"How you play this market depends on your time frame and objectives. If you want to build some exposure in Asia, buy high-quality companies that will survive. In Singapore, that includes Fraser & Neave, United Overseas Bank and OCBC, which is run by an American, David Conner. In Hong Kong, I like Swire Pacific and Sun Hung Kai Properties. Asian banks never understood CDOs [collateralized debt obligations], so they didn’t buy a lot… In Thailand, buy Bangkok Bankand, Glow Energy, and in India, Icici Bank and Infosys Technologies. Banks in Singapore sell for 1.3 times book. In Thailand they are below book and have relatively high dividends. If all these companies drop another 50%, which I wouldn’t rule out, buy more." MARC FABER
These are Marc Faber`s picks for an investment in asian stocks. In Hong Kong he picks two stocks: Swire Pacific and Sun Hung Kai Properties.
31 January, 2009
28 January, 2009
Faber on Big US Tech Stocks
Marc Faber, who normally favors foreign stocks and commodities is bullish on US tech companies:
"Recently I bought some U.S. stocks for the first time in a long time. If you buy Intel (INTC), Cisco (CSCO), Yahoo (YHOO), Oracle (ORCL) and Microsoft (MSFT), you will do much better in the next 10 years than you would with Treasuries. These stocks will double and even triple - before going to zero." MARC FABER
I got a little thrown by the “before going to zero” bit, so I checked in with my colleague Lauren Rublin, who edits the Roundtable, who explained that he was kidding about that part. As Lauren explains, Faber is “really, really bearish long-term about stocks,” but he nonetheless has affection for large-cap tech. There’s some other good stuff in the Roundtable this week; you should read the whole thing. in Barrons`s Blog
"Recently I bought some U.S. stocks for the first time in a long time. If you buy Intel (INTC), Cisco (CSCO), Yahoo (YHOO), Oracle (ORCL) and Microsoft (MSFT), you will do much better in the next 10 years than you would with Treasuries. These stocks will double and even triple - before going to zero." MARC FABER
I got a little thrown by the “before going to zero” bit, so I checked in with my colleague Lauren Rublin, who edits the Roundtable, who explained that he was kidding about that part. As Lauren explains, Faber is “really, really bearish long-term about stocks,” but he nonetheless has affection for large-cap tech. There’s some other good stuff in the Roundtable this week; you should read the whole thing. in Barrons`s Blog
25 January, 2009
Marc Faber Comments on Barron`s Roundtable
This is Marc Faber`s comments on the Barron`s Roundtable:
I'm not optimistic about the global economy. The next Madoff case - the next Ponzi scheme - is the U.S. government. It will go bust. It is only a question of time.
ICICI Bank (IBN) and Infosys Technologies (INFY) - Asians might go to casinos and gamble, but in their businesses they are ultra-conservative.
Alcoa (AA), Rio Tinto (RTP), BHP Billiton (BHP), Vale (RIO), Xstrata (XSRAF.PK), Freeport-McMoRan (FCX) - when volatility diminishes, you want to be in cyclical industries. The financial crisis and collapse in commodities prices will keep supplies out of the market, setting up an explosion at some point.
Morgan Stanley India Investment Fund (IIF), iShares MSCI Brazil Index ETF (EWZ), Templeton Russia & Eastern Europe Fund CEF (TRF), Greater China Fund (GCH) iShares Trust FTSE-Xinhua China 25 Index Fund (FXI), and Turkish Investment Fund (TKF) - "in a recovery driven by easy money, zero interest rates and fiscal deficits, emerging markets - the most cyclical part of the global economy - can rebound." Sees 50% upside.
ProShares UltraShort Lehman 20+ Year Treasury ETF (TBT) - the U.S. Treasury market is the short of the century. Could take two years to work out.
Nicholas-Applegate Convertible & Income Fund (NCV) - junk and convertible bonds could rally substantially, led by government buys and copycat private investors.
Intel (INTC), Cisco Systems (CSCO), Yahoo (YHOO), Oracle (ORCL) and Microsoft (MSFT) - will double and even triple before going to zero. You'll do much better with them than with Treasurys.
I'm not optimistic about the global economy. The next Madoff case - the next Ponzi scheme - is the U.S. government. It will go bust. It is only a question of time.
ICICI Bank (IBN) and Infosys Technologies (INFY) - Asians might go to casinos and gamble, but in their businesses they are ultra-conservative.
Alcoa (AA), Rio Tinto (RTP), BHP Billiton (BHP), Vale (RIO), Xstrata (XSRAF.PK), Freeport-McMoRan (FCX) - when volatility diminishes, you want to be in cyclical industries. The financial crisis and collapse in commodities prices will keep supplies out of the market, setting up an explosion at some point.
Morgan Stanley India Investment Fund (IIF), iShares MSCI Brazil Index ETF (EWZ), Templeton Russia & Eastern Europe Fund CEF (TRF), Greater China Fund (GCH) iShares Trust FTSE-Xinhua China 25 Index Fund (FXI), and Turkish Investment Fund (TKF) - "in a recovery driven by easy money, zero interest rates and fiscal deficits, emerging markets - the most cyclical part of the global economy - can rebound." Sees 50% upside.
ProShares UltraShort Lehman 20+ Year Treasury ETF (TBT) - the U.S. Treasury market is the short of the century. Could take two years to work out.
Nicholas-Applegate Convertible & Income Fund (NCV) - junk and convertible bonds could rally substantially, led by government buys and copycat private investors.
Intel (INTC), Cisco Systems (CSCO), Yahoo (YHOO), Oracle (ORCL) and Microsoft (MSFT) - will double and even triple before going to zero. You'll do much better with them than with Treasurys.
24 January, 2009
Gloom Doom and Gloom
Marc Faber is the editor of the famous newsletter Gloom, Doom and Boom. In Marc Faber words,
"The Gloom Boom & Doom Report is an in depth economic and financial publication, which highlights unusual investment opportunities around the world.
The guiding philosophy is that, as Horace already observed, "many shall be restored that are now fallen and many shall fall that are now in honor."
The Gloom Boom & Doom report aims, based on economic, social and historical trends, to warn investors when investment themes have become widely accepted and are, therefore, highly priced and risky, while it continuously searches for opportunities in unloved and depressed markets.
Subscribers to the GBD report are usually institutional investors, corporations or high net worth individuals, who are in a position to invest internationally and in all asset classes including bonds, equities, commodities and real estate, and have the necessary account facilities in place to do so."
Marc Faber is one of the most respected and followed international investors. Find out which stocks is Faber recommending, which commodities futures we should buy or sell and what to do in the hyperactive FOREX markets.
"The Gloom Boom & Doom Report is an in depth economic and financial publication, which highlights unusual investment opportunities around the world.
The guiding philosophy is that, as Horace already observed, "many shall be restored that are now fallen and many shall fall that are now in honor."
The Gloom Boom & Doom report aims, based on economic, social and historical trends, to warn investors when investment themes have become widely accepted and are, therefore, highly priced and risky, while it continuously searches for opportunities in unloved and depressed markets.
Subscribers to the GBD report are usually institutional investors, corporations or high net worth individuals, who are in a position to invest internationally and in all asset classes including bonds, equities, commodities and real estate, and have the necessary account facilities in place to do so."
Marc Faber is one of the most respected and followed international investors. Find out which stocks is Faber recommending, which commodities futures we should buy or sell and what to do in the hyperactive FOREX markets.
20 January, 2009
Skeptical about Government action to sort this Crisis
“Specifically central banks, or specifically the US Fed, by keeping interest rates artificially low for too long, they created a huge leverage in the system. So the people who created the problem now are in charge to bail out the system and that’s why I am very skeptical that it would work” MARC FABER
FAber is very skeptical about government action to sort this crisis.
FAber is very skeptical about government action to sort this crisis.
19 January, 2009
Marc Faber Latest Interview: 19th January
Marc Faber commented the world events and here are the highlights:
CREDIT MARKETS
- credit markets have improved somewhat;
- Government Bonds will be downgraded in 2009 or 2010;
- LQD, the corporate bonds US ETF dropped to 75 and then made a huge rally to over 100; corporate bonds have already rallied;
STOCKS
- S&P 500 has rallied from 741 to 943 and then corrected somewhat; might rally some more in the next couple of months;
- Second Half of 2009 (2H09): May be even worse than the first half; people hope it will be better; Stocks may be under pressure;
- At 800-850 the S&P 500 is not unexpensive;
WHERE TO FIND VALUE?
- Japan stock market is trading at the 1981 level;
- South Korea and Taiwan are trading at 1987 levels;
- Look for value in Asia;
- Dividends Yields in Asia are 3 to 4 times higher than Bond Yields;
COMMODITIES
- Oversold markets, and major lows in commodities prices;
- When the economy recovers, commodities will rally strongly because new supply has all but stopped;
BONDS
- Who will buy a 30 Year Government Bond with a less than 3% Yield?
- I see no deflation in Consumer Prices, only in Asset Prices;
WHAT TO BUY
- dollar may continue to strenghen;
- Markets may rally a bit further;
- Asian Stocks;
Track Marc Faber investment decisions, stock picking and trading here on the Marc Faber Blog. Links to the full video interviews by Marc Faber:
VIDEO INTERVIEW 1
VIDEO INTERVIEW 2
CREDIT MARKETS
- credit markets have improved somewhat;
- Government Bonds will be downgraded in 2009 or 2010;
- LQD, the corporate bonds US ETF dropped to 75 and then made a huge rally to over 100; corporate bonds have already rallied;
STOCKS
- S&P 500 has rallied from 741 to 943 and then corrected somewhat; might rally some more in the next couple of months;
- Second Half of 2009 (2H09): May be even worse than the first half; people hope it will be better; Stocks may be under pressure;
- At 800-850 the S&P 500 is not unexpensive;
WHERE TO FIND VALUE?
- Japan stock market is trading at the 1981 level;
- South Korea and Taiwan are trading at 1987 levels;
- Look for value in Asia;
- Dividends Yields in Asia are 3 to 4 times higher than Bond Yields;
COMMODITIES
- Oversold markets, and major lows in commodities prices;
- When the economy recovers, commodities will rally strongly because new supply has all but stopped;
BONDS
- Who will buy a 30 Year Government Bond with a less than 3% Yield?
- I see no deflation in Consumer Prices, only in Asset Prices;
WHAT TO BUY
- dollar may continue to strenghen;
- Markets may rally a bit further;
- Asian Stocks;
Track Marc Faber investment decisions, stock picking and trading here on the Marc Faber Blog. Links to the full video interviews by Marc Faber:
VIDEO INTERVIEW 1
VIDEO INTERVIEW 2
17 January, 2009
Marc Faber Interview
Q: How have you read the big rally that came into many global equity markets in early parts of January and do you think that’s now coming apart?
A: We were oversold when the S&P in the US reached 741 on November 21. We had a rally of around 25% and some markets rallied even more. We can still rally a bit more because there is a huge liquidity injection into the market by all the Central Banks around the world. But in general I feel it’s a bear market rally and that after this rally we will test the lows or exceed the lows again…
Q: In this kind of an environment since both those commodities have turned quite volatile crude and gold how would you map them for this year?
A: I do not think that gold will rise a lot in the near future because compared to the CRB (Commodity Research Bureau), a broad index of commodities gold is very overvalued as compared to nickel, copper and oil. In the near-term, industrial commodities which are more oversold than the stock market two months ago could rally somewhat. I would position myself as a trader in some commodities.
Q: You had mentioned earlier that you expect to see global markets go back to the lows we saw last year. Would you say there is a fear of overshooting that target and markets might actually see lows lower than what we saw in October?
A: Yes, I think that’s absolutely possible and likely. The global economy is in deep trouble. The big question is we are in depression but is this depression is going to be inflationary or deflationary? In both cases the markets will not perform particularly well because in a deflationary depression all asset prices will continue to go down. In an inflationary depression interest rates will go up and so on the both assumption equity prices are not particularly inexpensive.
Marc Faber is one of the most respected and followed international investors. Find out which stocks is Faber recommending, which commodities futures we should buy or sell and what to do in the hyperactive FOREX markets.
A: We were oversold when the S&P in the US reached 741 on November 21. We had a rally of around 25% and some markets rallied even more. We can still rally a bit more because there is a huge liquidity injection into the market by all the Central Banks around the world. But in general I feel it’s a bear market rally and that after this rally we will test the lows or exceed the lows again…
Q: In this kind of an environment since both those commodities have turned quite volatile crude and gold how would you map them for this year?
A: I do not think that gold will rise a lot in the near future because compared to the CRB (Commodity Research Bureau), a broad index of commodities gold is very overvalued as compared to nickel, copper and oil. In the near-term, industrial commodities which are more oversold than the stock market two months ago could rally somewhat. I would position myself as a trader in some commodities.
Q: You had mentioned earlier that you expect to see global markets go back to the lows we saw last year. Would you say there is a fear of overshooting that target and markets might actually see lows lower than what we saw in October?
A: Yes, I think that’s absolutely possible and likely. The global economy is in deep trouble. The big question is we are in depression but is this depression is going to be inflationary or deflationary? In both cases the markets will not perform particularly well because in a deflationary depression all asset prices will continue to go down. In an inflationary depression interest rates will go up and so on the both assumption equity prices are not particularly inexpensive.
Marc Faber is one of the most respected and followed international investors. Find out which stocks is Faber recommending, which commodities futures we should buy or sell and what to do in the hyperactive FOREX markets.
13 January, 2009
Marc Faber: It might be Far Worse
"I am far from certain that US equities, which have declined by about 50% from their highs, are such a a bargain. Valuations are far from where they werea at major market lows such as in 1932, 1974, and 1982. Moreover, economic conditions may turn out to be far worse than in previous recessions, including the Great Depression at the beginning of the 1930s. Everybody seems to think that, thanks to the government’s monetary and fiscal interventions, this recession will come nowhere near the 1930s slump. However, I think it might be far worse – and precisely because of the interventions." MARC FABER IN the DOOM BOOM and GLOOM Report
One of the most interesting parts of Dr. Faber latest Doom, Boom and Gloom Report.
"The S&P 500, adjusted for inflation, is at its highest level ever, save for the 1995-2007 period. By contrast, at the market bottom in 1974, the S&P, adjusted for inflation, was lower than it was in 1906. In 1974, the market cap of all stocks was 31% of GDP versus 100% now, and the Dow yielded 6% and was at a marked discount to book value. The 1974 rally, while powerful, ended in 1976. Stocks resumed their fall and hit their inflation adjusted low in 1982." MARC FABER
Marc Faber is one of the most respected and followed international investors. Find out which stocks is Faber recommending, which commodities futures we should buy or sell and what to do in the hyperactive FOREX markets.
One of the most interesting parts of Dr. Faber latest Doom, Boom and Gloom Report.
"The S&P 500, adjusted for inflation, is at its highest level ever, save for the 1995-2007 period. By contrast, at the market bottom in 1974, the S&P, adjusted for inflation, was lower than it was in 1906. In 1974, the market cap of all stocks was 31% of GDP versus 100% now, and the Dow yielded 6% and was at a marked discount to book value. The 1974 rally, while powerful, ended in 1976. Stocks resumed their fall and hit their inflation adjusted low in 1982." MARC FABER
Marc Faber is one of the most respected and followed international investors. Find out which stocks is Faber recommending, which commodities futures we should buy or sell and what to do in the hyperactive FOREX markets.
09 January, 2009
Bloomberg Video Interview: 8th January
VIDEO 1
VIDEO 2
Watch Marc Faber latest videos here on the Marc Faber`s Blog. The Doom, Gloom and Boom Report editor predicts higher oil prices ahead.
"The trade of 2009 is to short US Treasuries big time", and "Russia can be bought via an ETF" were two of the most interesting ideas of this interview. "When there is a disaster it leads to opportunities (BRIC Countries)"
Marc Faber is one of the most respected and followed international investors. Find out which stocks is Faber recommending, which commodities futures we should buy or sell and what to do in the hyperactive FOREX markets.
VIDEO 2
Watch Marc Faber latest videos here on the Marc Faber`s Blog. The Doom, Gloom and Boom Report editor predicts higher oil prices ahead.
"The trade of 2009 is to short US Treasuries big time", and "Russia can be bought via an ETF" were two of the most interesting ideas of this interview. "When there is a disaster it leads to opportunities (BRIC Countries)"
Marc Faber is one of the most respected and followed international investors. Find out which stocks is Faber recommending, which commodities futures we should buy or sell and what to do in the hyperactive FOREX markets.
Faber: Oil, Copper and Nickel
"I do not think that gold will rise a lot in the near future because compared to the CRB, a broad index of commodities gold is very overvalued as compared to nickel, copper and oil. In the near-term, industrial commodities which are more oversold than the stock market two months ago could rally somewhat. I would position myself as a trader in some commodities." MARC FABER
Dr. Faber gave this interview to CNBC India this morning. He had told Bloomberg yesterday that Gold was expensive relative to other commodities. In Marc Faber`s Blog you can read about ehat Dr. Doom is buying and selling and Dr. Faber`s outlook on the economy, commodities and equity markets.
If you want to win in the markets managing your own money, you will learn a lot from an experienced investor like Marc Faber. Marc Faber is one of the most respected and followed international investors. Find out which stocks is Faber recommending, which commodities futures we should buy or sell and what to do in the hyperactive FOREX markets.
Dr. Faber gave this interview to CNBC India this morning. He had told Bloomberg yesterday that Gold was expensive relative to other commodities. In Marc Faber`s Blog you can read about ehat Dr. Doom is buying and selling and Dr. Faber`s outlook on the economy, commodities and equity markets.
If you want to win in the markets managing your own money, you will learn a lot from an experienced investor like Marc Faber. Marc Faber is one of the most respected and followed international investors. Find out which stocks is Faber recommending, which commodities futures we should buy or sell and what to do in the hyperactive FOREX markets.
BRIC Countries may Rebound Nicely
BRIC (Brazil, Russia, India, China)
"Prices are now down to attractive levels as an entry-point, as a trading opportunity, like the metal stocks I mentioned. So, I think I would buy these BRIC countries for a rebound, looking for a rebound of around 30% from the present level." MARC FABER
Faber sees a trading opportunity in same stock markets around the globe. Jim Rogers has been very bullish on China and Taiwan for a long time now, and recently added to his positions.
"Prices are now down to attractive levels as an entry-point, as a trading opportunity, like the metal stocks I mentioned. So, I think I would buy these BRIC countries for a rebound, looking for a rebound of around 30% from the present level." MARC FABER
Faber sees a trading opportunity in same stock markets around the globe. Jim Rogers has been very bullish on China and Taiwan for a long time now, and recently added to his positions.
08 January, 2009
Faber on Oil
"I would say, the long-term demand for oil is there. The supply won’t be there. So, long-term, I think the price will be much higher than it is today." MARC FABER
Marc Faber on Gold and Industrial Commodities
Gold is now very expensive compared to industrial commodities. Actually, it’s at the highest level in 30 years or more. And so right now, as of today, I would rather buy a basket of oversold industrial commodities.
Marc Faber has been bullish on gold for a very long time, but sees relative value elsewhere.
Marc Faber has been bullish on gold for a very long time, but sees relative value elsewhere.
07 January, 2009
Faber on the Economy
"Well, economically it will be very bad. We have a contracting economy, globally, everywhere. And, I mean, not mildly contracting, but falling off a cliff. However, after this fall off of a cliff, the news in the next 3 months could look somewhat better than expected. In other words, there could be some rebound from the lows in economic activity." MARC FABER
Marc Faber is one most regarded economists and investors in the world. Follow all his economic projections and investments on this website.
U.S. Economic “Stimulus” Proposals
"Well, it may help a little bit, temporarily. But in the long run, it’s a disaster. Any government intervention into the economy is basically bad, in particular, an intervention that is designed to support prices. The Federal Reserve, and the Treasury, both actually want to support asset prices. Most cartels that have been designed to support prices eventually broke down and prices collapsed." MARC FABER
Marc Faber is one most regarded economists and investors in the world. Follow all his economic projections and investments on this website.
U.S. Economic “Stimulus” Proposals
"Well, it may help a little bit, temporarily. But in the long run, it’s a disaster. Any government intervention into the economy is basically bad, in particular, an intervention that is designed to support prices. The Federal Reserve, and the Treasury, both actually want to support asset prices. Most cartels that have been designed to support prices eventually broke down and prices collapsed." MARC FABER
Marc Faber favors Industrial Commodities
“Right now, as of today, I would rather buy a basket of oversold industrial commodities than gold" Marc Faber
06 January, 2009
Marc Faber Video Interview
MARC FABER LATEST VIDEO INTERVIEW
In his latest video interview Marc Faber talks to Bloomberg Television about the markets, commodities and the recession.
In this interview Marc makes some very interesting quotes like: "World War III has already began" and "Yahoo will eventually be taken out" and "Asian stocks are very attractive"
In his latest video interview Marc Faber talks to Bloomberg Television about the markets, commodities and the recession.
In this interview Marc makes some very interesting quotes like: "World War III has already began" and "Yahoo will eventually be taken out" and "Asian stocks are very attractive"
A Trade War
“It’s to some extent a trade war,” said Marc Faber, publisher of the Gloom, Boom & Doom Report.
“You cheapen your currency so you export problems to somebody else, but since the whole world is engaged in trying to lower the value of their currencies, it may very well happen that all currencies lose value against the hot currencies like precious metals.”
“You cheapen your currency so you export problems to somebody else, but since the whole world is engaged in trying to lower the value of their currencies, it may very well happen that all currencies lose value against the hot currencies like precious metals.”
05 January, 2009
Faber expects precious metals such as gold, silver and platinum to outperform assets such as equities and bonds in 2009
"Around the turn of each year forecasts are made for the following year. I find making predictions amidst so much government interventions to be particularly difficult" Marc Faber
According to him, the additional printing of money across economies for financing such stimulus packages would lead to "higher and higher fiscal imbalances". In such a scenario, Faber expects precious metals such as gold, silver and platinum to outperform assets such as equities and bonds in 2009.
"I need to confess that I have no idea where the S&P 500 will be in a year's time, but given the catastrophic economic conditions we find ourselves in, I am convinced that governments around the world will increase the intensity with which they will attempt to save the world with monetary and fiscal measures," he said.
Faber feels that geopolitical risks will be a factor impacting asset prices this year. In Marc Faber`s Blog you can track all Marc`s activity, ideas and thoughts on the markets and world economic conditions.
According to him, the additional printing of money across economies for financing such stimulus packages would lead to "higher and higher fiscal imbalances". In such a scenario, Faber expects precious metals such as gold, silver and platinum to outperform assets such as equities and bonds in 2009.
"I need to confess that I have no idea where the S&P 500 will be in a year's time, but given the catastrophic economic conditions we find ourselves in, I am convinced that governments around the world will increase the intensity with which they will attempt to save the world with monetary and fiscal measures," he said.
Faber feels that geopolitical risks will be a factor impacting asset prices this year. In Marc Faber`s Blog you can track all Marc`s activity, ideas and thoughts on the markets and world economic conditions.
04 January, 2009
The Treasury Market Bubble
Marc Faber has recently said that shorting Treasuries would be the best trade of 2009. This weekend Barron`s published this fine article about the Bond Bubble:
"THE BIGGEST INVESTMENT BUBBLE TODAY may involve one of the safest asset classes: U.S. Treasuries. Yields have plunged to some of the lowest levels since the 1940s as investors, fearful of a sustained global economic downturn and potential deflation, have rushed to purchase government-issued debt.
The market also has been supported by comments from the Federal Reserve that it, too, may buy long-term Treasuries. As a result, the benchmark 10-year Treasury note yields just 2.40%, down from 3.85% as recently as mid-November. The 30-year T-bond stands at 2.82%, and three-month Treasury bills were sold last week for a yield of just 0.05%. Many investors argue it's dangerous to buy Treasuries with such low yields. While a holder can expect to get repaid in full at maturity, the price of longer-term Treasuries could fall sharply in the interim if yields rise. The 30-year T-bond, for instance, would drop 25% in price if its yield rose to 4.35%, where it stood as recently as Nov. 13. The bear market may have begun Wednesday, when prices of 30-year Treasuries fell 3%. They lost another 3% Friday. - "Get out of Treasuries. They are very, very expensive," Mohamed El-Erian, chief investment officer of Pacific Investment Management Co., warned recently. Pimco runs the country's largest bond fund, Pimco Total Return (ticker: PTTPX)." in Barron`s Online
The best way to short treasuries is to sell ZB Futures. ZB Futures are the futures on the Long Term Government Bond (30 Years) traded on CBOT.
"Treasuries offer little or no margin of safety if the economy unexpectedly strengthens in 2009, or the dollar weakens significantly, or inflation shows signs of reaccelerating. Yields on 30-year Treasuries easily could top 4% by year end." in Barron`s Online
Full Article: HERE.
"THE BIGGEST INVESTMENT BUBBLE TODAY may involve one of the safest asset classes: U.S. Treasuries. Yields have plunged to some of the lowest levels since the 1940s as investors, fearful of a sustained global economic downturn and potential deflation, have rushed to purchase government-issued debt.
The market also has been supported by comments from the Federal Reserve that it, too, may buy long-term Treasuries. As a result, the benchmark 10-year Treasury note yields just 2.40%, down from 3.85% as recently as mid-November. The 30-year T-bond stands at 2.82%, and three-month Treasury bills were sold last week for a yield of just 0.05%. Many investors argue it's dangerous to buy Treasuries with such low yields. While a holder can expect to get repaid in full at maturity, the price of longer-term Treasuries could fall sharply in the interim if yields rise. The 30-year T-bond, for instance, would drop 25% in price if its yield rose to 4.35%, where it stood as recently as Nov. 13. The bear market may have begun Wednesday, when prices of 30-year Treasuries fell 3%. They lost another 3% Friday. - "Get out of Treasuries. They are very, very expensive," Mohamed El-Erian, chief investment officer of Pacific Investment Management Co., warned recently. Pimco runs the country's largest bond fund, Pimco Total Return (ticker: PTTPX)." in Barron`s Online
The best way to short treasuries is to sell ZB Futures. ZB Futures are the futures on the Long Term Government Bond (30 Years) traded on CBOT.
"Treasuries offer little or no margin of safety if the economy unexpectedly strengthens in 2009, or the dollar weakens significantly, or inflation shows signs of reaccelerating. Yields on 30-year Treasuries easily could top 4% by year end." in Barron`s Online
Full Article: HERE.
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