Readers of FIR and MoneyNews will know that we have been very cautious of the
U.S. stock market. Today, Julian Robertson, the legendary manager of the Tiger
hedge fund said he was, "cautious, extremely cautious," on the market.
Julian Robertson has over $9 billion under management. He has given his
investors an average yearly return, net of fees, of some 25% a year over the
past 20 years. When he says he is cautious, we should all pay attention.
Interviewed on CNBC's Street Signs, Robertson was asked what made him so
cautious. He replied, "there are a number of things now overhanging the market
that could come to break and hurt us badly for a long time."
Asked for details, Robertson cited housing as a serious concern. He then said
that, if interest rates turn up, in combination with an oversupply of housing,
things could look very bad.
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[Editor's Note: Clearly home prices across the board are in the midst
of a serious correction, one which our sister publication, Financial
Intelligence Report, told readers about months ago. Both
Sir John Templeton
and Yale Professor and real estate expert
Robert Shiller told FIR
readers that they expected the housing market correction to result in prices
plunging up to 40 percent. And, unfortunately, it looks like their predictions
will be on the spot.]
In a later CNBC interview, Jim Cramer (of Mad Money) supported the thoughts
expressed by Julian Robertson. Most interestingly, Cramer pointed to a core
characteristic of humility in the air of Tiger Fund managers. We believe that
humility is indeed a great asset in the investment of both financial and
political capital.
As readers will know, we have been forecasting, contrary to most market
practitioners and commentators, that the next Fed move will be to increase
interest rates, most probably, after the election. We have advised our
conservative readers to be very cautious and to concentrate their financial
investments in four basic asset classes: cash, short-term high quality bonds,
gold and overseas markets, where well over half of the world's people live and
create increasing rates of economic activity.
We now feel that gold will lead the dollar down and rise considerably in
dollar price in the near future. Indeed, the historic price relationship between
black gold (oil) and the alluring yellow stuff now indicates that gold bullion
should be at about double its present price.
As for interest rates, we have long believed that inflation is stalking us,
in what we term as "Stealth Inflation." Today's employment statistics lent
support to our inflationary arguments and that we are about to see a rise in
interest rates. Both stock and bond markets fell. Indeed, today, the ten-year
Treasury fell in price to increase its yield by a whopping ten basis points!
[Editor's Note: The government is manipulating inflation data.
Read this free report.]
It is now only four days until the election. As the great J.P. Morgan once
said, in testimony to Congress, "politics is big business." [We believe that
this has not been the case in Europe, or in many other countries and may have
provided one of the fundamental reasons for the split in the old Western
Alliance over the invasion of Iraq, where American motivation was rightly or
wrongly seen as yielding to the big business interests of oil]. It will be
interesting to see to what extent the Republicans are punished at the polls,
over Iraq, not by big business, but by grass roots voters.
Should the Republicans lose control of either or both houses, we believe
there may be an initial sell-off in the U.S. financial markets. However, we
believe that a ‘hung' government will lead to less government interference, a
quick withdrawal from Iraq and possibly to a cut in wild government spending.
This may prove good for U.S. markets in the longer-term.
Editor's Notes:
