A fed funds rate hike will show that the economy "can stand on its own two feet," the Deutsche Bank economist says.» Read More
Marc Faber is not backing down.
The famed investor known as "Dr. Doom" has been calling for a 20 percent correction in stocks for years, only to see the market continue to march higher and higher. But rather than throw in the towel or even admit that his earlier calls missed the mark, Faber says stocks could fall all the way down to his early bearish targets.
On Thursday's edition of CNBC's "Futures Now," host Jackie DeAngelis played Faber a clip of comments he made more than two years ago, on Oct. 4, 2012, when he said that he has moved largely to cash because "I think within the next six to nine months, we can buy just about everything 20 percent lower."
Of course, the S&P 500 has instead risen more than 40 percent to 2,040, leaving Faber's unofficial S&P target of 1,160 (a 20 percent discount from the opening price on Oct. 4, 2012) deeply in the dust. So she asked if he still sees the market falling to that level.
"Everything is possible," he replied. "I also expressed that it was conceivable that we were in a year like 1987, and that the market would go straight up and then have a meaningful decline. And I still believe that there are considerable risks."
He also points out that some stocks have not done as well as others.
"A lot of stocks are down significantly from their recent highs. Many fund managers have underperformed the indices because so many stocks have been going down," Faber said. "We have to look at everything in the context. And I also have to point out that I've always advocated, in absence of knowing the future, to have roughly 25 percent in stocks, 25 percent in bonds."
Tony Dwyer, chief equity strategist at Canaccord Genuity, admits he has a reputation for being, as he put it, "an uber-bull." And with a year-end S&P 500 target 9 percent above Tuesday's opening price, that reputation may be warranted. However, he says that bears who myopically focus on the potential ramifications of the Federal Reserve's actions are missing a key lesson of investing.
"There will be a time when I'm just as bearish as I am bullish," Dwyer said Tuesday on CNBC's "Futures Now." But "'this will end badly' is a statement that has killed performance for decades. It end badly, [but that thesis] is not investible right now until the Fed begins to aggressively raise rates."
Dwyer believes that those who say the market is "propped up" by the Fed are somewhat missing the point.
"The first half of an economic cycle is always Fed driven. Think about it like putting a fire-starter log to get an outdoor fire going. Eventually, that log is going to have to transfer the energy to the natural wood. And I think that's kind of what's happening in the economy now," Dwyer said. "I think there's real evidence, through consumer confidence, income numbers, payroll data, that you're getting that loan demand that is getting transferred to the wood."
With stocks in slow motion, traders and fund managers are finding big action in the commodity and currency markets.
The S&P 500 may be right at all-time highs, but it didn't move more than 0.6 percent on any day last week. That pales in comparison to the action in gold and crude oil, which traded in 4 percent and 2.5 percent ranges, respectively, on Friday alone.
It is this sort of rocky action that has led the volatility indexes of gold and oil to trade at elevated levels, even as S&P implied volatility has dropped to the lowest levels since September, after October's quick flush and rebound.
This isn't the consequence of more caffeine being served in the commodities trading pits. Since July, the U.S. dollar has been surging against other currencies, and the move has only been exacerbated by the announcement of further asset purchases from the Bank of Japan, and dovish words from the European Central Bank. Incidentally, this has also increased implied volatility in the dollar, with options on the PowerShares Dollar ETF now pricing in annualized volatility of 9 percent, which is up from 5 percent in the beginning of September.
The dollar surge, along with other factors, has put pressure on oil and gold. Commodities tend to enjoy an inverse relationship with the U.S. dollar, given that as each dollar becomes more valuable, it takes fewer of those dollars to buy an ounce of gold or a barrel of oil.
"The biggest story over the last few months have been the dollar strength as central bank policies have diverged, so we should expect commodities that are influenced by the dollar to be pushed around," said Jim Iuorio of TJM Institutional Services.
As we close the book on the silver anniversary of CNBC, the company's digital arm is looking ahead to the next 25 years and the trends, challenges and innovations that will define that era.
The following are companies best positioned to capitalize on these waves. Some may look familiar, while others will be a total surprise. However, they all have one or more of the following characteristics: a deep moat, an energetic leader, steady and growing cash flows, and multiple revenue streams. No need to look up their quotes everyday, just stash these away and open in 2039.
1. Facebook (FB)—The crowd long-term favorite, Mark Zuckerberg's social network has all the attributes listed above. No other company will dominate the way we communicate in the future, as well as entertain and inform ourselves. Twenty-five years from now its 2014 acquisition of Oculus Rift, a 3-D virtual reality headset maker, will look prescient or just downright crazy. Mike Murphy of "Fast Money" thinks it will be our first ever trillion-dollar company.
2. Alibaba (BABA)—With a market value north of $250 billion, the Chinese online retail giant does not have the law of large numbers on its side. But don't tell that to its charismatic leader Jack Ma. The 50 year old has said he wants the company, founded in 1999, to last 102 years so it can "span three centuries." The only company on this list without any exposure to the U.S. will change that soon with the rollout of its "AliExpress" brand.
3. Google (GOOG)—Any long-term portfolio would be incomplete without a position in this do-it-all tech giant. While most of this company's revenues came from search advertising during the previous decade, the next 25 years for Google will not be so easily defined. From a cure for autism to self-driving cars, it will be fun seeing which one of Larry Page's moonshots hits pay dirt first.
4. Apple (AAPL)—Don't worry, there's plenty left for Tim Cook to conquer. The Apple Watch—set for release early 2015—will be the company's first foray into the ubiquitous "Internet of Things." Look for the TV and car to follow suit. And don't forget about the income part of the total return equation. A record-breaking cash hoard means healthy payouts for years to come.
5. Tesla (TSLA)—This list wouldn't be complete without at least one of Elon Musk's ventures. Bottom-basement gas prices have diminished Tesla's environmental appeal. Now it's a bet on convenience and quality. Imagine a nonstop drive from Boston to D.C. where you don't even touch the wheel? We're not that far away.
6. Nike (NKE)—Phil Knight's shoe company stands to benefit from the explosion of the middle class in emerging markets like China and Mexico. "Nike's brand investment, innovation levels and extensive global distribution network should allow further market share growth, often at the expensive of local competitors," Goldman Sachs said in a recent note.
7. Edwards Lifesciences (EW)—The world's largest manufacturer of heart valves will benefit from an aging, active U.S. population. And just wait until the emerging China middle class discovers red meat.
8. Carnival Corp. (CCL)—The world's largest cruise company just commissioned four new ships to be built in less than 18 months. The company can't build boats fast enough to keep up with those retiring baby boomers.
9. Align Technology (ALGN)—Talk about a competitive moat. Align has 80 percent of the invisible braces market. The dental equipment market in emerging countries should grow by double digits annually over the next decade, according to Goldman Sachs.
10. Veolia (VE)—"Futures Now" contributor Scott Nations gives us our last name on the list, a provider of clean water and desalinization techniques. "Water is the main constraint to growth," said Nations. "Veolia is going to be selling the most precious commodity in the world to the people who need it most."
Crude oil may have found its way off of the multiyear low it hit on Tuesday. But according to two traders, bearish dynamics on the supply and demand sides mean it's too early to call the bottom just yet.
"There are so many factors in the equation that are putting downward pressure," on crude oil, Brian Stutland said Thursday on CNBC's "Futures Now. "In the U.S., our oil drums are almost starting to fill up and hit max capacity. You have the Saudis now saying they're going to lower prices in the United States. You have weaker demand in China. And on top of that, a stronger dollar, and crude oil trades in U.S. dollars."
"I think you have to be careful trying to buy bottoms here on such a volatile asset class right now," Stutland concluded.
In fact, he favors making a bearish play on oil futures. Specifically, he advocates selling December crude oil futures at $77.50 per barrel, with a target of $74.50.
"We are just pumping more oil out of the shale plays here in the United States than you can imagine, and that is really putting pressure on oil," Scott Nations agreed. "$75, $74.50 is completely doable."
After a swift flush in the middle of October, stocks find themselves back in record territory. And according to Thomas Lee of Fundstrat Global Advisors, that roller-coaster action clearly points the way for the S&P 500 to rally another 13 percent in five months' time.
"Whenever the market has a deep decline like we saw, typically the bounce that follows is around 20 percent over the next six months," Lee told CNBC. "From the low of 1,850 or 1,900, that's close to 400 points, which would take us to 2,200 or 2,300 by April."
A level of 2,300 would be about 13 percent higher from Thursday's trading.
Yet Lee going on more than historical precedent. He says current market fundamentals set up well for continued gains in equities.
"It's been a pretty dumbfounding market, and I think there's been a lot of skepticism about the bounce," Lee said Thursday on CNBC's "Futures Now." "There are concerns that utilities have been rallying. Of course, (there are) the global issues. So I think there's enough of a wall of worry that the market can still surprise to the upside."
Is it about to get way worse for gold?
Bullion is down 5 percent in a week, breaking below the $1,180 level where gold futures had found support to hit a four-year low. And according to Mark Dow, what we're now witnessing is the second phase of the gold bubble collapse.
"2011 was the first phase of the gold bubble unwind. We consolidated for the past year. And it looks as though we're starting the second and more difficult phase of the unwind of the bubble," Dow said Tuesday on CNBC's "Futures Now."
As Dow explains it: "Gold benefited significantly in the post-crisis period from the monetary policy story. But a lot of fears in the monetary policy phase have proven unfounded."
In the 19th century, Britain was "the empire on which the sun never sets." In the present day, that moniker more aptly describes the reign of stimulative central bank policies. And that has stock market bulls shouting "Tally-ho!"
In the same week that the Federal Reserve ended its asset purchasing program, the Bank of Japan delighted markets with the announcement that it will increase purchases of Japanese government bonds and other assets. The central bank signaled its intention to continue its strenuous effort to improve Japan's economy and quash deflation expectations.
The question now is whether the European Central Bank will look to follow suit, as the ECB is set to announce a rate decision on Thursday, and follow that up with a press conference. Whether it comes now or in the near future, further ECB action is widely anticipated by many market participants, as the bank likely feels the need to combat a stagnant European economy that is also battling off deflation.
The great hope is that ECB president Mario Draghi will announce, or at least foreshadow, U.S. or Japan-style bond purchases.
"It's difficult to say exactly what the market's expecting, but clearly if the language remains unchanged, that will be a disappointment," commented Deutsche Bank FX strategist Oliver Harvey. "European risk assets are certainly looking for more direction from the ECB."
Read More ECB stimulus may lack desired scale, QE an option: Sources
Interestingly, on top of serious concerns about Eurozone growth, the BOJ's move could increase the odds for ECB stimulus. The euro has jumped against the yen, and if the ECB fails to act, the euro could grow even stronger—which is bad news for European exporters. That perception explains why the euro fell against the dollar in Friday trading, according to Kathy Lien of BK Asset Management.
Still, Lien doesn't expect to see stimulative action—just more dovish words. "The ECB probably takes more steps to talk down its currency," she predicted.
Gold prices got crushed on Thursday, dropping 2 percent and settling below the widely watched $1,200 level. And according to traders Jim Iuorio and Brian Stutland, it could get even worse for bullion—especially if the U.S. dollar stays strong.
"When you're talking about the gold trade, my opinion is that it is all about the dollar," Iuorio of TJM Institutional Services said Thursday on CNBC's "Futures Now." "If you look over the last six months, you have had a multitude of reasons to buy gold, and every one of them has been ignored. The only thing that really matters is the dollar."
The U.S. Dollar Index has been risen 8 percent since the beginning of July, and over the past two days has been nicely buoyed by the Federal Reserve's (well-telegraphed) announcement that it would end its bond-buying program. This is thought to be the prelude to a rise in the U.S. central bank's target rates. And if rates in the U.S. rise, owning U.S. dollars will become even more attractive than owning currencies such as the euro or the yen.
More specifically, Iuorio is focusing the U.S. dollar against the euro (the relationship that makes up the lion's share of the Dollar Index). Since the U.S. central bank is preparing to raise rates, and the euro zone's central bank may be primed to embark on further stimulative measures, Iuorio is with many market participants in predicting that euro weakness against the dollar will persist.
A rising dollar tends to hurt gold prices, because as the dollar increases in value, it takes fewer of those dollars to buy the same amount of bullion.
The Federal Reserve has just announced the end to its asset-purchasing program, which is known as "quantitative easing." But for one billion-dollar bond fund manager, that's no cause for concern. In fact, he says the QE program was none too significant for the economy or for markets.
"I frankly think QE3 was a complete waste of time," John Lekas said Thursday on CNBC's "Futures Now."
Lekas, CEO and senior portfolio manager at Leader Capital (which has $1.2 billion under advisory), says that the bond market has consistently indicated that the end of QE was not worrisome.
"Every time they've talked about ending QE, interest rates went down, the 30-year rallied, and that should shock people. Because in theory, ending that bond-buying program, rates should have gone up and bond prices should have sold off," Lekas pointed out.
But how could it be that the Fed's much-obsessed-over bond-buying program had a minute impact? Lekas says a comparison of two data sets shows something very interesting.
"During all the QE programs, [the Fed] bought $2.64 trillion worth of Treasurys. If you look at excess reserves, meaning that the bank just took that money and put it into the Fed—it's $2.67 trillion," Lekas said. "Meaning it was a nonevent, it never mattered, and I don't know why everyone thought it was so important."
Read More Mohamed El-Erian: 'QE trade is evolving'
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