Friday, August 25, 2006

Beware booming asset markets - Dr. Marc Faber

Increased Recession Risks!

By Marc Faber
Pfäffikon, Switzerland
August 23, 2006

As we acquire more knowledge, things do not become more comprehensible, but more mysterious. -- Albert Schweitzer

According to Stephen Roach, “April was a critical turning point on the global rebalancing watch. After years of denial, the stewards of globalization — namely, the G-7 finance ministers and the IMF — finally sounded the alarm over the threat of mounting imbalances. The rebalancing fix that was endorsed has three key ingredients: the adoption of a multilateral global architecture of surveillance and consultation, general agreement on dollar depreciation, and a global tightening of monetary policies.” And after having warned for the last few years that the growing global imbalances would lead to some sort of crisis, Roach expressed optimism that “the good news is that none of this speaks of a terribly disruptive endgame for global rebalancing. Had global policy makers ignored the problem, a dollar crisis at some point in the not-so-distant future was a distinctive possibility. But now the combination of architectural reform, currency adjustments, and monetary tightening points toward a more orderly and hopefully benign strain of global rebalancing.” Still, Roach also warns: “It is important to stress that an orderly adjustment in the real economy is no guarantee of an orderly adjustment in liquidity-driven markets, especially those risky assets that have gone to excess.” for more read here

Beware booming asset markets!The upside potential for equities appears to be very limited despite the likelihood that the Fed will not increase the Fed fund rate at its August meeting. There is much resistance for the S&P 500 between 1290 and 1320 and technical conditions are not supportive of a strong and sustainable rally. for more read here..

The ominous rise around the globe of the resources-based corporate state is accelerating. The implications for the West are enormous, yet such implications are only beginning to be understood. As noted above, such states are concluding rapidly increased numbers of strategic agreements among themselves for the joint exploration and production of oil and gas, and with the rapidly rising powerhouse economies of the East, such as China and India, for the private long-term supply of oil and gas. for more read here

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