Marc Faber Sees Further Downside

There's plenty of room for the stock market to decline, noted bear Marc Faber said Thursday on CNBC. "Yes, I see further downside," said the editor of "The Gloom Boom & Doom Report."

However, Faber said that there were plenty of reasons for stocks to head lower other than what the Federal Reserve was doing in terms of quantitative easing. "I think the markets are worried about something else," he said on "Fast Money."

Faber noted that interest rates have been rising for a year, pointing to the 30-year U.S. Treasury bond and the 10-year U.S. Treasury note bottoming out in July. "So, we've been in an uptrend in interest rates," he added. But that wasn't the whole bear case. "The Chinese economy is much weaker than the official statistics suggest," Faber said.

"My view would be that at the present time, the Chinese economy is growing at something like 4 percent per annum, and without huge credit expansion there would probably be no growth at all."

Other emerging market economies were also poised for poor growth, he added. The outlook for gold and other metals were not great, either.

"Technically, commodities look horrible," Faber said, adding that for precious metals "some technical factiors would suggest that we're approaching at least an intermediate low." Read more >>

Google plans 'wireless balloons' to spread the Internet

Google aims to help wire the world by bringing the Internet to a billion or more new people, including small villages and cities outside of major urban areas in Southeast Asia and sub-Saharan Africa -- using special balloons to broadcast the wireless connection.

According to The Wall Street Journal, Google plans to team up with local telecommunications firms and equipment providers in the emerging markets to develop the networks, as well as create business models to support them, people familiar with the project said. The networks also could be used to improve Internet speeds in urban centers, the paper reported.

To speed the spread of the Internet in these areas, the company has worked on special blimps, called high-altitude platforms, to broadcast a signal over hundreds of square miles.

Google has also considered helping to create a satellite-based network.

"There's not going to be one technology that will be the silver bullet," meaning that each market will require a unique solution, said one person familiar with Google's plans. Read more >>

Marc Faber, aka Dr. Doom, says there’s nowhere to hide from Bubblegeddon, not even gold

The world is filling up with bubbles, and there’s nowhere to hide, not even in gold, said high-profile market bear Marc Faber, editor and publisher of The Gloom, Boom and Doom Report, on Bloomberg “Surveillance” on Wednesday. The latest bubble is U.S. stocks, which have been testing record highs lately.

“I was relatively positive about U.S. stocks since March 2009,” Faber said. “I haven’t any short positions. I haven’t been shorting any stocks since 2009. But the U.S. marches up , consumer confidence marches down, and emerging markets are performing badly relative to the U.S. The dollar is strong indicating a tightening of international liquidity. And so I don’t think that the U.S. market will go up a lot from here I rather think that there’s now considerable downside risk.”

But what about gold? Why isn’t that holding up as a safe haven? Faber was asked.  He argued that the money central banks are printing  isn’t flowing evenly into the economies they are trying to help. Instead, it’s  just causing more bubbles like the tech bubble in 2000, housing prices up to 2007, commodities in 2008, and most recently select emerging market stocks indexes and the U.S. Read more >>

World Bank chief warns no region immune to Europe crisis

World Bank President Jim Yong Kim on Wednesday warned that most regions of the world will be hurt by the debt crisis enveloping the euro zone and said it was vital to protect the strong economic gains of the past decade in the developing world.

In his first public speech since taking the helm of the World Bank on July 1, Kim said even if the euro zone crisis is contained, it could still reduce growth in most of the world's regions by as much as 1.5 percent. A major crisis in Europe could slash gross domestic product in developing countries by 4 percent or more, enough to trigger a deep global recession, he said.

"Such events threaten many of the recent achievements in the fight against poverty," he said, noting that over the last decade nearly 30 developing countries have grown by 6 percent or more annually.

Outlining challenges for the global poverty-fighting institution, Kim said his priority was to protect development gains from economic risks, such as the euro zone crisis, which has begun to weigh on growth in large emerging economies like China. Read more >>

Investors Position for a Synchronized Global Slowdown

The insufficient job creation, stagnant earnings and alarming long-term unemployment highlighted by May’s disheartening jobs report underscore America’s persistent unemployment crisis. The numbers also speak to a synchronized slowdown that is now taking hold of the global economy — a phenomenon that is being signaled by virtually every other data release out of Europe, the U.S. and emerging countries.

The realization of lower global growth, together with increasing financial instability in some parts of the world (particularly Europe), is an important driver of the recent sharp selloff in equities and other risk assets. It has also turbocharged the collapse in yields on higher quality government bonds, with the 10-year U.S. bond at a record close of 1.46% on Friday (and Germany even lower).

To state the blatantly obvious, the best investor positioning for the last few weeks was an across-the-board defensive, “up in quality” one. The much more difficult (and urgently relevant) question on many people’s mind today is whether this still makes sense — particularly in view of the dramatic valuation moves.  Read more >>

Glaxo Smith Kline to slash 4,000 jobs

BRITAIN’s biggest drugs company, Glaxo Smith Kline, is to axe up to 4,000 more jobs as part of its plans to restructure its workforce and focus increasingly on emerging markets.

The bulk of the cuts will be in America and Europe, and are part of the company’s efforts to shift resources away from low-growth territories into parts of the world with greater scope to expand sales.

Glaxo, which has been headed for nearly two years by chief executive Andrew Witty, employs 99,000 staff across the world and is expected to reveal plans for select cutbacks alongside its annual results this Thursday. This will be combined with a drive to make its research and development arm more cost-efficient.

Although the job losses will not be as severe as those announced last week by its rival Astra Zeneca, they will provide further depressing news for a sector that is fighting to contain costs as it reduces its reliance on big-selling blockbuster drugs, many of whose patents will soon expire.

Last week, Astra revealed it would cut 8,000 jobs. Its chief executive, David Brennan, warned that the company was unlikely to see a rise in sales for five years. More...

Credit Default Swaps Linked to US, UK and Japan Double

David Oakley
Bets rise on rich country bond defaults
The mounting level of debt in the industrialised world is prompting a growing number of investors to use the derivatives market to bet on the chance of rich governments defaulting on bonds.

Public debt and CDS volumesThe volume of activity in sovereign credit default swaps – which measure the cost to insure against bond defaults – linked to the US, UK and Japan have doubled in the past year because of concerns about their public finances.

CDS volumes for Italy, which has one of the highest debt burdens of the developed economies, are now the highest for an individual country, according to the Depository Trust & Clearing Corporation.

In contrast, the outstanding volume of CDS linked to emerging nations such as Russia, Brazil, Ukraine and Indonesia have been flat or fallen in the past 12 months as investors have become less interested in trading the risks of those countries.

In the past, the CDS market for developed countries was sluggish, because few investors saw the need to buy or sell protection against a risk of default that seemed exceedingly remote.

However, rising debt levels and growing political and economic uncertainty have created a more active market, with more investors now seeking insurance. Meanwhile, many banks are prepared to offer protection in exchange for a fee.

This fee has recently jumped, since the cost to insure the debt of developed countries has increased since the summer of last year, while the cost of insuring emerging market debt has fallen.

Gary Jenkins, head of fixed income research at Evolution, said: “The biggest single risk hanging over the bond markets is the rapid rise in public debt in the industrialised world.

“If we get to a point where the market thinks the levels of debt are unsustainable, then we will see an almighty sell-off in the government bond markets, with yields soaring. Governments need to take action to cut deficits and debt.”

Fitch Solutions, the data arm of the Fitch Group, said that there was almost as much uncertainty in the CDS market about the outlook for the developed economies and their bond markets as there was for emerging economies.

Comparisons between Italy and Brazil are often used by strategists as an example of the contrasting fortunes of the developed and emerging world.

Italy’s ratio of debt to gross domestic product is forecast to rise to 127.3 per cent in 2010.

On the other hand, Brazil’s debt-to-GDP ratio is forecast to stabilise at 65.4 per cent in 2010.

Nigel Rendell, senior emerging markets strategist at RBC Capital Markets, said: “It is not surprising that investors are increasingly worried about debt in the industrialised world. Debt to GDP of more than 100 per cent is difficult to sustain.”

CNBC: A New Global Currency and a New World Order

The dollar will get "utterly destroyed" and become "virtually worthless", said Damon Vickers, chief investment officer of Nine Points Capital Partners. Due to the huge wage disparities between the United States and emerging markets like China, Vickers said that may resolve itself in some type of a global currency crisis.

"If the global currency crisis unfolds, then inevitably you get an alignment of a global world government. A new global currency and a new world order, so we may be moving towards that," he said.