Global assets poised for a ``Severe Correction''

Alert Focus: Mammon / The Third Seal James 5:3 Your gold and your silver have rusted; and their rust will be a witness against you and will consume your flesh like fire. It is in the last days that you have stored up your treasure! Global Markets Face `Severe Correction,' Faber Says BLOOMBERG - By Ian C. Sayson and Pimm Fox - January 8, 2007 -- 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,'' Faber said in an interview with Bloomberg Television 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.'' 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 company manages about $300 million in assets. The bullish outlook of traders in everything from bonds, equities and commodities to real estate and art suggests valuations are peaking, Faber said. Last year, the Morgan Stanley Capital International World Index of developed stock markets jumped 18 percent, 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. ``I am not a great buyer of assets now,'' 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.'' Faber, publisher of the Gloom, Boom & Doom Report, does have some favorites. 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.'' … http://www.bloomberg.com/apps/news?pid=20601087&sid=afYGFBA.L8PQ&refer=home Stocks: The Chinese Correction? S&P says charts for a fund that tracks a key Chinese index look "downright scary", and it could be due for a major pullback STANDARD & POOR'S EQUITY RESEARCH - by Mark Arbeter - January 8, 2007 -- While our technical focus tends to be on the U.S. stock market -- with some analysis of the the UK's FTSE and Germany's DAX indexes -- investor fund flows have been heavily weighted towards overseas stock markets. Investment dollars tend to migrate to better returning assets, and, in this case, much more risky assets, in our view. It seems like any stock from China is a no-lose investment. The view of some speculators appears to be "just keep throwing money at the Chinese momentum, and you're on our way to quick riches." It kind of reminds you of the dot.com days. Our warning: Don't be the last one out the door. The iShares FTSE/Xinhua China 25 Index Fund (FXI), an exchange-traded fund (ETF), is designed to mimic the index it is named after. The FTSE/Xinhua is designed to represent the performance of the largest companies in the China equity market that are available to international investors. The index is made up of 25 of the largest and most liquid Chinese companies, and as of Jan. 3, financials were the largest sector representing almost 43% of the fund. Telecommunications is about 19% of the fund, followed by 16% for oil & gas, 11% industrials, and 9% for basic materials. The ETF first started trading in March, 2005. We have two major concerns about the FXI, and similar overseas investments. Number one, the chart has gone asymptotic and trading volume has exploded. The second is less scientific and more of an educated guess. And that is, we doubt investors really know anything about the companies in the fund, other than that they are based in China. The saving grace may be that these are large companies with a track record and not a '90's Internet company with zero revenues and no track record. The chart of the FXI is downright scary, in our view, and due for a major correction. The ETF bottomed out at 66 on June 13, 2006, and as of the close on January 3, 2007, has soared a remarkable 76% in less than 7 months. More incredibly, the FXI has spiked over 26% since November 28, and 13.5% since December 21. Can you say "mass speculation"? Since the last major low in June, 2006, the slope of the advance has changed four different times, getting steeper every time. Trading volume has exploded in the first trading days of 2007, running almost three times that of average daily volume. This is very typical of a speculative blowoff, and many times, they end badly. Daily momentum is extremely overbought, and has traced out negative divergences. As of January 3, the ETF was an incredible 39% above its 200-day exponential moving average. The cycle of market emotions has gone from optimism to euphoria very quickly. Unfortunately, it is likely to reverse to fear then panic, in our opinion. How this all plays out for the U.S. market is difficult to say, but it is not healthy and screams of an intermediate-term top, in our view. … [More] http://www.businessweek.com/investor/content/jan2007/pi20070108_578184.htm?campaign_id=rss_topEmailedStories US-China trade deficit at all-time high FINANCIALTIMES of LONDON - By Richard McGregor in Beijing and Eoin Callan in Washington - January 11, 2007 -- China’s trade surplus reached $177.5bn (£118.7bn) last year, 74 per cent higher than in 2005, a rise that will intensify pressure on Beijing further to open its markets and accelerate the revaluation of its currency. The growth in the surplus reported by China’s customs agency – up from $102bn in 2005 and $32bn in 2004 – has been driven by continued strength in exports, up 27 per cent year on year, and relatively weaker imports growth of 20 per cent. The bilateral deficit with the US is even higher according to Washington’s measure, reaching an all-time high of $214bn in the 11 months to November. The gap between Beijing’s and Washington’s measure of the value of their bilateral trade is explained in large part by the US classification of value-added exports from Hong Kong as Chinese. The renminbi, China’s currency, has risen by about 6 per cent since it was formally decoupled from its US dollar peg in June 2005, and it is expected to continue its gradual rise this year. However, with China’s labour costs remaining low and productivity in many industries rising, few economists expect the stronger renminbi to have any substantial impact on the trade surplus. The widening trade gap with China will increase the pressure on Hank Paulson, US Treasury secretary, to persuade Beijing to allow its currency to appreciate. There is mounting impatience in Washington, where members of the newly elected Congress are proposing legislative action. Max Baucus, chairman of the Senate finance committee, is expected to introduce legislation to lower the burden of proof for China to be accused of “currency manipulation” by the US Treasury. In the House of Representatives, Sander Levin, head of the trade subcommittee, will introduce a controversial bill to prompt the use of anti-subsidy laws against non-market economies such as China. http://www.ft.com/cms/s/c14d05c4-a0b3-11db-acff-0000779e2340.html Venezuelan currency dives as Chávez plots nationalization THE TIMES of LONDON - By Nick Hasell and Elizabeth Judge - January 10, 2007 -- Venezuela’s stock market tumbled almost 19 per cent and its currency lost a third of its value in unofficial trading as investors took fright at President Chávez’s plans to nationalise utilities as part of his “Socialist revolution”. The benchmark IBC index of the Caracas stock exchange plunged 11,574 to 50,439, dragged down by the shares of the power and telephone companies of which the Government intends to seize control. American depositary receipts of CANTV, the telecoms carrier that is the only Venezuelan company traded on the New York Stock Exchange, fell by as much as 43 per cent. In Caracas, the company closed down 30.3 per cent and shares were suspended until Friday…. The knock-on effects were felt in Mexico, where the IPC index dropped 2.3 per cent on selling of telecoms stocks owned by Carlos Slim. The Mexican billionaire is in the process of buying the 28.5 per cent stake in CANTV owned by Verizon Communications, the American telecoms operator. The stake is one of three Latin American assets Verizon was preparing to sell to Mr Slim for an expected $3.7 billion (£1.9 billion). The White House swiftly attacked Mr Chávez’s nationalisation pledge and insisted that any American companies affected must be compensated. … http://www.timesonline.co.uk/article/0%2C%2C5-2539704%2C00.html#cid=OTC-RSS&attr=Business Mugabe poised to take over goldmines LONDON DAILY TELEGRAPH - Peta Thornycroft in Johannesburg - January 11, 2007 -- ABOUT 20,000 miners have been arrested in police raids across Zimbabwe. Their detention, in one of the largest police actions in the country's recent history, has left thousands of families without any support at a time of rampant inflation and a desperate shortage of maize meal, the staple food. President Robert Mugabe's Government said it has detained more than 19,000 "illegal" miners in recent weeks, giving rise to speculation that Mr Mugabe intends to nationalise the mining sector six years after he precipitated the collapse of the economy by seizing 90 per cent of white-owned farms. Last year, he said he would take at least 51 per cent of all mines without offering compensation. Many of those arrested are legally registered with the Ministry of Mines, but the Government has claimed it is detaining illegal gold panners who are selling ore on the black market. … http://www.smh.com.au/news/world/mugabe-poised-to-take-over-goldmines/2007/01/10/1168105052143.html Euro begins 2007 in record mood AGENCE FRANCE PRESSE - January 2, 2007 -- The euro struck a near three-week high against the dollar and all-time peaks against the yen and Swiss franc in European trade. The Tokyo and Singapore markets remained closed for New Year celebrations Tuesday, while US trading was put on hold to allow Americans to mark the recent passing of former president Gerald Ford. The euro hit as high as 1.3288 dollars in early European exchanges on Tuesday, the highest point since December 13, 2006…. Analysts believe the principal driver of the foreign exchange market last year had been differences in interest rates across economic zones. Interest rates in the US have been held steady since last August at 5.25 percent, giving momentum to the European currency in recent months, while recent data in Japan has dampened expectations of another rate hike there. The euro is meanwhile now being used by 13 countries after Slovenia became on Monday the first former communist state to join the European Union's common currency. Slovenia's adoption of the euro comes five years after euro bills and coins were introduced, almost three years after Slovenia acceded to the EU, and 15 years after Slovenia declared independence from the former Yugoslavia. The euro replaces the tolar, a currency introduced in 1991 as a symbol of the tiny country's independence and an instrument aimed at cutting Belgrade's monetary control over the Slovenian economy. … http://www.breitbart.com/news/2007/01/02/070102120240.tvog769g.html Planned Destruction of the Middle Class Study finds home prices are beyond reach of many workers REUTERS - By Andrew Stern, Reuters - January 10, 2007 -- CHICAGO -- U.S. home prices may have dipped over the past year, but many American workers still struggle to afford a median-priced home in major cities, a new study said Wednesday. "American workers are really not gaining ground and they're so far behind in the first place," said Barbara Lipman, research director for the non-profit Center for Housing Policy, which conducted the study. While the median home price in the 202 largest metropolitan areas declined 2% in third quarter 2006 to $248,000 from a year ago, mortgage rates rose enough over the year that homes actually became less affordable as pay did not keep pace. "The real story is what happened to salaries," Lipman said. "Lower-paid occupations — such as in retail, or home health workers — their salaries went up only about 3%." …http://www.usatoday.com/money/economy/housing/2007-01-10-housingaffordability_x.htm?csp=34 FAIR USE NOTICE: This blog contains copyrighted material the use of which has not always been specifically authorized by the copyright owner. We are making such material available in our efforts to advance understanding of religious, environmental, political, human rights, economic, democracy, scientific, and social justice issues, etc. We believe this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. 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