BULL VERSUS SUPER BULL
Here’s an unusual duo for this version of bull versus super bull. In an interview on CNBC earlier today, Marc Faber, generally a bear, said he was bullish on equities in the near-term mainly because investors have become too negative. Jeremy Siegel of Wharton, the noted permabull says stocks are long-term attractive. Now to be clear, Faber’s not that bullish. In a later part of the interview he said the global economy is entering a recession, China’s experiencing a hard landing, Europe is coming apart at the seams and that corporate profits were likely to get slammed. But he’s near-term bullish….More via CNBC with full interview below:
You won’t often find Marc Faber and Jeremy Siegel taking the same side of an argument, but both market gurus believe that, despite the global turmoil, investors are better off with stocks than government bonds.
…Faber, the noted bear and author of the Gloom Boom & Doom report, and Siegel, the bullish Wharton School professor, believe that with negative real bond yields prevailing there’s little choice but to pick stocks.
“Everything looks bad at the present time and people are relatively bearish. At the same time, you have the 10-year note at less than 1.5 percent and you have stocks like Johnson & Johnson yielding almost 4 percent,” Faber pointed out during a Monday “Squawk Box” appearance on CNBC.
“This is the first time in 60 years that dividend yields on the market exceed long-term interest rates. It’s the first time in 60 years when you don’t need gains in stocks, that you don’t need higher returns than gains in bonds,” Siegel said. “You don’t have to worry so much about the day-to-day volatility if the corporation, if the firm has good coverage on its dividend, because it’s going to continue to pay.”
See below for the full interview:
Source: CNBC
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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32 Comments
Faber didn’t provide an update on the imminent USA hyper-inflation. He was “100% sure the USA would enter hyperinflation” a few years back. I would have been keen on a progress report as I’m not seeing a lot of hyper-inflation…
ECB Euro-wide deposit insurance? Does the good Professor understand the big problem is a run on countries and not banks? The ECB would actually need to guarantee that if Spain left the Euro that depositors would somehow avoid having their deposits re-denominated in the new currency. That’s not possible…
Congrats to those with the balls to go long against this outrageously negative sentiment backdrop as oppose to listening to non-sense posted yesterday by the “price followers”. And I quote:
“The ECB MUST come out big tomorrow. Anything short of this and the market has the patience of a Palastinian Valet in Jerusalum parking a White Van that sounds like a clock.
The problems are over in the Atlantic and they come front and center this week. Why do you think an emergency meeting was called. The clock is ticking.
This week should be the catalyst for Ben to move. Which would take us to the first week of July where by you would go long.”
The ECB did NOTHING yet the market is RIPPING.
@ BJM
The SPX has gone from 1422 to 1266. Our line in the sand is 5% higher than today. However most of these stocks are down 7%-10%. If I today the price action dictated I chang my position than I will. In this scenario I would have 35% Cash I could invest which if the market went to X would outperform YOU and the SPX. I’ve protected my clients and come back in at lower prices.
Your down 35 points in the 4th quarter- The Bears have pushed you around the field for 50 minutes and you finally break through and get a sack. Jumping up and down calling out the Bears sidelines. You not only get a yellow flag penalty but the Senior offensive Tackle(me) walks up to you..taps you on the shoulder and points to the scoreboard. Somewher you believe this is about you. About how good you are. As a player who’s been around long enough I can tell what I’ve learned is that my job is to win. I win by making money. Going after you now to teach you a lesson distracts me from what has already occured. I won. The game is over. You leave with a sack on one play(day) claiming victory. And I leave having made more money than your ego will ever allow.
One last comment- you forget we have the same job. To grow our accounts. I don’t have a subscriptions service, newsletter, blog or am tied to being bearish or bullish. This is not politics or relgion. I have one requirement. To make money. Thus you should ask yourself two questions.
1. Why would I turn cautious.
2. Before you declare Victory in the game on one play out of 250 trading days. If someone who does the same thing as you warns you a storm is coming. Rather than run out on a sunny day telling everyone how dumb that guy is I would ask him if anything has changed to his forcast. That is what this is all about.
Like I said…you are who you are and no matter what you demand alot of attention. You need to be updated through out the day on all my trades and views so that I can cover my ass. Because no matter what I say you will use it in a way that proves your view.
The great thing about this is there is nothing to say. The market is the ultimate verdict. And one of us is flexible and one of us is not. Who do you think will make more money? I could go long and I’d still be miles ahead of your clients.
I don’t want to give to much on the market stuff right now because I don’t want to help you with what were seeing. You did ask a couple of interesting questions though. The ECB did nothing and the market is ripping. Now you should be asking yourself some things but I don’t even want to help you there. Better to let the market and life teach you what you have not allowed me to help you with.
Lastly, and I mean this. I ask that get out all your opinions about me in a response and then leave it be. Let it all out and then move on. Life is too short and we are wasting air going back in forth. It will never end. And I do love this site. Respect Cullen’s place of business. I know how much goes into this site…even if it is not his entire focus. For that have at it…call me stupid and quote everything I’ve ever posted and then move on. We should not intereact with each other any more here. Takes away from the beauty of the world.
All one needs to do is look at the comments by you and Bferro back when the market briefly tried to hit new highs….
http://pragcap.com/the-eurozone-decoupling#comments
and here….
http://pragcap.com/the-mayjune-disaster-area#comments
and then a crash warning here that you guys called correctly for a whopping 4% down move from 1330 to 1278….
http://pragcap.com/the-second-half-of-the-primary-bear-market
You win BJM
The floor is all yours
I have questions for you to ponder.
When rumors come out in advance of important dates regarding easing what asset would you want to see to confirm central bank liquidity? What set up do rumors allow for? If you managed alot of money what would rumors allow you to do? What would happen if the rumors turned out to be just rumors? How could you tell in advance? Could you tell?
Why would the fed leak via Hilensrath. If you read what he actually says it is the first time that the leak was not as bullish as the market is telling you. Thus the disapointment factor seems to have increased.
But…agian..You win. You keep wanting to hit me when your job is to tackle the running back. I can’t get you to see your losing the game.
I hate doing this…but I’m going to go dark for awhile. You require to much attention BJM and don’t wish to be stalked on this site. I’ll come back down the road.
You win BJM
BJM – 2 days ago you wrote “Capitulating today. Going 100% cash.”
http://pragcap.com/george-soros-sums-up-europe-in-2-paragraphs/comment-page-1#comment-109744
The market is up 2 days in a row since then. So WTF is your point with VII????
Seriously, this whiny child act of yours is getting old. Everyone’s got an opinion, no one will be right 100% of the time… but real time opinions rather than “I told you so” BS after the fact makes this site that much more interesting… and you’re currently causing the flow to go the opposite way. Please stop and go back to whoever you were a month ago rather than this cry baby act you’ve been putting on the last few days.
Me saying I went to 100% cash was 100% sarcasm in response to Bferro chiding my bullishness. Of course I didn’t go to cash, come on….
VII comes on here scolding everyone for not following prices pretending to have original work yet nobody says anything negative about his ridiculous prognostications, yet I come on here pointing out a very valid case for taking the contrarian stance both at the top of the market when VII and Bferro were saying to pile in “we’re going to 1500″ and now at the bottom when everyone is on “crash warning”….and when I’m proven right by powerful up-moves such as today I’m going to come on here and point it out….just as a reminder, Bferro came on here practically every day during the powerful Q1 move saying that he was right and all the bears were wrong…I don’t remember him receiving much crap for doing so. I’m glad he did – his opinion helped me a ton with learning how to interpret market movements etc…
Me doing the same thing – pointing out that I’m right and the bears/price followers are wrong – is not childish whining and is no different than VII coming on here bashing me for taking a contrarian stance saying that I “don’t know how to interpret price movements”.
When we crash 25% from here and I’m getting crushed, I would expect nothing less than for those calling for that to come on here bashing my position pointing out how wrong I am….
go back and re-read all of your comments from the last few days…. lots of “HAHAHAH” and LOLOLO, etc. That mocking is the childish stuff I’m referring to.
Oh I see – so blatantly copying others’ work as your own then scolding others like children for not agreeing with you is OK but calling someone out on it and expressing the humor associated is not…makes sense.
Hey, got your heads up. You can always email.
Separately…another thing I found interesting today…
Why would the Fed leak this to the WSJ a mere two weeks away from their meeting?
We all know they get the most bang for the buck if they surprise the market. Why then, a mere two weeks away, do you intimate you want more stimulus?
Further, why would they release it a day before the Beige Book is released and is reasonably bullish, at least relative to what you’d need to see in it for more stimulus.
I struggled with that today as well as the leak the night before the ECB did nothing on rates / Euro crisis.
It almost seems like the Fed is more worried about Europe right now than it the US economy…what are they seeing that they’re trying to forestall??
Anybody else concur?
Ben thinks a higher stock market will boost the economy. This is his last bullet he’s willing to fire and it’s becoming clear now that the global economy is hurting. But I don’t even think it’s the QE rumor that is boosting the market. It’s been mostly Spain in the last few days. The Spanish stock market is up 10% in 3 days…..It’s still all about Europe and I think it’s clear that they’re not gonna let it all unravel….
I don’t think they let it unravel either. It never does, and they never let it.
That said, time and time again they let it get to the point that such an outcome appears inevitable before action is taken.
Your point about his last bullet is noted. That said, that doesn’t answer the original question of why he felt compelled to leak that two weeks before their next meeting.
It makes absolutely no sense to me and actually seems weird. No element of surprise now at the meeting if they decide to engage and certainly lots of room for disappointment Iif they refrain.
I am such a non-expert, I wouldn’t attempt to judge which of you is right about the market. But ‘WII’ wins the popularity contest here, because he is funny.
Why not lighten up a bit?
Seconded
Chill out guys. VII don’t let one guy get under your skin. Most of us enjoy your posts even if we don’t always agree.
BJM, I would wait more than 1 day and 2% before doing your victory laps, come on now.
Everyone, cut it out. It’s fine to call someone out for the record, but don’t get petty about it. There are ways to be constructive about it. I am wrong about a lot of stuff. A LOT. And what do I expect? I expect people to be constructive about it. No one has this puzzle solved. No one. I am here to help you, you should be here to help me and each other. If that’s not your mentality then it’s the wrong mentality. We’re all learning from one another….
Oh look, it’s high school again.
“The ECB did NOTHING yet the market is RIPPING.”
But: “Draghi did open the door to a rate cut in July, telling reporters that “a few” members of the ECB Governing Council had argued for an immediate rate cut. Draghi said the decision to leave rates on hold was taken by “broad consensus.”
That makes the ECB likely to cut its key lending rate to 0.75% in July
Also, there is a rumor out that there will be world-wide coordinated central bank intervention immediately after the Greek election on June 17. That may be why the market is RIPPING for now.
Perhaps the anticipation of QE3 and coordinated CB action will cause a big rally from now until June 17, then investors may be disappointed after the action is taken.
Is it all hinging on expectations of the CB’s moves, or has the Wisconsin vote had anything to do today’s action?
Jeremy Siegel is a permabull who never changes his tune. Marc Faber has been arguing the case for U.S. hyperinflation for a long time, more than 4 years, and of course he has been way off. He has been advising against buying the long 30 yr T-Bond for the past 3 years, and it has a compounded annualized return of +13%. Although Faber is a Barron’s Roundtable member, his track record is weak. Siegel advised going 100% into equities in the spring of 2008. ‘Nuff said.
Expectation for Fed to take action is too high. Is Fed stupid enough to use its limited bullets before Europe itself does anything first? I really doubt it.
That’s my feeling as well, why do anything now? They will probably talk about the possibility of future actions to set the stage for when they need to do it, but I don’t see anything significant happening for a while.
Couldn’t say it better myself!!
http://www.thestreet.com/story/11570842/1/it-is-almost-always-darkest-at-dawn.html
Anybody else find it interesting that the Fed floated that leak to the WSJ the night before the ECB came out and:
1) failed to cut rates
and
2) had no concrete measures for or inclination to ameliorate the Euro situation?
Why were they motivated to coordinate that announcement with the ECB actions (lack thereof)?
Manipulation. The Fed needs to keep the idea of QE alive to keep the market up. But it needs to keep it in its back pocket in case of emergency as the market has done most of its work for it.
Europe did not cut rates as a bluff to say that everything is fine. No need for action.
You fake it for as long as you can.
I love Ben!
And this unbelievable end-of-the-day up-move is yet more proof of the market bottoming in the short to medium term….
The only proof in this game of investing is the 100 proof liquor of choice we drink.
What is everyone’s thoughts on this – economic growth is different to equity returns.
Primarily referring to a study by Ritter (2005) which looked at equity returns from 1900 to 2002 and found a negative cross-country correlation of real stock returns and per capita GDP growth. Found that valuation not economic growth is more important.
Real case example? China over last 10 years? GDP Growth has not translated into shareholder returns.
I can sum up my thoughts by saying that this post is one of the best posts I’ve seen on any site in awhile. It touches on the fact that valuation is the most important determinant of long-term returns.
It’s fascinating that after a 30 year bull market everyone is piling into treasuries that yield 1% and change yet 30+ years ago (at what 15%?) you couldn’t give them away. The Dow at that same time was trading at book value and yielding over 5% yet it was the death of equities. Now today here’s the Euro Stoxx 50, an index of world-class companies like the Dow 30 trading at book and yielding over 5% and no one wants it.
Someone on CNBC yesterday said Japan was uninvestable (sic). Everyone thinks it’s uninvestable, that’s obvious. A few islands full of world-class companies trading at 90% book and small caps at 75% of book and no one wants them. It’s rather remarkable that only 4% of Japanese household assets are in stocks. Now before anyone decides to school me on all the negatives surrounding Japan I urge you to save your time. I’m aware of them just like everyone else in the univestable world; just like everyone in 1982 with the Dow.
And like everyone else I have very little idea where any market will be a year, ten years, twenty years or more from now but considering the lessons of history concerning valuation, sentiment etc. I have a much better idea of where to place my bets.
Cullen, get a bio already you lazy ass.
Stocks and commodities are where it is eventually at, years down the road, so get ahead of the crowd!!!
TPC, you have convinced me that hyperinflation will not happen. But gold going to $15k/oz is very far away from hyperinflation, and very profitable! Copper will be near $10/lb in five years, bank on it suckers.
Hope everyone is well.
Cullen – I added your blog to this top 100 financial blogs list.
http://list.ly/list/1HO-top-100-investment-blogs