Wednesday, June 16, 2010

Thoughts From Investing Legends

News flow is very bleak today. Spain bond spreads over bunds is the widest ever and this morning brought a string of weak economic data out of U.S. (though industrial production wasn't bad) but so far the markets are ignoring it. Like I said yesterday a close below the 200 day moving average in my mind makes it 50/50 the rally is over. Without that close the odds are high we are going to at least 1140.

Two interesting articles citing two investing legends.

The first from Reuters citing George Soros thoughts on Europe.

Europe faces almost inevitable recession next year and years of stagnation as policymakers' response to the euro zone crisis causes a downward spiral, billionaire investor George Soros said on Tuesday.


European banks had bought large amounts of the sovereign bonds of weaker euro zone countries for a tiny interest rate differential, Soros said.

"That's one of the reasons why the banks are so over-leveraged and why the German and the French banks own Spanish bonds," he said.

"Now ... they have a loss on their balance sheets which is not recognized and it reduces the credibility of those banks so the banking system is in serious trouble," he said.

And this article from Australia Hearald Sun citing GMO's Jeremy Grantham thoughts on the great Australia housing bubble.

The Australian reported he said yesterday that Australia had an unmistakable housing bubble and that prices would need to come down by 42 per cent to return to the long-term trend.

"You cannot possibly miss it," he said.

"The price of housing typically trades about 3.5 times of family income and in bubble it goes to 6 or . . . 7.5 (times).

"Australia is having one now. You are at near 7.5 times family income . . . which suggests you are twice the size that you should be."

Oh I am sure many people are missing it.

No comments: