Taper or no Taper, the Fed will never end QE: Marc Faber

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When the Federal Reserve announces its next move on Wednesday, some expect it to reduce its $85 billion monthly bond-buying program, targeting an eventual end to quantitative easing in late 2014. Others expect the Fed to begin to reduce the program in early 2014, or to finish it off by 2015. But Marc Faber has a different take altogether .

"The Fed will never end QE for good," the editor and publisher of the Gloom, Boom & Doom report said Tuesday on CNBC's "Futures Now." "They will continue because these programs, once they're introduced, usually keep on going."

The Fed will announce its decision at 12:30 p.m. EST on Wednesday, and Fed Chairman Ben Bernanke will follow that up with a 2:30 p.m. news conference. Expectations for the meeting are mixed, but more that 50 percent of Wall Streeters expect the Fed to taper its QE program in either December or January, according to the CNBC Fed Survey. As economic data have improved, many investors are guessing that the Fed no longer considers QE to be as vital as before.
(Read more: Fed taper expected sooner: CNBC survey)

But Faber said the good times cannot last.
"The economic recovery, or so-called recovery, by June of next year, will be in the fifth year of the recovery," Faber said. "So at some stage the economy will weaken again, and at that point, the Fed will argue, 'Well, we haven't done enough, we have to do more.'"

The noted bear has little admiration for the economists at the Federal Reserve.
"The Federal Reserve—all of them—could be sitting on a barrel of dynamite, and then pouring gasoline on top of it, and then light a cigar with matches, throw the match into the gasoline, and then not notice that there is any danger," Faber said. "That is the state of mind of the professors at the Fed, who never worked a single [day] in business."

And while Faber actually believes that a reduction in QE could happen, he wouldn't view it as a true tapering, as he says it will be a largely meaningless, one-time move that will eventually be reversed as the economy worsens.

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News Source: www.cnbc.com

Gold Prices May Rebound Toward Year's End...

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Gold prices could rebound toward the year’s end as the current headwinds for the metal, selling by exchange-traded-fund investors and concerns about the Federal Reserve tapering its stimulus program ease, said a German bank on Monday.

Commerzbank said that if gold can rebound, that will help silver, too. Platinum and palladium should continue to receive price support from supply risks and strong demand.
They estimated gold prices will average $1,200 an ounce in the third quarter, rising to $1,300 in the fourth quarter and to $1,400 by the first quarter of 2014. By the end of 2014 they see gold prices rising to $1,600.

For silver they see prices averaging $19 in the third quarter, $21 in the fourth quarter and $23 in the first quarter next year. For platinum they see prices at $1,350, $1,425 and $1,500, with palladium prices averaging $675, $700 and $725, respectively, in the third and fourth quarters of 2013 and first quarter of 2014.

Gold prices fell to a three-year low of $1,180 by the end of June, caused by a sharp rise in real interest rates because of speculation about an imminent reduction in the bond purchases by the Fed as part of their quantitative easing program.

Commerzbank said despite the rise in real interest rates, they still remain low. “In the past, real interest rates had to rise to more than 2% over a prolonged period to have a sustained negative impact on the gold price. We do not expect this to happen. After the current phase of adjustment in the wake of the announced scaling back of the Fed's bond purchases, the headwind affecting the gold price should therefore ease from this side,” they said.

They also said that they expect ETF outflows to be limited, even if prices fall further. “Most of the remaining ETF holdings of almost 2,000 tons are likely to be held for other reasons than short-term profit maximization, i.e. mainly to hedge against long-term financial market risks and a loss of purchasing power due to inflation and currency devaluation. These motives continue to apply given the unresolved debt crises, high sovereign debt in the industrialized countries and therefore the continuation of ultra-loose monetary policies by the major central banks,” they said.

If gold prices rise on a sustained basis, “we would also expect silver to pick up again significantly,” they said, citing a rebound in the global economy resulting in greater industrial demand.

The PGMs are likely to be supported by concerns about South Africa and the potential production shortfalls because of simmering conflicts between unions and mines. Demand for PGMs is strong on both the automotive side and from investor demand, they said.

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News Source: www.reuters.com  

US Stock Futures Point To Lower Open Ahead Of FOMC Minutes...

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It's a busy calendar on Wednesday as markets look to parse what was said at the FOMC meeting on June 18-19 to gauge the future of the U.S. Federal Reserve's bond-buying program. Investors will also have wholesale inventories data and corporate earnings figures to digest before Fed Chairman Ben Bernanke's speech, which is scheduled for later in the day.

Futures on the Dow Jones Industrial Average were down 0.09 percent, while futures on the Standard & Poor's 500 Index were down 0.15 percent and those on the Nasdaq 100 Index were down 0.14 percent.

Investors await the release, at 2:00 p.m. EDT, of the minutes of the FOMC meeting, and are likely to scour its contents for hints about the Fed's plans for its quantitative easing, or QE, program, and for insights into how much longer the current low interest-rate scenario would continue. Investors also eagerly await Bernanke's speech at the NBER Summer Institute in Boston at 4.10 p.m. EDT for direction on monetary policy decisions.

The U.S. Department of Commerce will release its wholesale inventories report, which measures the change in the total value of goods held in inventory by wholesalers, at 10.00 a.m. EDT. Inventories are expected to increase by 0.3 percent in May after a 0.2 percent growth in April.

Also, investors will continue to focus on earnings reports on Wednesday, with Fastenal Co.  and Family Dollar Stores Inc.Releasing their earnings reports before the market opens, and Yum Brands Inc. reporting its quarterly earnings after market hours.A record number of S&P 500 companies have issued negative earnings guidance for the second quarter. So far, S&P 500 companies have issued 97 negative earnings pre-announcements and only 15 positive ones, for a negative-to-positive ratio of 6.5, according to Thomson Reuters. The guidance has contributed to a downward slide in second-quarter growth estimates, with earnings per share, or EPS, currently estimated to grow 3.0 percent, down from the 8.4 percent estimated at the beginning of the year.

Elsewhere, European markets were trading down Wednesday after disappointing trade data from China reinforced signs of a slowdown in the world’s second-largest economy and investors chose to tread cautiously ahead of the release of the FOMC minutes and the Fed chairman’s speech.
The Stoxx Europe 600 index traded down 0.32 percent, London’s FTSE 100 was down 0.43 percent, Germany's DAX-30 was down 0.35 percent and France's CAC-40 was trading down 0.43 percent.
In Asia, markets ended mixed while Chinese markets ended higher, despite China's disappointing trade data, which missed analyst expectations by a wide margin and showed a steep decline in the country’s exports and imports for the month of June.

Data released by the Chinese government on Wednesday showed that exports were down 3.1 percent from a year earlier and imports were down 0.7 percent. In contrast, economists had expected exports to have grown 4.0 percent and imports to have risen 8.0 percent in June.

China's Shanghai Composite index rallied up 2.17 percent while Hong Kong’s Hang Seng Index gained 1.07 percent. Japan’s Nikkei ended down 0.4 percent, retreating from a six-week high registered in the previous session, while Australia’s S&P/ASX 200 ended up 0.4 percent. South Korea’s KOSPI Composite index lost 0.34 percent while India’s BSE Sensex ended the day down 0.79 percent.

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News Source: www.reuters.com