Jim Rogers: Shanghai And Hong Kong Real Estate Should Decline

Shanghai and Hong Kong property prices may fall after being driven higher by speculative demand, said investor Jim Rogers today in a Bloomberg video interview.

According to Jim Rogers efforts to restrain lending underscore the government’s attempt to take “some of the heat out of the economy”. But he underlined that the rest of the Chinese economy inclusing the chinese stock market is “hardly in a bubble".

“Certainly, Shanghai real estate or Hong Kong real estate should decline,” considering that chinese and Hong Kong`s urban real estate may be in bubble territory, “My goodness, if anything’s in a bubble in the world, that and U.S. government bonds are certainly very overpriced.”

China raised the share of deposits banks must set aside as reserves starting on January 18, as the government seeks to rein in liquidity from record lending without stalling a recovery.

“China now realizes that they’ve created too much money, that prices are going up too much and they’re trying to slow things down,” Rogers said. “These things are designed to take some of the heat out of the economy. Let’s hope it works.”

Mark Mobius: Quite Positive On Malaysia

Emerging markets expert, Mark Mobius is bullish on Malaysian prospects and is not worried about the recent attacks on Christian churces:

The arson attacks on Christian churches in Malaysia won’t deter fund managers from putting money into the country, said investors and analysts including Templeton Asset Management Ltd. Chairman Mark Mobius.

“We are quite positive about Malaysia, we just opened an office and we believe there are great opportunities going forward,” said Mobius, who oversees $33 billion in emerging markets funds, in a telephone interview yesterday. "The attacks are minor incidents that were taken care of by the leadership and don’t pose any big problem.”

Related ETF`s: iShares MSCI Malaysia Index Fund (ETF) (EWM)

Warren Buffett's Favorite Economic Indicator Shows Weak Economy

Warren Buffett's favorite indicator shows a weak US Economy:

Rail traffic continues to show signs of a very tepid economic recovery as carloads and intermodal rail traffic got off to slow starts to the new year. Total carloads were off 12.7% compared to 2008 while intermodal traffic declined 3.6%. The breadth of the weakness continued to narrow, however, as 11 of the 19 commodity groups were up compared to 2008.

This weakness in rail data was best displayed by yesterday’s Railtime Indicators Report from the AAR which showed the weakest annual rail data in over 20 years. While the sequential trend continues to improve there is little doubt that the recovery is still very weak.

I would also like to add his recent comments about inflation, "the government's efforts to paper over the banking crisis are potentially very inflationary......worse than the 1970s inflation."

What Is The Best Fund Manager Of The Decade Buying Now?

Bruce Berkowitz was named the best fund manager of the decade. The Pragmatic Capitalist had a very good post about his investment techniques plus a video interview:

"Bruce Berkowitz, head of the $11.2 billion Fairholme Fund, talks with Bloomberg’s Margaret Brennan about his investment strategy. Berkowitz was this month named fund manager of the decade in the U.S. stock-fund category by Chicago-based research firm Morningstar Inc. The Fairholme Fund returned an average of 13 percent over the past 10 years, while the Standard & Poor’s 500 Index fell an annual 1 percent." in The Pragmatic Capitalist

Bruce Berkowitz likes healthcare insurers like Humana (HUM), financial services stocks and some REIT`s like St. Joe (JOE). He said, "we are beginning to come out of a very stressful period and stress creates cheap prices. We like healthcare, real estate, areas that have been hit hard either because of the recession, because of the Administration, so as I said we like Humana (HUM). And there is tremendous stress in financial services and they are beginning to recover. So financial services look interesting, the real estate companies such as St. Joe, smaller REIT`s (...)"

But then Berkowitz added, "there is still reasonably good values out there". In my experience when long-only fund managers say this, its time to run away from stocks or at least to wait for a very significant correction yo buy.

Doug Casey: Stock Market Will Have A Big Fall This Year

Doug Casey is extremely bearish on stocks and he predicts a big fall this year:

Well, it's nothing but a gut feeling, but I think the stock market is riding for a big fall this year.

Everyone was afraid the world was going to come to an end a year ago, and it almost did. But governments all around the world stepped in and printed up trillions of their various currency units - it's not just the United States. And still, retail price inflation hasn't blossomed. It seems that governments are bent on keeping asset prices up to avert panic. They focus on controlling perception instead of fixing the problem. It stems from an economic version of the theory that all we need to fear is fear itself. As long as we have the right psychology, everything is going to be okay - total nonsense.

It's the Wile E. Coyote theory of economics. As long as you never look down after running off a cliff chasing the roadrunner, you can keep treading air. Unfortunately, although the power of positive thinking may help in many ways, it's of zero use if you continue living above your means and making stupid decisions.

My thinking about the stock market is this: corporations have done as "well" as they have mainly by cutting expenses. Laying people off, that sort of thing. So the bottom lines have not fallen as far as we might expect - but the top line has been hit. Revenues are falling for corporations across the board.

The world's financial system has to adjust to a new reality, one with lower levels of consumption and differing types of production. The legions of unemployed are not going to go back to work anytime soon, at least not doing anything like what they were doing before the bubble burst. The economy is going to continue deleveraging. There's going to be less debt to allow the purchase of all this stuff people have been buying, resulting in lower corporate earnings. So it's hard to see revenues doing anything but continue to spiral downwards for years to come.

I've been bearish on general equities for years, based on fundamentals. Whether they go up is no longer a reflection of prosperity - it's a reflection of how much money the government creates and where it goes. But I am feeling particularly strongly bearish on Wall Street right now. That's my gut. The social mood of the country is going to turn ugly and gloomy; people won't want to call their brokers and "get into the market." in The Daily Crux

He says that he only wants to buy stocks again when dividend yields are in the 6 to 12% range and people have forgotten the market even exists.

Related ETF`s: SPDR S&P 500 (ETF) (SPY), ProShares UltraShort S&P500 (ETF) (SDS), ProShares UltraShort Dow30 (ETF) (DXD)

Douglas "Doug" Casey is an American-born free market economist, best-selling financial author, and international investor and entrepreneur. He is the founder and chairman of Casey Research, a provider of subscription financial analysis about specific market verticals that he has focused his investing career around, including natural resources/metals/mining, energy, commodities, and technology.

Marc Faber: Looming Sovereign Debt Crisis

Marc Faber was interviewed today on Yahoo Finance TECH Ticker and he expressed his concerns over a looming sovereign debt crisis:

"After every financial crisis there's a sovereign debt crisis, Marc Faber says. Countries that borrowed too much during the boom times start struggling to pay their competitors back, and eventually some of them default.

The countries most likely to blow up this time around are the "PIIGS": Portugal, Ireland, Italy, Greece, and Spain. One ore more of them, Faber says, will likely default in the next couple of years. And, that could result in the death of the Euro currency.

Longer-term, Faber says, Japan and the US are in line for the same fate.

The US crisis won't hit us this year or next year. But within 5-10 years, the United States will be forced to quietly default on its debt, most likely by printing money and destroying the value of the currency." in Yahoo Finance

Marc Faber called the March bottom on the S&P 500 Index on Bloomberg TV and he is now turning bearish on the stock market.

Doug Kass: Waiting For A Correction

Doug Kass expressed his markets views today and he is mostly bearish. He sees several market threats to the markets including,

"I remain fearful of the ramifications of populism in 2010-2011 on economic growth and on the market's prospects."

This China will tighten monetary policy thus tightning global liquidity,

"China is setting the stage for a rise in benchmark interest rates in the first half of 2010 (something included in my surprises for 2010 list)."

And thinks that when the the stock market looks to good to be true, you should be fearful,

"And I know that when things look too good to be true (read: the markets persistently rise), they usually are! I am not a Cassandra, and I have suggested on RealMoney Silver that, while there are numerous market positives in place as we enter 2010 that could produce favorable economic and corporate profit growth outcomes, there are also many probable outcomes that are less benign. Often, the irrational is rationalized in such strong market settings, and arguably, this has been the case over the past six months, as headwinds (e.g., still sluggish labor markets, rising populism and marginal tax rates, commodities pressure, higher interest rates, etc.) are too easily ignored and perception becomes readily detached from reality."

Doug Kass is the general partner Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP. He co-authored "Citibank: The Ralph Nader Report" with Nader and the Center for the Study of Responsive Law and currently serves as a guest host on CNBC's "Squawk Box."

Most Overbought Stocks

If you are looking for some stocks to short, here is a list of the most overbought stocks on the S&P 1500 Index:

Some stocks in the index are trading at extremely overbought levels. There are 25 stocks in the index currently trading more than 25% above their 50-days including, Patriot Coal (PCX) is the furthest above its 50-day at 47%.

Patriot Coal (PCX) is followed by Tuesday Morning (TUES) 46%, Methode Electronics (MEI) 45%, New York Times (NYT) 42%, US Steel (X) 37%, and Century Aluminum (CENX) 37%. Ford (F) is also on the list at 30.61% above its 50-day and its my favourite short play.

The S&P 1500 is currently trading well above its 50-day moving average, and 84% of the stocks in the index are above their 50 days SMA.

Table: B.I.G. Website

Mondays Account For All The Bull Move Of The Last 16 Weeks On The S&P 500

Historically Mondays have been the worst performing day of the week. But recently Mondayss have been the stronger day of the trading week and account for all the bull move of the last 16 weeks:

"Although it was one of the smaller Monday gains in the last three months (0.17%), today's advance in the S&P 500 keeps the 'Monday Bull Market' rally intact. As shown below, the S&P 500 has now seen gains on fourteen of the last sixteen Mondays with an average change of +0.81%. The index's average rest of week performance has been a decline of 0.21% with positive returns only half of the time. If it weren't for Mondays, we would be staring at a much different market picture." in Bespoke

I do not think this pattern will hold for much longer and we will see a lot more of "red" Mondays.

Related ETF`s: SPDR S&P 500 (ETF) (Public, NYSE:SPY)

Small Speculators Are Still Bearish (CFTC)

Small speculators are known to be the worst market timers. The latest data from CFTC shows that small speculators are net bearish:

"The latest data from the CFTC showed little change in the bearish position taken on by small speculators. Based on the late December AAII sentiment data it appeared as though small investors were taking on a more complacent attitude heading into year-end, but the latest AAII data showed a more bearish reading that is in-line with the small speculators report from the CFTC. Small traders who have been wrong at just about every step of the equity markets over the last year, remain net short." in Seeking Alpha

According to this data, the markets should have a little more upside. But being so overbought, the probable course of this market over the next few weeks is down.

Art Cashin: The Beginning Of An Economic Contraction?

Art Cashin is a little concerned about the drop in commercial paper issuance and the M3 contraction. Those may me signs of the beginning of an economic contraction:

"But I'm looking at two other numbers that kind of surprised me: commercial paper issuance dropped dramatically in the recent week and M3* seems to be contracting."

"We're going to watch to see if that's a sign that the economy is starting to pull back a little here."

Art Cashin comments were made just after the release of the Employment Report.

Jim Chanos: China Is Heading For A Crash

Jim Chanos, 51, whose hedge fund, Kynikos Associates, based in New York, is specialized in short bets is very bearish on the chinese economy:

Mr. Chanos is warning that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like “Dubai times 1,000 — or worse,” he frets. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent. in New York Times

Jim Chanos see a credit bubble developing in China and he told CNBC recently,

"Bubbles are best identified by credit excesses, not valuation excesses. And there’s no bigger credit excess than in China.”

Bill Gross: Fed Won`t Raise Rates Until 2011

The Bond King, Bill Gross thinks that the Federal Reserve won`t raise interest rates until 2011 because inflation and economic growth remain weak:

"The output gap and the core inflation rate is probably heading downward for the next 12 to 24 months. If that’s the case and if unemployment stays close to 10 percent, then there’s no reason for the Fed to begin to raise interest rates."

Even though 10 Year Treasury yields may go up 30 or 40 basis points because of the removal of some of the stimulus:

"So if this money disappears—and I’ve been recommending for the Fed to continue these programs—but if they discontinue them, than interest rates may rise by that 30 to 40 basis points gradually over the next three to six months”

Stephen Roach: Risks Of A New Investment Bubble

Morgan Stanley`s Stephen Roach, urged the policy makers in the US to start exiting emergency stimulus. Roach sees the risk of a new investment bubble:

“There is never an easy time to do it. The longer they wait, the greater the chance they sow the seeds for the next bubble. So I’m in favor of an early exit strategy.

We’ve seen the most extraordinary monetary stimulus on the record in the 15, 16 months post-Lehman Brothers. We’ll have to see the most extraordinary withdrawal of stimulus on record if this recovery is as strong as Bernanke and markets think it is, the time to exit is now.” in Bloomberg.com

Roach also criticized Ben Bernanke for assuming that monetary policy did not play a role in the subprime crisis:

“I think we need to take a very careful look at monetary policy and central bankers who do not believe that interest rates played a role in this crisis. I think that view is dead wrong.”

Mark Mobius Sees Downside Risks In Emerging Stock Markets

Mark Mobius sees downside risks in emerging stock markets due to the coming IPO`s:

“When you look at the size of some of these IPOs, they’re pretty massive,” Mobius, 73, who oversees $34 billion of developing-nation assets at Templeton Asset Management Ltd., said in a telephone interview from Tokyo.

“At the right price, the IPOs will be absorbed, but you’re going to have some hiccups. It’s too much supply coming out.”

Marc Faber expressed similar concerns today, “There are some clouds on the horizon. For sure, the supply of equities (in emerging markets) will go up because the valuations are up.”

Byron Wien: US Dollar And Interest Rates Outlook

Byron Wien gave his US Dollar outlook for 2010 in his annual list of surprises to expect in 2010. Wien is one of the best known Wall Street veterans and has been publishing his list of economic, market and political surprises since 1986:

"Because it is significantly undervalued on a purchasing power parity basis, the dollar rallies against the yen and the euro. It exceeds 100 on the yen and the euro drops below $1.30 as the long slide of the greenback is interrupted. Longer term prospects remain uncertain."

Byron also expects the Federal Reserve to begin tightning monetary policy in the second quarter:

"The Federal Reserve decides the economy is strong enough for them to move away from zero interest rate policy. In a series of successive hikes beginning in the second quarter the Federal funds rate reaches 2% by year-end."

Byron Wien: The S&P 500 Will End 2010 Unchanged

Byron Wien, predicts that gross domestic product will expand almost twice as fast as economists forecast in 2010 while the S&P’s 500 Index ends the year unchanged. Byron Wien was one of the strategists that correctly predicted rallies in equities, gold and oil last year.

An advance in stocks in the first half will give way to losses as the S&P 500 drops as low as 1,000 before finishing 2010 where it began. As real economic growth climbs toward 5 percent, the Federal Reserve will start boosting interest rates in the second quarter, pushing its target for overnight loans between banks to 2 percent.

“Even though the economy is strong and earnings exceed expectations, rising interest rates and full valuations present a problem for stocks", said Byron Wien. “Concern about longer- term growth and obligations to reduce leverage at both the public and private level unsettle investors.”

Wien picked Japan as the best-performing “major industrialized” nation this year, saying a weaker yen will help exports, pushing the Nikkei 225 Stock Average above 12,000, a 13 percent gain from the 2009 close.

Financial-service stocks will beat the market, Wien said. A few days ago Marc Faber said that his best contrarian play for 2010 was to buy japanese banks. I am also very bullish on japan as I see very limited downside risk at these levels. Remember that the Nikkei 225 topped at 40,000 points 20 years ago...

Natural Gas Deals: More To Come?

After the XTO Energy buyout from Exxon Mobil, there is another big natural gas deal announced today. France's Total signed a 2.25 billion dollars tie-up with Chesapeake Energy (CHK) becoming the latest international oil major to take advantage of low gas prices to snap up shale gas assets.

Natural gas assets are being bought my major energy players and some smaller natural gas players like Delta Petroleum (DPTR) may benefit. Delta Petroleum (DPTR) is trading at 1.10 dollars per share, down 79% in 1 year.

China Will Launch Index Futures In March

China is planning to launch index futures based on the CSI 300 Index next March. This contract may facilitate the access of international and retail investors to the chinese stock market:

"China’s securities regulator may introduce futures contracts on the country’s stock indexes as early as March, an official said. The first contract, based on China’s CSI 300 Index, may begin trading after the Communist party’s annual congress in March.

Index futures would give investors in China a mechanism to profit from declines in prices for the first time, allowing them to hedge risks. That may help ease fluctuations in a market in which the stock benchmark almost doubled in 2007, slumped 65 percent in 2008 and rebounded 80 percent last year.

Singapore Exchange Ltd. started trading stock index futures based on the FTSE Xinhua China A50 Index, which tracks Class A shares of China’s 50 biggest companies, in 2006. The value of the contracts advanced 84 percent last year.

The value of the futures contracts will be points of the CSI 300 multiplied by 300 yuan, according to the trading rules the exchange set. At today’s closing level of 3535.23, an investor would have to put up 106,000 yuan to buy a contract valued at 1.06 million yuan." in Bloomberg

Gold Trading Below Its 50 Day Moving Average. Is The Bubble Popping?

In the last month Gold made quite a reversal. After making several consecutive historical highs, Gold has reversed course and is trading more then 100 dollars per ounce off the highs. But the million dollar question is, "is this a long term reversal or just a small and healthy correction in a bull market?". I am not sure that this is the reversal but I wouldn`t buy gold at these levels under any circumstances.

"Less than one month ago today, the price of gold was trading above 1,200 dollars per ounce, and hitting record highs what seemed like every day. Since then, the fortunes of gold have reversed dramatically. After breaking below its 50-day moving average before Christmas, gold attempted to rally back above that level on Monday but was quickly met with additional selling. Today, however, gold is making another run at the 50-day after failing to make a new low yesterday." in BIG Website

I will just add to this post that Dennis Gartman thinks that gold stocks will be the worst performing group. I don`t think its time to buy gold or gold related assets like gold stocks.

Related ETF`s: SPDR Gold Trust (ETF) (GLD), Market Vectors Gold Miners (ETF) (GDX)