Commodities tipped to collapse

[michael_selway]

http://www.theglobeandmail.com/servlet/story/LAC.20070109.RFABER09/TPStory/Business

After right call on crash of '87, Marc Faber says it's time again

Money manager warns 'severe correction' imminent in world stock markets
IAN C. SAYSON AND PIMM FOX

Bloomberg News

Marc Faber, who predicted the U.S. stock market crash in 1987, said global assets are poised for a "severe correction" and it's time to sell.

"In the next few months, we could get a severe correction in all asset markets," Mr. Faber said in an interview in New York. "In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate."

Mr. Faber, founder and managing director of Hong Kong-based Marc Faber Ltd., advised investors to buy gold in 2001, which has since more than doubled. His firm manages about $300-million (U.S.) in assets.

The bullish outlook of traders in everything from bonds, equities and commodities to real estate and art suggests valuations are peaking, Mr. Faber said. Last year, the Morgan Stanley Capital international world index of developed stock markets jumped 18 per cent, while a survey of Wall Street's biggest bond-trading firms predicted U.S. Treasuries will post the best gains in five years during 2007.

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"I am not a great buyer of assets now," Mr. Faber said. "We may be in a situation where consumer-price inflation comes back and will have a negative impact on the valuation of assets."

Mr. Faber, publisher of the Gloom Boom & Doom Report, does have some favourites. Singapore and Vietnam are his top picks in Asia because stocks in Singapore aren't "terribly expensive compared with interest rates" in the city-state, while Vietnam's equities have "incredible potential in the long run."

Vietnam's Ho Chi Minh stock index more than doubled last year and was Asia's best-performing benchmark. Singapore's Straits Times index climbed 27 per cent, beating a 15-per-cent increase in the Morgan Stanley Capital International Asia-Pacific index. So far in 2007, Vietnam's index has surged 10 per cent, again leading gains in the region, and Singapore's is up 0.6 per cent. The MSCI is down 1 per cent.

Mr. Faber recommends investors steer clear of shares in the world's biggest developing economies after the emerging markets in 2006 outperformed their developed counterparts for a fifth straight year.

"Emerging markets could get kicked in the next three months so I'd be careful of buying Russian shares," Mr. Faber said. "I'd also be careful of buying China and India shares now."

Russia's dollar-denominated RTS index surged 75 per cent last year, while the Hang Seng enterprise index, which tracks Hong Kong-listed shares of Chinese companies, jumped 94 per cent. India's Sensex index, which more than quadrupled in the past five years, is valued at 25 times estimated earnings.

Mr. Faber also advises investors stay away from shares in Thailand. Its SET index has been the world's worst-performing benchmark in the past month, sliding 15 per cent as currency controls and bombs in Bangkok spooked investors.

On a more positive note, Japanese stocks may prove good bets this year, Mr. Faber said. The Nikkei 225-stock average climbed 6.9 per cent in 2006 and the broader Topix index added 1.9 per cent, the smallest gains among benchmarks for the world's 10 biggest markets.

The U.S. market outpaced Japan last year, with the Standard & Poor's 500-stock index climbing 14 per cent and the Dow Jones industrial average surging 16 per cent.

Strategists at 14 of the biggest Wall Street firms all estimate that U.S. stocks will advance this year. The last time they were in agreement was for 2001, when the S&P 500 dropped 13 per cent.

"It's going to have to be something unexpected and somewhat dramatic" to spur the type of pullback that Mr. Faber predicts, according to Wayne Wicker, chief investment officer at Vantagepoint Funds in Washington, which has about $28-billion in assets. "Given the current environment we see today, I don't see anything imminent, other than a huge amount of money chasing deals, as a real negative."

Mr. Faber said gold should rally further on expectations that supply of the precious metal will decline and demand for it will increase to hedge against inflation. Gold climbed 23 per cent last year, its sixth year of gains.

"The price of gold will continue to go up and probably very substantially," Mr. Faber said. "In the long run, it's very clear that central banks are basically increasing the supply of money and the supply of gold is obviously very limited."

Oil prices are also tipped to rise as political instability in the Middle East and other producing areas threaten supply and global demand increases. Crude oil in New York added less than 0.1 per cent to $61.05 (U.S.) a barrel in 2006, after tripling in the previous four years.

"Everyday the world is burning more oil than new reserves are added," Mr. Faber said.

thx

MS

 

[Wysiwyg]

http://www.theglobeandmail.com/servlet/story/LAC.20070109.RFABER09/TPStory/Business

After right call on crash of '87, Marc Faber says it's time again


thx

MS

Is this the same Marc Faber......

Magic mushrooms for breakfast

A 1998 South China Morning Post polled public figures in Hong Kong with the question, 'Have you ever taken Cannabis?' Cannabis is illegual but not uncommon in Hong Kong, and freely available in many countries around South-East Asia. Most people said no, or refused to be quoted. Faber was as usual more straightforward and more confident: 'Naturally, I have smoked a lot of marijuana, but for breakfast I prefer omelette of Balinese mushrooms.

 

[panem]

Sorry, but what Mr. Faber says is nonsense:

Uranium shortage, energy shortage, silver shortage.

At LEAST those comms won't fall at all.

 

[Wysiwyg]

Sorry, but what Mr. Faber says is nonsense:

Uranium shortage, energy shortage, silver shortage.

At LEAST those comms won't fall at all.

Ahhh....but see as the prediction is made now, then in the unknown future it can be reefered to as "Marc Faber does it again".

Sheeesh...he should be retired and living in Barbados by now.

P.S. He might be right though. :kiffer:

 

[wayneL]

Sorry, but what Mr. Faber says is nonsense:

Uranium shortage, energy shortage, silver shortage.

At LEAST those comms won't fall at all.

Sorry, but what Mt Faber says makes all the sense in the world.

 

[panem]

Sorry, but what Mt Faber says makes all the sense in the world.

Well, sorry:

I got Mr. Faber wrong !

By saying: "The stocks will fall" he is right.

But Uranium, Gold, Silver, Oil will raise - so he is right.

Those shares connected to that will multiple, I guess.

Different views on that?

 

[wayneL]

Different views on that?

Nope!

Hamburg eh? Home of Bronsky & Bernstein. I watch it as part of my futile attempts at learning German.

So far I can say "Ein bier bitte"

 

[Sean K]

Well, sorry:

I got Mr. Faber wrong !

By saying: "The stocks will fall" he is right.

But Uranium, Gold, Silver, Oil will raise - so he is right.

Those shares connected to that will multiple, I guess.

Different views on that?

I think he actually said that nothing in the short term would survive, but the best places for money would be gold or cash. In the short term, everything would be effected but then PMs and oil would be the place to have any spare $$.....I thought he said that?

 

[panem]

Nope!

Hamburg eh? Home of Bronsky & Bernstein. I watch it as part of my futile attempts at learning German.

So far I can say "Ein bier bitte"

Great!


"Ein Bier, bitte" is the most important sentence in Germany!

Since we have over 3.000 different beers brewt here.

Well, Hamburg is the "Reeperbahn", where you will find the girls standing around and doing some nice talking - and more...http://latesturanium.com/

It is also the city with the most millionairs in Europe.

But that goes hand in hand, I think...

Where I come from (Blankenese - Hamburg):

http://www.hotel-behrmann.de/bilder/bild_um3.jpg

http://www.pro-wohnen.de/Blankenese4.jpg

http://www.welt-atlas.de/datenbank/fotos/0-9001/big/0-9001-19.jpg

 

[wayneL]

Great!


"Ein Bier, bitte" is the most important sentence in Germany!

Since we have over 3.000 different beers brewt here.

Well, Hamburg is the "Reeperbahn", where you will find the girls standing around and doing some nice talking - and more...http://latesturanium.com/

Reeperbahn = die sündige meile, ja? (I looked it up )

It is also the city with the most millionairs in Europe.

But that goes hand in hand, I think...

Where I come from (Blankenese - Hamburg):

http://www.hotel-behrmann.de/bilder/bild_um3.jpg

http://www.pro-wohnen.de/Blankenese4.jpg

http://www.welt-atlas.de/datenbank/fotos/0-9001/big/0-9001-19.jpg

Looks exceptionally nice, In fact I will be there sometime in the next year.

Mission: To sample as many of those 3,000 beers as possible. There also used to be a metzgerei where I lived in Perth. I want to get into some of those things again. My favourites: Kasseler Kotelett, Lachsschinken, Thüringer Rostbratwurst amongst many others ...YUM

....and just to feign being on topic, I predict the price of these commodities to crash

 

[panem]

Uranium to crash?
Very funny!
Silver at 8 $?
Never!
Na, dann Prost!
Hier ein Bier und ein feines Schnitzel!
No way, Sir!
It is against all researches, articles and fundamentals I read in the last 12 month.
And that was quite a lot...
You ARE from Germany, right?
It sounds like you are a Bayer?

Mahlzeit, der Herr!

 

[wayneL]

Uranium to crash?
Very funny!
Silver at 8 $?
Never!
Na, dann Prost!
Hier ein Bier und ein feines Schnitzel!
No way, Sir!
It is against all researches, articles and fundamentals I read in the last 12 month.
And that was quite a lot...
You ARE from Germany, right?
It sounds like you are a Bayer?

Mahlzeit, der Herr!

No No lol, not uranium et al to crash! I meant the price of Kasseler to crash HAHA.

Not not from Germany, but have a lot to do with Germans because of das Deutche pferde und dressurreiten But did have a previous attempt at those 3000 beers in Bayern. Loved it.

Long silver atm..... and copper ferchrissake lol.

 

[panem]

See ya at the Reeperbahn, I hope!

Would be very nice!

One link to remember:

http://www-pub.iaea.org/MTCD/publications/PDF/Pub_1259CD_web.pdf/PDF/Pub_1259.pdf

Cheers!

 

[champ2003]

See ya at the Reeperbahn, I hope!

Would be very nice!

One link to remember:

http://www-pub.iaea.org/MTCD/publications/PDF/Pub_1259CD_web.pdf/PDF/Pub_1259.pdf

Cheers!

That article is 1.5 years old.

All the best

Champ2003

 

[Dr Doom]

So does this qualify as a 'collapse' yet?.

Zinc, Copper Plunge After WSJ Report of Losses at Red Kite Fund

By Millie Munshi and Pham-Duy Nguyen

Feb. 2 (Bloomberg) -- Zinc plunged the most in nine years and copper dropped to a 10-month low, fueled by a report of losses by metals-trading hedge fund Red Kite Management Ltd.

Red Kite's $1 billion fund lost 20 percent in the year to Jan. 24, the Wall Street Journal reported, citing an ``unofficial estimate'' the fund gave to one investor. Base metals have lost as much as 27 percent this year on rising global inventories and slowing global growth.

``The fear is that it's an Amaranth'' Advisers LLP, the hedge fund that lost $6.6 billion last year on natural-gas trades, said Michael Guido, director of hedge-fund marketing at Societe Genearle SA in New York. ``The problem is that we don't know how serious it is, and uncertainty breeds liquidation.''

Zinc for delivery in three months fell $310, or 9.1 percent, to $3,080 a metric on the London Metal Exchange, the biggest drop since July 1997. Copper for delivery in the three months fell $255, or 4.6 percent, to $5,345 a ton, after earlier reaching $5,250, the lowest since March 27. Aluminum, lead and tin also fell on the LME.

Signs of losses by hedge funds that had poured money into metals during last year's rally may prompt some speculators to reduce their holdings, accelerating the decline in prices, said Mo Ahmadzadeh, president of metals trading at Mitsui Bussan Commodities Ltd. in New York.

Hedge funds ``may be one sector that is feeling they've gotten more ahead of themselves in this market,'' Ahmadzadeh said. ``There's been a lot of willingness from the funds and the investment community to sell.''

190 Percent Gain

Red Kite's performance in January was the worst for any month in at least a year, the Wall Street Journal said today, citing an investor who saw the fund's results. One of Red Kite's funds last year gained more than 190 percent betting on metals, the newspaper reported.

David Lilley, who co-founded Red Kite with Michael Farmer and Oskar Lewnowski III, declined to comment when contacted by Bloomberg. Farmer wasn't available to comment on the Wall Street Journal report.

Not everyone is convinced the losses of one hedge fund signal metals are a bad investment.

``There's absolutely no reason for metals to fall this way,'' said Michael Metz, chief investment strategist at Oppenheimer Holdings Inc. in New York. ``The decline reflects the stress on one or more leveraged players. When the locals smell a catastrophe, they liquidate. In my opinion, it's a good time to buy.''

Zinc Slump

Zinc dropped as much as 12 percent to $2,990 a ton, and prices are down 27 percent this year. The metal, last year's second-biggest gainer behind nickel after jumping 126 percent, has posted five straight weeks of declines.

This year's slump has been spurred partly by rising inventories. Stockpiles monitored by the LME, the world's biggest metals bourse, have increased 8 percent since the end of December. LME-monitored stockpiles dropped 175 tons to 98,350 tons, the exchange said in a daily report today.

Supplies of zinc and other metals have risen following record prices last year. Zinifex Ltd., the world's second- largest zinc producer, said on Jan. 30 that the raw material used in producing the metal is more available than a year ago. China, the biggest producer and user of zinc, was a net exporter of refined metal in 2006 for the first time in three years, Beijing Antaike Information Development Co. said Jan. 26

Increased Production

Miners such as Canada's Lundin Mining Corp. have increased production of zinc concentrate, the raw material shipped to smelters, in a bid to capitalize on last year's prices. Zinc traded at a record $4,580 on Nov. 10.

Supply will surpass demand by 85,000 tons this year compared with a shortfall of 272,000 tons in 2006, Goldman Sachs Group Inc. said in a December report.

``The $3,400 level has been a crucial point and that being broken poses further downside risk for the metal,'' Peter Fertig, a commodity analyst with Dresdner Kleinwort in Frankfurt, said today by telephone.

Barclays Capital, the investment bank of Britain's third- largest lender, cut its average 2007 price forecast for the metal to $3,700 a ton, from $4,200, on Jan. 29.

Copper futures fell 10.75 cents, or 4.3 percent, to $2.423 a pound on the New York Mercantile Exchange, the lowest closing price since March 24. Prices have fallen 16 percent this year.

Swelling Inventories

Global stockpiles of the metal are now at the highest level since June 2004, according Bloomberg data. Inventories monitored by the LME rose 16 percent in January, after gaining 18 percent in December. Stockpiles in London are now at the highest level since March 2004.

``The huge tonnage that has entered LME warehouses over the last two months suggests that the market is now running in a substantial physical surplus,'' said John Kemp, a London-based analyst at Sempra Metals, said in an e-mailed note.

Prices have also fallen because slower growth in the U.S., the world's second-biggest consumer behind China, means shrinking demand for the metal used in electronics, cars and air conditioners.

Businesses in the U.S. employed fewer people than forecast, the Labor Department reported in Washington today and manufacturing in the U.S. unexpectedly contracted in January.

The Institute for Supply Management's manufacturing index fell to 49.3, the lowest since April 2003, the private industry group said. Readings less than 50 signal a contraction in production at U.S. factories.

Nickel Rises

Eight of 17 people surveyed yesterday and Jan. 31 forecast copper will fall next week. Five expected a gain and four said little change.

Among other LME-traded metals, nickel was today's only gainer, rising $550, or 1.5 percent, to $37,400 a ton as stockpiles continued to drop, exacerbating supply tightness.

Inventories monitored by the LME shed 144 tons, or 4.3 percent, to 3,222 tons, the lowest since July 1991 and equal to less than one day of global consumption.

Low stockpiles forced buyers to pay $2,775 a ton more for metal for immediate delivery as of yesterday than for metal for delivery in three months. Such premiums are likely to attract sellers of nickel, David Thurtell, an analyst at BNP Paribas in London, said today by phone.

Nickel stockpiles jumped 14 percent in two days from Aug. 22, when the price differential, known as backwardation, peaked at $5,250 a ton.

Aluminum, the most traded metal on the LME, slipped $33 or 1.2 percent, to $2,720 a ton, tin fell $200 to $11,700 a ton, and lead dropped $35 to $1,630 a ton.

 

[theasxgorilla]

Great article Doc.

I wonder what BREND can tell us about this Red Kite situation?

 

[reece55]

Cheers for posting the article Doc......

Those holding ZFX will most likely have a nasty shock on Monday then I suspect, I wonder if the $16 barrier will be broken ........ I noticed that AXA topped up of late too, so it's interesting times ahead.......... I, like ASX Gorilla, would be interested in anyone who could reveal more about Red Kite........ very interesting, the cracks are certainly appearing, first copper now it looks like zinc is in a bit of strife TA wise....... More ahead, only time will tell.....

Cheers

 

[CanOz]

One thing is absolutely certain.....Monday will be a very interesting day.

Cheers,

 

[BREND]

Great article Doc.

I wonder what BREND can tell us about this Red Kite situation?

Already talked about it in the "Zinc" thread.

I have long heard of Red Kite's involvement in copper. They used to buy up 50% of copper inventory at LME warehouse, trying to corner the copper market. Many people suspect they are the ones who have push copper price up from $3000 to $7000 level.

 

[Dr Doom]

Sounds like Red Kite have been left holding the baby, so to speak. Looks like they have been holding a sizable inventory but now as prices have corrected they find themselves having toget rid of their long positions, putting further pressure on the price??.