If the property industry collapses in Dubai, it will be finished. Dubai’s relative autonomy will come to an abrupt end.”

The emirate’s push into luxury property developments and tourist attractions was diversification on “paper sand,” said Davidson, a professor of Middle Eastern affairs at Durham University in the U.K.

The same article goes on to conclude that Dubai’s investment honeymoon is over :

Real-estate values surged fourfold over the past five years, fueled by a supply shortage and an influx of expatriates. Rising commodities prices drove inflation, which accelerated to a record 11.1 percent in the U.A.E. last year. Dubai opened its property market to foreign investment in 2002.

Borrowers tapped mortgages for as much as 90 percent of a property’s value to buy homes on the manmade fronds of the Palm Jumeirah and villas with gardens or golf-course views in developments such as Emirates Hills, The Springs and The Lakes.

Now the credit crunch is coming to Dubai. It’s being aggravated by oil prices that have tumbled 68 percent since reaching a record $147.27 a barrel on July 11.

That will mean less interest in buying third or fourth homes in Dubai, said Gabriel Stein, a director at London’s Lombard Street Research, which provides economic analysis.

“There are bound to be white-elephant developments,” he said. “If it was built on the premise of ‘build it and they will come’ then that will now turn out to be a mistake.”

Banks are tightening lending or freezing it altogether. Amlak Finance PJSC, one of the U.A.E.’s biggest mortgage lenders, said Nov. 19 that it had suspended new home loans. London-based Lloyds TSB Group Plc stopped offering mortgages for apartments in Dubai on Nov. 11 and reduced the amount it will lend for villas to 50 percent of the price, from 80 percent.

The cost of a seven-bedroom villa on Palm Jumeirahdropped to as low as 19 million dirhams ($5.2 million) last month, from 30 million dirhams in September, according to the Dubai unit of German real-estate company Engel & Voelkers AG.

Matt Woolsey gives a quick global round up of a dire real estate scene in his latest article :

The sun isn’t shining for homeowners in Malaga, on the Costa del Sol.

Foreign buyers have stopped purchasing homes site unseen. Vacation home-seeking Spaniards, heeding the government’s warnings about a recession, have also pulled back. That leaves 54,000 vacant and unsold new properties throughout Malaga province, according to the Spanish Ministry of Housing. That’s 34,000 more than in all of boom-bust capital Phoenix, Ariz., based on Trulia.com figures pulled from Arizona’s multiple listing services, despite Phoenix’s 200,000 person larger population base.What’s more, 93% of Spanish mortgages are of variable rate, according to the European Mortgage Federation, thus pegging them to the growing Euribor rate. In 2003, that dipped to 1.94%; it’s now 4.27%.

And he continues :

As the real estate industry limps into 2009, such barometers are expected to remain bleak. To illustrate, Forbes.com assembled a series of snapshots of global real estate markets.

In some places, like the Baltic states, recent overbuilding is leading to softening. In Dubai, the slowdown stems from concerns about a declining oil market and in Spain and Florida, massive mortgage bubbles are driving down prices and upping defaults.

Of course, spots under sunny skies and sandy beaches aren’t the only ones suffering. Since the U.K. property market’s apex in March 2008, prices are down 13.4%, according to Knight Frank, a London-based real estate firm. Its head of residential research, Liam Bailey expects that in 2009, “U.K. residential prices will fall 30% from their peak, taking values back to September 2003 levels.”

This is also happening in the U.S. and Ireland. Both countries’ housing markets have lost more than 10% of their value in the last 12 months. Across both, prices have fallen to 2005 levels, according to Zillow.com, a U.S. data firm, and the Economic and Social Research Institute, an Irish research group.

Many economists believe the bottom has yet to arrive. For that, they are looking to the 2003 level, which is the technical point at which price booms began around the world.

But even that can’t be trusted.

“Nobody is going to buy buildings when they can buy first mortgages or second mortgages with 19 or 15% returns,” says D. Kenneth Patton, professor at NYU’s Schack Institute.

When transactions for buildings instead of mortgages return to favor, look for deals to take place in the U.S. This is because many investors see the American market as a good long-term play.

“Foreign investors have always targeted the major U.S. cities as being one of the best places to invest,” says Richard Kessler, chief operating officer of Benenson Capital Partners, a New York real estate fund. “I think when they come back into the market, they’ll come back into those marketplaces; the New Yorks, L.A.’s and San Frans.”

Until that point, however, expect another painful year around the globe.

Forbes throw light on the Asian real estate scene which is also witnessing a drastic drop and exodus of investors:

The real estate markets in India and China are fizzling. Over the last five years, prices for homes in China doubled. Now the number of sales and home values are falling in many parts of the country.

Oversupply and a slowing Chinese economy are playing a role. Also hampering real estate values is China’s ambitious stimulus plan to encourage the construction of new, affordable housing. Real estate investors worry the increased supply will push down prices further. (See “Olympian Bust?”)

India’s real estate market is following a similar course. It boomed over the past five years and now is slowing. High inflation and tightened credit are throttling the Indian economy. The restricted credit is also making it harder and more expensive for buyers to finance acquisitions.

The author goes on to give examples of billionaires from both countries who have suffered massive losses due to real estate:

Nobody’s more aware of the real estate market’s woes than KP Singh. The Indian billionaire is still worth $7.8 billion, but that’s just a fraction of his worth earlier this year. In March, we pegged his fortune at $30 billion. Shares of DLF, Singh’s real estate company, fell steeply over the past year.

Singh announced Tuesday that his company was deferring some projects because of weakening demand and a credit crunch. “Demand has gone down so substantially that now [a] lot of projects are being closed down,” he told a Reuters reporter at the India Economic Summit.

A sudden wealth evaporation also struck Yang Huiyan of China. In 2007, Yang Huiyan topped our list or China’s richest people with a fortune of $16.2 billion. She’s no longer at the top because her fortune fell to $2.2 billion.

For those investors and individuals with cash on hand, however, there are some amazing buying opportunities out there right now and most of these bargains will only get better as this author expects the real estate prices globally to continue to drop significantly during 2009, and probably beyond.

Asian Investments, Investment News, Middle East Business, Real Estate Investment investment properties, Real estate crisis

China’s sovereign wealth fund said it wouldn’t “dare” invest in foreign financial firms after losing $6 billion on stakes in Morgan Stanley and Blackstone Group LP.

“I don’t dare to invest in financial institutions now,” Lou Jiwei, chairman of China Investment Corp., said today at a conference in Hong Kong. “The policies of the developed nations on these institutions are not clear. Until they are clear, I don’t dare to invest in them. What if they go bust? I will lose everything.”

Reaction from one of China’s largest investment houses - read the full story from Bloomberg here !

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Asia’s tiger economies took a bigger hit from the global slowdown sooner than expected as South Korea’s industrial output fell sharply in October and Thailand posted its slowest export growth in six years.

The economic crisis that has gripped the developed world has started to bite in what had been one of the world’s fastestgrowing regions and a rise in political risk in Thailand and India could exacerbate the growing economic problems.

Although Indian annual economic growth between July and September came in stronger than expected at 7.6%, data on Friday showed, it marked the slowest pace of expansion in almost four years. Malaysian growth data is expected to show that the economy expanded by 4.5% in the third quarter from a year earlier, which will be its worst performance in over three years.

Interesting read - it seems that Asia is now also badly affected from the Credit Crunch and sooner than expected - read the full article from The Economic Times, India here

Asian Investments Asia Credit Crunch, India, Malaysia, Thailand