If You believe you can, you probably can!

Monthly Market Commentary: September 1, 2014

My regular readers must have realized by now that I am not a great protagonist of “Big Government” with all its agencies (including the Fed) since it is thwarting economic growth. One of the reasons is that once government becomes excessively large, its laws and regulations also become extremely complex and hence cumbersome. I am stating my case once again with two fascinating true stories.

With few exceptions hedge funds have underperformed most indices including gold and longer-term Treasury notes in 2014. Particularly disappointing was the performance of “Global Macro Hedge Funds” and “Equity Long/Short Hedge Funds.” I am trying to explain the causes of this underperformance.

Finally, veteran investor Kahn observed that, “I would recommend that private investors tune out the prevailing views they hear on the radio, television and the internet. They are not helpful. People say 'buy low, sell high’, but you cannot do this if you are following the herd. You must have the discipline and temperament to resist your impulses.”

I think most investors tend to forget these very simple principles, which will over time lead to a satisfactory performance.

I am enclosing three reports:

Michael Gayed explains that, “The risk of a stock market correction cannot be determined by looking at a chart of the S&P 500, the Russell 2000, or with any combination of moving averages. The source of any kind of stock market correction is ultimately going to come from junk debt, and a reversal of this incredible search for yield that has resulted in the belief that risk no longer exists in a ‘don’t fight the Fed’ world.”

Kenny Schachter, our advisor about contemporary art writes about artist Philippe Vanderberg’s Beautiful Misery. He opines that, “The art business in its present-day form didn’t exist when I started in the sixties. But the universe of the studio must be distinguished from that of the art scene. They are two opposed worlds, independent from each other…..”

I am enclosing also the latest newsletter of the Child’s Dream Foundation, which I, and my readers indirectly support (www.childsdream.org).

Finally, never forget that, “The most important persuasion tool you have in your entire arsenal is integrity”
(Zig Ziglar). 

With kind regards
Yours sincerely
Marc Faber

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