MARC FABER: The Stock Market Has Peaked 1987 Style

“The stock market has “peaked out” and bonds may be on their way to a rebound, Marc Faber, publisher of the Gloom, Boom & Doom Report, said Thursday on CNBC.

“I think we have made an intermediate top, and it could be a longer-term top,” he said on “Fast Money.”

“I don’t think the market is as overbought as it was in ’87, so I don’t expect a crash. But I think for the time being, the market has peaked out, and I think in the meantime, bonds, which are extremely oversold, could rebound,” he said.

The S&P 500 closed at 1,502.52 Thursday. A level of 1,530 could prove to be a longer-term high, Faber said.

“What I maintained in earlier interviews is that either we have a correction now, and then we go up further or we go straight up high in July-August, from where we could crash, so I welcome a correction here,” he said. “The question will be, after this correction, we have to watch the market’s rebound, whether it can make a new high or not.” …”
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“RICHMOND, Va. (AP) — A Food and Drug Administration veteran who helped spearhead efforts to regulate the tobacco industry in the 1990s is taking over the agency’s Center for Tobacco Products.

FDA Commissioner Margaret Hamburg says Mitch Zeller will become the center’s director on March 4.

The center’s first chief, Dr. Lawrence Deyton, plans to step down and become a professor of medicine and health policy at George Washington University.

A law enacted in 2009 gave the FDA authority to regulate a number of aspects of tobacco marketing and manufacturing, though the agency cannot ban nicotine….”

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“TOKYO (AP) — Japanese authorities have identified the causes of fuel leaks and other problems withBoeing’s 787 but are still investigating the more serious battery problem that forced an emergency landing in January and the worldwide grounding of the jets.

An oil leak was caused by an improper paint job that led to a switch not working properly, while inadequate taping led to cracks in cockpit glass, and a faulty part led to braking problems, according to the Transport Ministry’s investigation released Friday into problems that occurred with the 787 Dreamliner in January.

The government issued orders to fix the problems with 787s operated by Japan Airlines and All Nippon Airways, the country’s two major carriers and the biggest customers for Boeing Co.’s new jet.

All 50 of the 787 jets in service around the world have been grounded for more than a month after a lithium-ion battery in a 787 operated by ANA overheated Jan. 16, forcing an emergency landing inwestern Japan. Earlier in January, a lithium-ion battery caught fire in a Japan Airlines 787 parked in Boston.

Boeing and U.S. authorities are also investigating, but Friday’s findings shed little light on the main problem.

The 787 is the first jet to extensively use lithium-ion batteries, which weigh less, charge faster and are more powerful than other kinds of batteries. Japanese manufacturer GS Yuasa makes the batteries for Boeing….”

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“LONDON (Reuters) – Central banks are in a deep easy-money hole of their own digging that they will have to start filling in at some point. But that day still looks quite some way off.

Indeed, the Bank of Japan and the Bank of England are staking out a much bolder stance, brushing aside warnings from some that they might be stoking currency wars by depreciating their currencies or sowing the seeds of asset bubbles and inflation.

For Japan, inflation would be a solution, not a problem, after years of gently falling prices. The country’s nominal gross domestic product is no higher than it was 20 years ago, saddling the government with a debt-to-GDP ratio of 235 percent and climbing.

Britain seems simply to have concluded that higher inflation is a price worth paying to revive economic growth.

Three of the Bank of England’s nine-member Monetary Policy Committee, including Governor Mervyn King, voted this month to buy more bonds under its quantitative easing (QE) program even though inflation has been above target for five years and is unlikely to fall back to its 2 percent goal for another three years.

“There are clear signs of a softening of the commitment to inflation control across a number of economies,” said Simon Hayes, an economist at Barclays Capital in London.

A QUESTION OF JUDGMENT…”

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“Canada’s banks, recognized as the world’s strongest after a year of record profits and rising share prices, will begin to show the effects of a slackening in domestic consumer lending when they report first-quarter results next week.

“The Canadian banks did very well through all of this mess,” said John Kinsey, who helps manage about C$1 billion ($981 million) at Caldwell Securities Ltd. in Toronto, including bank shares. “Now this is kind of a reality check.”

Royal Bank of Canada (RY), which is trading near an all-time high, Toronto-Dominion Bank (TD)and the country’s four other main lenders are expected to post a 6.9 percent increase in per-share profit excluding some items for the quarter ended Jan. 31, according to Darko Mihelic, an analyst at Cormark Securities Inc. in Toronto.

Canadian banks will probably underperform their U.S. peers, which are starting to see signs of retail banking tailwinds, said John Aiken, an analyst at Barclays Plc. Barclays cut its rating forCanadian Imperial Bank of Commerce to underweight from equal weight, and National Bank of Canada to equal weight from overweight, due to greater reliance on domestic retail banking. The firm raised the rating for Bank of Nova Scotia to overweight and for Royal Bank to equal weight from underweight.

The nation’s banks, ranked the world’s soundest by the World Economic Forum for five straight years, face a consumer- lending slowdown as Canadians struggle with record debt levels and a cooling housing market. Finance Minister Jim Flaherty reduced maximum amortization periods for mortgages last year to rein in borrowing. Bank of Canada Governor Mark Carney has repeatedly warned about carrying too much debt….”

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“Brazil’s inflation in mid-February exceeded economists’ expectations for the eighth consecutive month, adding pressure on the central bank to raise interest rates. Swap rates rose.

Prices as measured by the IPCA-15 price index rose 0.68 percent from Jan. 16 through Feb. 14, the national statistics agency said today. The median estimate from 38 analysts surveyed by Bloomberg was for a 0.62 percent increase. Annual inflation accelerated to 6.18 percent from 6.02 percent the previous month.

Inflation has exceeded the central bank’s 4.5 percent target for more than two years as Dilma Rousseff’s government spurred demand by extending tax breaks for consumer goods and pressuring banks to lower lending rates. With inflation running faster than Chile, Peru, Colombia and Mexico, the bank’s ability to keep its benchmark lending rate at a record low 7.25 percent to boost growth is being put to the test.

“Today’s number shows inflation is very worrisome, it remained rather high even with the reduction in electricity rates,” Newton Rosa, chief economist at SulAmerica Investimentos, said by telephone from Sao Paulo. “Inflation is distancing itself more and more from the center of the target and without a doubt could prompt the central bank to act.”

Swap rates on the contract maturing in January 2014, the most traded in Sao Paulo today, rose six basis points, or 0.06 percentage point, to 7.73 percent at 9:15 a.m. local time. The real strengthened 0.3 percent to 1.9664 per U.S. dollar….”

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“Italy’s economy will shrink again this year and unemployment will continue rising in 2014 to reach 12 percent, European Commission forecasts show.

In its fourth recession since 2001, Italy’s gross domestic product will fall 1 percent this year after a 2.2 percent decline in 2012, the Brussels-based commission said today in its latest forecasts. That’s deeper than the 0.5 percent contraction it predicted in November. The economy may grow 0.8 percent in 2014, the commission said.

Prime Minister Mario Monti’s austerity policies, aimed at shrinking the euro area’s second-biggest debt load afterGreece and spurring competitiveness, have been the focal point of the election campaign that ends tomorrow. With the economy shrinking, candidates including Monti have fought over how much to roll the squeeze back….”

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“The euro-area economy will shrink in back-to-back years for the first time, driving unemployment higher as governments, consumers and companies curb spending, the European Commission said.

Gross domestic product in the 17-nation region will fall 0.3 percent this year, compared with a November prediction of 0.1 percent growth, the Brussels-based commission forecast today. Unemployment will climb to 12.2 percent, up from the previous estimate of 11.8 percent and 11.4 percent last year.

Economic and Monetary Affairs Commissioner Olli Rehn said authorities must press on with reforms to end the region’s debt crisis and help the recovery. While “hard data” has been disappointing, there also has been more encouraging “soft data” that points to better times, he told reporters today.

A strengthening of the euro economy later this year may be led by Germany, where investor confidence rose in February to a 10-month high. The commission’s weak outlook reflects government austerity measures and efforts by companies and consumers to reduce debt. The European Central Bank said today banks will next week return 61.1 billion euros ($80.5 billion) of its second three-year loan, a measure introduced to aid lending at the depths of the financial crisis.

“We clearly have a decoupling with different recovery trends, with Germany certainly recovering at a much faster pace,” saidMarco Valli, chief euro-area economist at UniCredit Global Research in Milan. “We still have a lot of noise and volatility in the monthly data, but the bottom line is that the euro zone as a whole has already turned.” …”

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“U.K. government bonds fell, following the biggest drop in 10-year yields since September yesterday, as an improvement in German business sentiment undermined demand for the safest assets.

The pound rose for a second day against the euro after the European Central Bank said financial institutions will repay less of its second round of three-year loans next week than economists estimated, indicating European banks are wary of lending to each other. Sterling headed for a second weekly decline versus the dollar after Bank of England policy maker David Miles said the central bank should increase stimulus….”

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“German business confidence rose more than economists forecast to a 10-month high in February, adding to signs that Europe’s largest economy is gathering strength.

The Ifo institute in Munich said its business climate index, based on a survey of 7,000 executives, climbed to 107.4 from 104.3 in January. That’s the biggest increase since July 2010 and the fourth straight monthly gain. Economists predicted an advance to 104.9, according to the median of 38 forecasts in a Bloomberg News survey….”

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“The euro touched the lowest level against the dollar in more than a month after the European Central Bank said financial institutions will repay less of its three-year loans next week than economists forecast.

The 17-nation currency trimmed gains versus the yen as the ECB said 356 banks will hand back 61.1 billion euros ($80.5 billion) on Feb. 27, the first opportunity for early repayment of the second Longer-Term Refinancing Operation. The median forecast of economists in a Bloomberg News survey was for 122.5 billion euros. The Australian dollar rose the most in seven weeks versus the U.S. currency after central bank Governor Glenn Stevens said the bar for intervention was high.

“The LTRO announcement is lower than expectations and the euro has taken a bit of a hit on that,” said Bilal Hafeez, global head of foreign-exchange strategy at Deutsche Bank AG in London. “This could imply banks aren’t finding so much demand for credit in the euro area, which will weigh on the European growth picture. The ECB is unlikely to tighten policy this year, which weighs on the euro.”

The euro fell 0.1 percent to $1.3171 at 7:34 a.m. in New Yorkand touched $1.3157, the lowest level since Jan. 10. The common currency was little changed at 122.86 yen after strengthening as much as 0.8 percent. The yen weakened 0.2 percent to 93.27 per dollar.

The euro also declined after the European Commission forecast the region’s economy will shrink for a second year in 2013. Gross domestic product will contract 0.3 percent in 2012, compared with a November prediction of 0.1 percent growth, the Brussels-based commission said…..”

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“India’s central bank said companies must have an equity capital of 5 billion rupees ($92 million) and a 10-year track record before getting a banking license, as it begins taking applications for the first time in a decade.

Foreign ownership of new lenders will be capped at 49 percent for five years, the Reserve Bankof India said in a e- mail statement. Companies must apply by July 1.

The rules bring India a step closer to issuing new permits as part of a process that has been under way for more than three years. Lenders winning licenses will compete with State Bank of India (SBIN), the nation’s largest, and ICICI Bank Ltd. (ICICIBC) amid the slowest economic growth in 10 years.

The licenses are unlikely to be issued until late 2014 or early 2015, A.S.V. Krishnan, a Mumbai-based analyst at Ambit Capital Pvt. said by phone today.

India’s banking sector needs to be open to more private companies to improve access to banking services, former finance minister Pranab Mukherjee said in February 2010….”

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“The Australian dollar climbed after Reserve Bank Governor Glenn Stevens endorsed the current level of borrowing costs and signaled that the bar is high for currency intervention.

The so-called Aussie advanced versus all of its 16 major counterparts after Stevens said “there is a good deal of interest rate stimulus in the pipeline” in testimony today to a parliamentary committee in Canberra. It’s set for a five-day gain after five consecutive weeks of declines, the longest stretch in eight months. New Zealand’s currency climbed after a report today showed credit card spending increased for a third- straight month in January.

“Stevens’ comments are very firmly focused on what a strong currency means for inflation, rather than including any threat of action,” said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp. (WBC) “The tone of his prepared comments indicates no great urgency to cut rates in the near term.”

The Australian dollar rose 0.7 percent to $1.0314 as of 4:49 p.m. in Sydney. It’s gained 0.1 percent since Feb. 15, when it completed a five-week decline, the longest streak since June. New Zealand’s dollar, known as the kiwi, climbed 0.4 percent to 83.76 U.S. cents, trimming its five-day drop to 0.9 percent.

The rate on Australia’s 3-year government bonds, among the most sensitive to interest-rate expectations, rose 3 basis points to 2.88 percent. The 10-year yield was little changed at 3.54 percent.

Interest-rate swaps data compiled by Bloomberg show traders see a 69 percent chance RBA policy makers will keep the cash rate at 3 percent when they next meet on March 5, up from 62 percent at the end of last week.

Intervention Consideration…”

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“Reserve Bank of Australia Governor Glenn Stevens endorsed the current level of interest ratesand said he’d need to be confident the currency is “seriously overvalued” before considering intervention to weaken it.

“There is a good deal of interest rate stimulus in the pipeline,” he said today in semiannual testimony to a parliamentary panel in Canberra. “It is having an effect.”

The local currency and bond yields rose as Stevens said an overnight cash rate target at 3 percent is appropriate. The RBA chief reiterated that rate cuts are more likely than increases as he aims to rebalance a two-speed economy where mining regions in the north and west thrive while manufacturers, builders and retailers in the south and east struggle.

The so-called Aussie’s almost 60 percent climb in the past four years has hurt exporters. While rate settings aren’t seeking a particular exchange rate response, “they are being set with a recognition of the exchange rate’s effect on the economy,” he said.

“The other tool that may be available is, of course, intervention, and I think the truth is that the power of forces at work here, you need to be pretty confident that it’s seriously overvalued or that the market’s behaving in some quite irrational way before you would launch a large-scale intervention,” Stevens said in response to a lawmaker’s question. “It’s somewhat too high, but we’re not talking 50 percent or something like that.”

Zero Rates…”

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“China’s new home prices rose in most cities the government tracks for a third month, adding pressure on leaders to intensify policy-tightening efforts to prevent asset bubbles and inflation as the economy rebounds.

Prices climbed in January from December in 53 of the 70 cities, compared with the previous month’s 54, which was the most since April 2011, according to data today from the National Bureau of Statistics. Ten cities showed declining prices and seven were unchanged….”

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“Hong Kong doubled the sales tax on property costing more than HK$2 million ($258,000) and targeted commercial real estate for the first time as bubble risks spread from apartments to parking spaces, shops and hotels.

The stamp duty will increase to 8.5 percent of the purchase price for all properties, Hong Kong Financial Secretary John Tsang said at a briefing today. The Hong Kong Monetary Authority also tightened mortgage terms for commercial properties and parking spaces.

The government widened its property curbs to cover commercial transactions after earlier this week hundreds of people turned up to buy hotel rooms being sold by Li Ka-shing’sCheung Kong (Holdings) Ltd. (1) in the city, prompting a warning from the government. Home prices have doubled in the past four years on near-record low mortgage rates, an influx of mainland Chinese buyers and a lack of new supply….”

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“Softbank Corp. (9984), the Japanese wireless carrier that agreed to buy a $20 billion stake inSprint Nextel Corp. (S), wants to raise 370 billion yen ($4 billion) in bonds to help finance the acquisition.

Japan’s third-largest carrier priced 300 billion yen of 1.47 percent four-year notes that will go on sale to retail investors on Feb. 25, Nomura Holdings Inc. said in a statement today. The company also sold 70 billion yen of similar-maturity 1.467 percent debt, data compiled by Bloomberg show…”

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