Friday, December 30, 2011

Marc Faber Bearish

"I am convinced the whole derivatives market will cease to exit. Will become zero. And when it happens I don't know: you can postpone the problems with monetary measures for a long time but you can't solve them... Greece should have defaulted - it would have sent a message that not all derivatives are equal because it depends on the counterparty."

 And on the long-term future: "I am ultra bearish. I think most people will be lucky if they still have 50% of their money in 5 years time. You have to have diversification - some real estate in the countryside, some gold and some equities because if you think it through, say Germany 1900 to today, we had WWI, we had hyperinflation, WWII, cash holders and bondholders they lost everything 3 times, but if you owned equities you'd be ok. In equities in general you will not lose it all, it may not be a good investment, unless you put it all in one company and it goes bankrupt." As for gold: "I am worried that one day the government will take it away." As for the one thing he hates the most? No surprise here -government bonds.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Friday, December 23, 2011

Perma-Bear Marc Faber: U.S. Equities Not Terribly Expensive - Wall St.Cheat Sheet

Marc Faber, publisher of the Gloom, Boom & Doom Report spoke to Bloomberg TV and said that U.S. equities are not “terribly expensive” and that he thinks the euro will survive.

Faber on his latest report:

“It’s actually quite gloomy but if you’re very gloomy what do you invest in: Treasuries, Italian bonds or commodities or equities?  I happen to think U.S. equities are not terribly expensive, so relatively speaking to other assets, they may for a while actually do quite well.”

On the market now:

“Right now, the market is in neutral territory. It was very oversold on October 4th when the S&P dropped to 1,074. Now around 1260, the upside in my opinion will be between 1,280 and 1,350 because there’s a lot of supply around that area. But if there is some good news coming out of Europe, and good news would simply mean postponing the problems for another few years with some kind of money printing operation, either by that ECB or IMF or EFSF, [that] lift stock prices higher.”

“[Postponing problems] is not good news, but it is better news than if the whole eurozone falls apart. It gives some time to maybe find better solutions. I doubt they will be found, but with money printing you can hide a lot of things and you can postpone problems as we have seen in the U.S.”

On the outlook for the euro:

“I think the euro will survive, the question is in what form. It may survive without the weaker countries or it could survive theoretically just as a currency aside from local currencies. You would have in France and Italy and Spain and Greece, local currencies and…the dollar. So, I could travel anywhere in Europe and still pay in euros.”

On whether he’d rather own euros or dollars:

“I have a very special stock tip for you. The symbol is g-o-l-d (NYSEARCA:GLD). That is what I prefer to hold. Both the euro and the dollar are long-term undesirable currencies, especially given zero interest rates in the U.S. Equities to some extent become like cash because they become a store of value compared to cash at a zero interest-rates. Paintings become a store of value, stamps become a store of value.”

On emerging markets:

“There is close correlation between all markets in the world. This year, the U.S. has grossly outperformed the emerging markets   In Asia, we’re down between 15% and 25% in markets. In Eastern Europe, even more. The U.S. this year is a wonderful market relative to the rest of the world. ”

“I think this outperformance may go on for a while. Some emerging markets could rebound more strongly than the U.S. because they are more oversold. Like India, the currency is down 18% since July and the market is down 22%.  Currency adjusted, the market has been extremely weak and is oversold. It could rebound somewhat here, but forget about new highs. It’s not going to happen anytime soon.”

On China:

“The reason I’m not very keen on China at the present time [is because] we had a credit bubble, we still have artificially low interest rates and a huge fiscal deficit in orders words artificial stimulus. That’s coming to an end. Yes, the government can further stimulate and slash interest-rates again and reduce reserve requirements, but it will just postpone the problem and aggravate the problem in my opinion.”

“When you have an economy like China that becomes so big so quickly, you can have a more meaningful setback. If the U.S. economy grows at 3% or contracts that 3%, it has no impact on the price of copper to speak of….In the case of China, whether the economy grows at 10% or 5% as a huge impact on the demand for iron ore and copper and aluminum, steel and coal. The Chinese economy today has a much larger impact on the rest of the world than is generally perceived economically speaking.”

View the original article here

Thursday, December 22, 2011

No need for money exchange, greece can use drachma

Faber comments on Greece.
"It's going to be painful, very painful, But rather than to intervene into something that is not going to work in the long run … [intervention] is the wrong medicine." Mentalities in Greece, Portugal and Spain are totally different from that found in Germany, making forging and carrying out agreements difficult.

Greece could conduct transactions in drachma and euros or dollars. "The same is true in Latin America." says Faber. "I pay in dollars, I never exchange any money."

Marc Faber vs Jim Rogers

Marc Faber and Singapore’s Jim Rogers disagree on commodity prices and China. Read below their take on these markets.

Marc Faber: “Well if we define a bubble as a period of excessive growth and artificially low interest rates, then China had a huge bubble. Usually bubbles are not deflated by a soft landing, but by a hard landing and this concerns me, actually, much more than the European  situation.”

If China’s rapid growth slows “meaningfully” or crashes, “it will have a huge impact on the demand from China for raw materials, for commodities,” according to Faber, which “will impact Australia, Africa, the Middle-East and Latin America” and could create a “vicious spiral on the downside” to one of the  only few outperforming sectors of the world economy—commodities.

Jim Rogers: “Corrections are the normal way of all markets. Marc still does not understand China. There are going to be several hard landings in the next few years, but China’s will be less hard overall than others such as Greece, U.S., et al,” and Mr Rogers added that he believes China’s economy will undergo some busts in some sectors but will be offset by booms in other sectors.

Rogers also cited the super bull market for gold, which crashed in price by 50 percent in 1974 following a six-fold move in the  price of the yellow metal to $200 from its pegged price of $35 per the ounce in  1971.  After reaching as low as nearly $100 following the crash, the gold price continued its bull market with a 750 percent gain during that six-year  period.

Wednesday, December 21, 2011

Investors not shying away from solar power - San Francisco Chronicle

Stion, a new solar manufacturer in San Jose, has raised a total of $234.6 million from venture capitalists and other investors.

Solyndra notwithstanding, some investors are still willing to bet big money on solar power.

Google, for example, reported Tuesday that it will invest $94 million to help build four solar power plants near Sacramento.

And Stion, a San Jose startup that makes thin-film solar cells, said Tuesday that it has raised another $130 million in private investments, much of it from Korean private equity funds.

The high-profile bankruptcy of Fremont's Solyndra in September prompted intense scrutiny of all manner of solar companies and projects, particularly those involved in manufacturing. A flood of inexpensive solar cells pouring from new factories in China has undercut many American solar businesses, pushing several into bankruptcy.

But the plunge in solar-cell prices has been a boon to developers of solar power plants.

The four plants that Google will fund - along with investors Kohlberg Kravis Roberts & Co. - will be built by San Francisco's Recurrent Energy, a subsidiary of Sharp Corp. The plants will sell their electricity to the Sacramento Municipal Utility District and should begin operations next year. Three are already under construction.

"The declining cost of solar has really driven demand for us, in our business," said Arno Harris, Recurrent's CEO. "I would say unequivocally that there's a ton of interest in investing in these projects."

Google has already invested in solar-thermal power plants, which use mirrors to concentrate sunlight, generate steam and turn turbines. But the Recurrent project marks the first time the Internet search giant has invested in power plants that use photovoltaic panels, which generate electricity directly from sunlight.

Google's clean-energy investments have now topped $915 million. The company reported in November that it was pulling the plug on an ambitious four-year research effort to make renewable power cheaper than coal, but it has not stopped investing in the sector.

Stion, meanwhile, has now raised a total of $234.6 million from venture capitalists and other investors. The company will use some of the most recent funding to expand its solar-module manufacturing facility in Hattiesburg, Miss.

Stion also will create a subsidiary in Korea to build a factory there, supplying thin-film solar modules to growing markets in Asia. One of the lead investors in Stion's new financing round is Avaco, a Korean company that makes thin-film processing equipment.

"Solar has always been a global business, and this investment enables Stion to address market demand in Asia and beyond," said Chet Farris, Stion's CEO. "We have added world-class investors as well as a strategic partner with deep technical expertise."

Wednesday, December 14, 2011

Jim Rogers says Faber is Wrong About China

Jim Rogers thinks Marc Faber has got it wrong about China, when he says the country is possibly headed for a hard landing, which would lead to a devastating impact on commodities around the world.

"Marc still does not understand China. There are going to be several hard landings in the next few years, but China’s will be less hard overall than others such as Greece, U.S., et al," Rogers told CNBC in an email.Rogers says some parts of China's economy will have a "hard landing" but other parts will continue to boom. He says the commodity market will have a correction, but rebutted Faber's view that it would be devastating."Yes, there will be consolidations in the commodity bull market just as all markets have consolidations," he said. "In 1987, stocks declined 40-80 percent worldwide, but it was not the end of the secular bull market in stocks.

"Rogers said he was still long commodities, adding that gold went up 600 percent in the 1970s and then corrected by 50 percent scaring a lot of people. "It then continued its secular bull market and rose 850 percent. Corrections are the normal way of all markets."According to Faber, Rogers' bullish call on commodities is misplaced. "If I was always bullish about commodities and completely missed out on the crash in 2008, then obviously, having tied essentially my reputation to commodities, I'd continue to be bullish," Faber said.

But Rogers said Faber had got it wrong when it came to his call in 2008. "I proclaimed repeatedly far and wide that one should not buy commodities in the run up phase. I also explained that I was not selling mine since we were [and are] in a secular bull market," Rogers said."I explained that my shorts of Citibank, Fannie Mae, all the investment banks and homebuilders, plus my long position in the Japanese yen would protect me in any sell-offs. When one’s shorts decline 90-100 percent, it is a good year even when one’s longs decline," Rogers added.

According to Rogers, Faber is the one who has made many wrong calls, arguing that he "totally missed" the secular bull market in commodities that began in early 1999."Also back in those days, he and his friends proclaimed often that China was a mess and would continue to be so," Rogers said. "They all were wildly excited about Russia. Some of his friends even left China to start operations in Russia. We all know how that resulted."

Tuesday, December 13, 2011

Safe to close the EU– Marc Faber

Investment analyst and entrepreneur Marc Faber spoke with FOX Business Network’s (FBN) David Asman and Liz Claman about the European debt crisis and attempts by the European Union (E.U.) to restore fiscal austerity. Faber said the best course of action would be to “dissolve the EU” and he blamed “bureaucrats” for not keeping the “3% maximum fiscal deficit and government debt to GDP maximums” in order to remain fiscally sound. Faber said the EU should “let the countries default” and while it “is going to be painful” it is better than an intervention that “is not going to work in the long run.” Excerpts from the interview are below, courtesy of Fox Business Network
On the whether the European Union was destined for failure:
“If they had kept the agreement 3% maximum fiscal deficit and government debt to GDP maximums, it could have worked. Why didn’t it work? What do these bureaucrats in Brussels do besides eating well and sleeping and sharpening their pencils? They are useless bureaucrats that brought about the financial crisis worldwide.”

On whether states in the European Union would be willing to give up their sovereignty to regain fiscal austerity:
“I doubt they are willing to do that. The best would be to dissolve the EU. Let the market sort this out. Let the countries default. It is going to be painful, but rather than intervene into something that is not going to work in the long run.”

On Germany rejecting the bailout proposal:
“Eventually they will come to some kind of compromise and there will be some kind of money printing.”

Faber Says He Bought Hang Seng Bank, Sun Hung Kai Properties

Marc Faber, publisher of the Gloom, Boom and Doom report, said he increased his investments in Hang Seng Bank Ltd. and Sun Hung Kai Properties Ltd. because their dividend yields will help them beat government bonds and cash.

“I happen to prefer to play China through some high- quality companies,” Faber said in an interview on Bloomberg Radio today. “They have reasonable dividend yields and they’re high-quality companies.”
Faber said global equities have fallen farther than warranted and he prefers Asian stocks even considering economic growth concerns in China. He bought Sun Hung Kai, Hong Kong’s biggest developer by market value, and Hang Seng Bank, the Hong Kong lender majority owned by HSBC Holdings Plc, because they may benefit from growth in the world’s second-largest economy.
Sun Hung Kai and Hang Seng Bank have an indicated gross dividend yields of 6.91 percent and 5.65 percent, respectively. The Hang Seng Index has a dividend yield of 3.81 percent, while the Standard & Poor’s 500 Index yields 2.27 percent.

“You’re better off by investing in equities than in government bonds and in cash for the next 10 years,” Faber said. “You have to live with volatility,” he said. “I’m not all that bearish about stocks.”

Marc Faber Fears Gold Confiscation From The Government

As far as how high the price of gold (NYSEARCA:IAU) can go, it depends upon who has control of the printing presses, according to  Faber.  Right now, he said, the power hungry in Washington won’t let gold bugs down,  as each sign of a lurking systemic collapse or stock  market meltdown has been propped up by the Fed.

“If I could show you a picture of Mr. Ben Bernanke and Mr. Obama, then I  would have to say that the upside is unlimited,” said Faber.

And the downside risk to gold rests on the shoulders of central bankers, as  well, as the Fed, and now the ECB, will go to any length to feed the global  financial system with creative and backdoor credit expansion mechanisms.

“In my view the downside exists if money printing by government is  insufficient to revive or maintain credit growth at this level and you have a credit collapse,” he said, and also noted that competing asset classes would  most likely fall more, thus retaining gold holders purchasing power during a bona fide deflationary collapse.

But, first, the globe will undergo roaring inflation, according to Faber, then, second, the Robert Prechter, Gary Schilling and David ‘Rosie’ Rosenberg  deflationary spiral scenario will play out.

“One day there will be a credit collapse, but I think we aren’t yet  there.  Before it happens they’re going to print,” Faber speculates.  “And when printing as it has done in the last 12 years in the U.S. leads to  discontent populations, because when you print money then only a few players in  the economy that benefit, not the majority of households.”

However, Faber warns that the gold market’s extremely volatile, a normal  symptom of a fiat-backed financial system inducing the public into  schizophrenia—of clinging to the familiarity of a 67-year-long financial system,  moving to periods of fearing total loss at the currency graveyard—will chase  investors out.

“A 30 percent correction or 40 percent correction cannot be ruled out, but as  I maintain, again and again, I’m not going to go and sell my gold,” Faber said  forcefully, as he explained that owning gold is should be viewed as the ultimate  insurance policy to cover financial calamity, a viewpoint shared by famed Dow Theory Letters’

Whether the gold price is in  bubble territory, as a few prominent analysts claim, Faber doesn’t see it that  way, at all.  In fact, he said, very few people own it or talk about  it.  History clearly demonstrates that every bubble will suck in the very  last investor before collapsing under its own weight.

Besides, the powerful propaganda machine, which endlessly repeats the party  line of a system predicated on a fiat system of dollar hegemony, will not allow  cheerleaders of the gold bugs to expend too much airtime away from Wall Street  advertisers and obvious shills (to the trained eye) of CNBC, Bloomberg and other ‘mainstream’ media.

So far, the propaganda has only delayed the inevitable rush into gold—the  next and longest stage of the bull market.

“I have one concern about gold.  I was recently on Taiwan and South  Korea, at two large conferences, nobody owned any gold,” Faber said.  “Gold  is owned by a minority, even in the U.S..  Most people in the U.S. have no clue what an ounce of gold is or looks like and so forth.  The same in Europe.”

But as the ‘wealthy’ begin to acquire gold, the chasm between the ‘rich’ and  poor will widen substantially, not just between the 1 percent and the rest, but between the upper 10 percent and the growing-poorer middle class.  That’s  when the democratic process turns ugly, morphing from a society of rights to a nation ruled by a tyrannical banana republic political dynamic.

Populist political leaders vying for votes from the masses will opt to score easy points with the 90 percent have-nots at the expense of the haves, with  draconian taxes on assets such as gold and silver held by the haves, not just through taxes on capital gains, but maybe even through a wealth tax on the holdings.

“This is what the tyranny of the masses can do,” Faber explains.

“You can make it, advertise it to the masses by just taking away from a few  people, he added.  “I’m worried most about is the case of gold, not the price; that I’m not worried . . . but I’m worried about the government taking it  away.”

The interview moves on to the discussion of the bull rally in gold and silver (NYSEARCA:SLV).   After 11 years of continuous gains in the price of gold, why, then, do so few  investors hold the metal?

Faber explains that there remains too many deflationists holding to their  thesis of a tumbling gold  price, though, as Faber suggests, there has been no factual evidence to  support the argument since the pop of the Nasdaq bubble of 1999.

What deflationists point to as proof of their contention, declining housing  prices and stock prices, are really manifestations of inflation moving out of  those asset classes into others, such as commodities,  precious metals and overseas assets, of all kinds.  Inflation, Faber has  stated in the past, doesn’t move all asset prices up simultaneously.

“I don’t hear about gold.  I lived through the last gold bubble between  1978 and January 1980.  The whole world, whether you were in the Middle  East or in Asia or Europe or in America was trading London gold, buying and  selling every day,” he recalls.  “This has not happened yet, and it hasn’t  happened.  Your friends, the deflationists, have been telling people that  gold will collapse to $200 an ounce for the last 10 years and that’s it was in a  bubble.

“[They] said it [gold] was in a bubble at $500; they said it at $600, and  they’re still maintaining it.  So a lot of people they don’t own it; they  bought it and sold it again.  But in the meantime, gold has moved into sold  hands.

“In my case, I’m not going to sell my gold unless I have to.  In other  words, everything else is bankrupt, bond market, stock  market, cash and real estate.”

Faber also points out, even though the price of gold appears to look like and  quack like a bubble duck, with the price of the yellow metal sporting gains of  700 percent since the year 2000, the monetary base and credit creation by the  Fed has been so large for so long, the gold price has much more room to move  higher to reach ‘fair value’.

“I can turnaround and say, look if I consider the price of gold, an average  price in mid-1980s, then we take $400 or $450, or whatever it is,” Faber  explains, “and we take the monetary base at that time; we take the international  reserve; we take into consideration that China hasn’t really begun in earnest to open up; and we haven’t had this wealth expansion in emerging economies, and so  forth and so on.  Then, I can maintain, well, actually the gold price is  not up; it’s just the price of money, or the value of money, has declined so  much against a stable anchor.  So I don’t think that we’re in a bubble  stage.”

For the newcomers to the gold market, Faber stresses, “Don’t buy it on  leverage.”

Reiterating his previous comments during the interview, Faber leaves the FSN  listener with his overriding observations of a U.S. government (other Westerner  countries, as well) that shows signs of eventually taking the next steps in its  fight to maintain a hopelessly broken political and financial system:  confiscation, not necessarily though a highly unlikely and dangerous  door-to-door search of proof of non-paid taxes on a citizen’s bullion stash, but  through confiscatory levels of taxation and possible criminal penalties to those  who daring to escape the Marxist or Fascist regime’s grip on power over its  population’s wealth.

“My only concern with the gold insurance is government will take it away,” Faber concluded.  “That is my only concern.  I’m not concerned about the price.

“I also have a concern generally speaking about our capitalistic system.  For sure people with assets, they will be taxed more heavily,  that’s for sure.”

Monday, December 12, 2011

US Not Terribly Expensive, Euro will Survive

“It’s actually quite gloomy but if you’re very gloomy what do you invest in: Treasuries, Italian bonds or commodities or equities?  I happen to think U.S. equities are not terribly expensive, so relatively speaking to other assets, they may for a while actually do quite well.”

I think the euro will survive, the question is in what form. It may survive without the weaker countries or it could survive theoretically just as a currency aside from local currencies. You would have in France and Italy and Spain and Greece, local currencies and…the dollar. So, I could travel anywhere in Europe and still pay in euros.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Thursday, December 8, 2011

Marc Faber, Jim Rogers not selling gold, but it’s not all good news forbullion

Investment gurus Jim Rogers and Marc Faber in recent interviews seem to agree on the dynamics in the gold market. Rogers says he’s not selling his gold and Faber says there is no bubble. But that doesn’t mean bullion is not still in a correction phase.

Investment Week quoted legendary global investor Jim Rogers, co-founder of the Quantum Fund with George Soros now based in Singapore, on the outlook for gold on Monday:

“It has been correcting for the past three months so it is overdue for a stronger correction, but I have no idea by how much. It is very unusual for any asset to go up for 11 years in a row with no correction. I own gold and I am not selling my gold.

The price at which I buy will depend on the circumstances. If it is going down because the world is going bankrupt then it would need to be priced at $900 for me to buy it. If there is an artificial occurrence then maybe between $1,200 and $1,400. It depends on what is going on in the world.”
Last week Bloomberg interviewed Marc Faber, fund manager and author of the widely followed ‘The Gloom Boom & Doom Report’ based in Chang Mia, Thailand.
Faber tells how he recently asked a room full of Asian investors if they owned gold and only a one said yes, which signalled to him that gold was not in a bubble because “if [he] asked the same question about Yahoo! type of stocks ten years ago everybody would have put up their hands.”

Gold’s spike above $1,900 an ounce was a “huge move” and bullion was “still in a correction phase” although it has to be remembered that for the year gold is still up 20%. Faber commented on the record gold price in early September saying at the time “when you buy gold, it’s an insurance against systematic failure and problems in the financial markets.”

Thursday, December 1, 2011

Marc Faber Sees Signs Of A Major China Slowdown Everywhere He Looks In Asia

There's something that worries Marc Faber more than Europe: China. Faber warned of a China crash in an interview today with King World News.

He says the slowdown is evident from his home in Chiangmai, Thailand:

"In China, if the economy slows down meaningfully or if there is a crash, it will have a huge impact on the demand from China for raw materials, for commodities.  It will impact Australia, Africa, the Middle-East and Latin America...

"I’m sure the economy (of China) is softer than official statistics would suggest and probably the government will start to print money at some point.  So maybe stocks will rebound here because of money printing, but again, it won’t help the economy....

I live in Asia and all I can say is I observe a meaningful slowdown in business activity recently and increasing corporate earnings that disappoint...

“There’s a huge capital flight [from China], there’s no question about this.”

Marc Faber Tells Fox Business Not to “Expect Too Much” from the CurrentMarket Rally

The rally came from a very oversold level. We have a very strong support on the S&P between 1100-1150. And usually the December month is a strong month as well as January so we have seasonal strength and oversold conditions and we can rally, but I don’t think you should expect too much. I think we’ll get into overhead resistance when the S&P rallies another 5% or so between 1250-1300.

“The optimism arises from some sort of a bailout and monetization. But if you look at the market, OK it’s up, but gold is also up and oil is up. Like in the US, we monetized time and again and it’s just postponing the problem. In the end, crisis will eventually happen. The problem of the Western world is that there is too much debt and too many unfunded liabilities.”

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Wednesday, November 16, 2011

Stocks Beat Bonds over time: Faber

Money-printing central banks such as the US Federal Reserve will keep prices elevated for risky assets like stocks. "When you print money everything goes up at different times, different asset classes," Faber said in a live interview. "I think that stocks may still continue to go up, and I would rather own equities than government bonds for the next 10 years."

Printing money is the way global governments will evade debt crises such as the one that is gripping Europe now, he said.

European ministers are convening to devise a way for Greece to get out of its debt jam, with a likely large bailout fund on the way for nations in similar distress as well as a separate allocation toward recapitalizing banks holding the bad debt.

Policymakers are facing criticism, though, for forestalling the crisis rather than solving it.
"The end crisis will be postponed until the sovereigns go bankrupt," Faber said. "They can postpone the end-game endlessly...say another five to 10 years. Each money-printing exercise brings about unintended consequences. These unintended consequences are higher inflation rates than had no money been printed."

The Fed, for one, has expanded its balance sheet to nearly $2.9 trillion in an effort to boost the economy through buying various forms of government debt. Faber has been a frequent critic of the
quantitative easing practices, which he thinks will continue.

But he said he's trying to maintain a positive outlook despite the dim view he takes of the policy approaches thus far.
"I think I'm very constructive and I'm a great optimist in life. Otherwise I would commit suicide in view of the kind of governments we have nowadays," Faber said. "For sure they will take wealth away from the well-to-do people one way or the other, and from the middle class they will take it away through inflating the economy and lowering the standard of living."
The injections of new money supply also are harming the global economy and causing bubbles, one of which is in Chinese real estate, he added.

"If the Chinese bubble bursts one day, which inevitably will happen — maybe not tomorrow, maybe in three months, maybe in three years — when it happens it will have devastating consequences for the global economy," he said.

Monday, November 14, 2011

Peter Schiff makes bold call

Sentiment for a euro swan dive must stand at a record; it must dwarf any negative reading the U.S. dollar ever had. No fresh data are available on the sentiment for the USD:euro cross, but the chatter everywhere about the imminent demise of the EU is truly deafening.

The Mr. Magoo of Wall Street, Euro Pacific Capital’s Peter Schiff appears to have not noticed.  As the crowd runs from talking nice things about the euro, he just muddles along with his prediction of a renewed U.S. dollar weakness against the euro—and sterling, yen, Swiss franc and the other small-weighted currencies making up the UDX. Sign-up for my 100% FREE Alerts!

“Our short-term target for the euro, maybe by year end, will be up near 1.48,” Schiff told KWN on Oct. 25.  “I think that’s going to catch a lot of people off guard who were writing the obituaries for the euro, to see the euro approaching the 1.50 level.  The dollar index should be headed back down to the 72 level.”

Schiff appears to be completely alone with that call.  Even Jim Rogers and Marc Faber cannot be quoted about the overly negative sentiment in the euro.

That should trouble contrarian investors; it reminds us of similar negatve sentiment of the U.S. dollar prior to Lehman’s death.  At that time, the USDX hovered at an all-time low of 72 in March 2008, scaring the bejesus out of the financial media of an imminent collapse of the dollar.

And like magic, the USDX soared approximately 24 percent to 89 by March 2009—a year latter, amid the Lehman Armageddon and talk of ‘deflation’ of 2009.  Jim Rogers and Marc Faber were among the handful of market savvy observers who warned of too many traders on one side of the boat before Lehman.  Not so today.

So, fast forward to today; it’s the euro’s turn.  And like clockwork, the media’s favorite apologist for the dollar among the gold community, Dennis Gartman, told Bloomberg News on Nov. 4, “The driving force in the gold market is the problems in the euro,” Gartman said in a telephone interview. “Central banks in Europe and individuals will want to lower their euro holdings and buy gold since no one knows what is happening to the euro. The euro is heading towards parity once again.”

Friday, November 11, 2011

Marc Faber believes the Fed will keep rates near zero longer than 2013

The Fed will keep rates near zero even longer than 2013.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Friday, November 4, 2011

Facts about economy-markets disconnect

Veteran investor Marc Faber has made a very interesting observation in his latest Gloom Boom and Doom report that conflicts this basic principle. Faber agrees that economic and stock market cycles have moved in tandem in the past. But he makes a case for them not being so closely linked in the future. The reason being the concentration of wealth, and liquidity if you will, in the hands of a few. Faber argues that despite poor economic fundamentals in the developed markets, equity and other asset classes may not suffer too much. The premise of this argument is that since the 1980s, wealth inequity has increased significantly. According to him, currently the top 1% percent of households in developed economies earns 20% of all incomes. Also they own 33.4% of the total net worth of these economies. Hence, even though consumer sentiment is controlled by 80% of the population, just 1% of the population controls the money supply and fiscal deficits. The latter in turn largely determine the value of assets and exchange rates. With economic uncertainties like lower income growth and unemployment not impacting the moneyed class too much going forward, Faber believes that equity investing may remain unaffected.

While the logic of Faber's comment cannot be sidelined, we believe that his observation about economy and markets getting disconnected is a theoretical misnomer. For even the 1% population does get affected by the poor sentiment amongst 80% of the population. And when that happens, money supply deserts risky asset classes likes stocks and chases safe returns. At such times most rich households too prefer to maintain their wealth in cash or safe and liquid assets. Hence income inequality may be a reality in developed and developing markets alike. But neither can remain insulated from the downsides of economic cycles by the virtue of wealth concentration.

Sunday, October 30, 2011

Printing Money and China Real estate

When you print money everything goes up at different times, different asset classes," Faber said in a live interview. I think that stocks may still continue to go up, and I would rather own equities than government bonds for the next 10 years.
Printing money is the way global governments will evade debt crises such as the one that is gripping Europe now, he said.

The injections of new money supply also are harming the global economy and causing bubbles, one of which is in Chinese real estate, he added.
"If the Chinese bubble bursts one day, which inevitably will happen — maybe not tomorrow, maybe in three months, maybe in three years — when it happens it will have devastating consequences for the global economy," he said.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Monday, October 17, 2011

Marc Faber: Go Long The Dollar, But Occupy The Federal Reserve

Faber expects volatility to continue (not necessarily means a downside to the markets), but dollar should be a long trade as whenever there's a bubble, e.g. tech bubble, housing bubble, stocks bubble, and commodities bubble, usually after the bubble bursts, there typically will be a 10-15 years of volatility before markets settle down to reignite an uptrend.

"Despite the fact that the [European Central Bank] and the European government will flood the market with liquidity to bail themselves out, global liquidity is tightening.....Whenever global liquidity is tightening it is bad for asset prices but good for the U.S. dollar, as was the case in 2008."

He thinks there had been far too many "interventions" by the Western governments, 
where the total share of the economy that's government owned or sponsored have grown tremendously,.  Add to that, the high levels of debt, it is almost impossible for the developed countries including Japan, the U.S. and Western Europe to grow.  
When the economy stagnates over a long period of time, people ("the 99%) seeking answers start to go after the "top 1%" minority like Wall Street, which took advantage of the system for profits.  However, it was Washington and the lobbyists who created the system to begin with.  So from that perspective, Occupy Wall Street should move to DC and Occupy the Federal Reserve on the way, Faber laments.

His solution for the U.S. economy - Flat tax on everybody "would be a good measure", and reducing the restrictive regulatory environment to encourage business to start investing again.  Moreover, the lack of savings is the biggest problem of the U.S.  Essentially, the U.S. will have to work more, and get paid less to get out of this mess.

EconMatters Commentary 

Dollar, despite the Federal Reserve's continuous QEs and twist, is still holing up well attesting to the dangerous state of the world's finance and economy.  So in the near term, dollar could be still king, but with a high degree of uncertainty longer term, depending on how the Euro, the closest competing currency, will come out from this seemingly ever expanding EU sovereign debt crisis.

As to the economic and fiscal state of the U.S., we are not as pessimistic as Faber, but have written many times that the U.S. has many structural issues in the labor market, and the vital decisions of the country are  and will be made based on politics, and by politicians who can't walk the talk.  If the U.S. does not start to make some fundamental changes, it could eventually prove Faber right.  

Towards the end of the interview, Faber made reference to Lee Kuan Yew, the first Prime Minister of the Republic of Singapore for three decades.  Lee Kuan Yew retired in May 2011, but has remained one of the most influential political figures in South-East Asia.

In the three decades during Lee's tenure as PM, the country has been transformed from a developing economy to one that's the most developed in Asia.  However, the "Singapore Model" is based partly on a socialistic structure (e.g., single political party, state planning, and state-owned enterprises).

As to the current economic and fiscal state of the U.S., we are not as pessimistic as Faber, but have written many times that America has many structural issues within the labor market and too many of the country's vital decisions are and will be made based on politics and by politicians who can't walk the talk.  If the country does not start to make some fundamental changes, it could prove Faber right.  

Dr. Doom Roubini, in an interview with Business Day less than a month ago, also noted Singapore could be one country that he was not averse to state involvement in the economy and held up Singapore as an economy that might be shielded from global shocks.

So we find it quite interesting that as a result of the global financial crisis, more and more Western economists are now moving towards socialism, while the more socialist countries such as China are becoming more capitalistic.  Could this be the New World Order underway? .

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Sunday, October 16, 2011

Gloom, Boom & Doom Publisher Faber on Bloomberg Surveillance

TOM KEENE, BLOOMBERG SURVEILLANCE: The Gloom, Boom and Doom Report, one of our more popular guests, Marc Faber. Good morning.

MARC FABER, PUBLISHER, GLOOM, BOOM & DOOM REPORT: Yes, good morning. How are you?

KEENE: Well, I think I'm good. We've got the Volcker Rule out and banks under siege. Do you care if we have a new banking structure? Do you care that our financial system needs to become more conservative?

FABER: I think it is a very good move that banks become far more conservative because banks, when you think of it, your salary is probably paid into a bank account and you expect that money to be available to you at any time. So the bank has a fiduciary function, and it has a certain social function. And with your deposit, the banks should not go and speculate.

So my proposal is basically to ring fence the depositors, and the domestic operation that is the traditional bank, and then farm out into separate entity what the bank does with money in terms of hedge fund activity. There are a lot of banks they are just like hedge funds. They take huge positions here and there, and then we have losses - as occurred for UBS in London, that basically should not be your concern as a depositor.

KEN PREWITT, BLOOMBERG SURVEILLANCE: Well, Marc, we've had more than one complaint here from guests on Bloomberg Surveillance that they won't invest in banks because the financial reports are not transparent enough. You cannot figure out what is going on in there.

FABER: Well, basically, we had the stress test in Europe and out of 90 banks, only six or seven were deemed to be unsafe. The safe banks, including Dexia, are not safe because the stress test was not properly conducted.

PREWITT: Well, is that the case here in the U.S., too?

FABER: Well, it is very difficult to really assess the quality of earnings of banks. But I am told by experts here in the U.S. that the auditors have become very, very tough and that banks basically are at their lows recently. JPMorgan was at less than $27. That $27 now is $32.

And at their lows, basically the banks were selling below book value. So some people say that American banks are actually a very good investment opportunity at the present depressed level.

KEENE: Marc Faber with us, the Gloom, Boom & Doom Report. Marc, I want to switch gears here. You have a fabulous chart courtesy of the Financial Times, which really describes the gilded age, the plutocracy that we are in now. It is the ratio of income of the top one percent, -


KEENE: - to the bottom 90 percent going back pre-Depression. It is absolutely stunning. Historically, with you being such a great student of our economic history, is it normal where we are now? Or is it normal where we were in the fifties, the sixties and the seventies?

FABER: I think normal is very difficult to define, but very clearly it is not normal where we are now. But we cannot blame Wall Street and well-to-do people for the mishap, for this ratio to have exploded on the upside. We have to blame essentially expansionary monetary policies that favor assets. So you have low consumer price inflation, you have no wage inflation.

In fact, the problem in America is that real wages, real compensation has been down since the 1970s. But at the same time, asset prices, equities, real estate and so forth have gone up dramatically, and that favors people who have these assets. And so the ratio expanded and you have now a record wealth, inequality, and income inequality.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Wednesday, October 5, 2011

October 2011 Gloom Boom Doom Report outlook:EU Debt Crisis, A China Meltdown

Marc Faber is out with the latest issue of his famous Gloom, Boom and Doom Report, which is always a must read for serious investors. Unlike most of the other talking heads, Faber has an excellent track record. He correctly predicted the top in the equity markets in Nov. 2007, and caught the bottom in March 2009, making his subscribers a lot of money. Here is a summary of his October 2011 report:

Stocks--Yes, stocks are very oversold, but that does not mean they cannot go lower. The dreadful price action in both Copper and the Shanghai Composite points to new lows for the equity markets. After US stocks make a new low below 1100 on the S&P 500 (SPY), there could be a year-end rally followed by a more meaningful decline into 2012. Investors should use any bounce in stocks as an opportunity to reduce their equity exposure. At this point, Faber advises no more than 25% of your portfolio be in stocks.

Gold--At $1900 gold was extremely overbought, and a correction was necessary. However, Faber now believes that gold could undergo a significant correction similar to what happened between 1974-1976, when gold fell 40%. Faber notes that a large decline in gold is now a distinct possibility. The first support level for gold is at the 200 DMA around $1500. Despite the potential for a pullback, Faber still likes gold and believes it will trade significantly higher.

Dollar--It's true that the dollar has no intrinsic value and is being printed into infinity, but the US dollar will be your best friend for the next few months. As global liquidity contracts on EU debt concerns and a possible hard landing in China, Faber advises investors to be long the dollar. Note this is a short-term call; longer term the dollar is going to zero.

Treasuries--Despite being bullish on the US dollar, Faber does not reccomend treasuries, noting that they are overbought and susceptible to a large correction.

China and Copper--If you think the market is falling because of incompetent EU bureaucrats you are behind the curve. According to Faber, the price of copper is signaling a very serious slowdown (if not complete collapse) in China. This is what is really behind the move down in all commodities. A hard landing in China would be devastating for the global economy. The Shanghai composite is making new lows along with copper, which is very bearish. Also stay away from the Australian and Canadian currencies. If China crashes, these markets will get massacred.

Emerging Markets--Stay away from these at all costs. All emerging markets are falling and making new lows. Even though Faber likes these longer term, they could still fall another 20%-30% before they would be good buys. These markets could even fall to their 2009 lows. However, this will represent a good buying opportunity because these markets will be the first to bottom.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Tuesday, September 27, 2011

Gold could go down

In a CNBC interview Monday, "Gloom, Boom, and Doom Report" author and contrarian investor Marc Faber thinks gold could bottom at $1,500 per ounce, but sees the metal dropping to as low as $1,000 to $1,200 per ounce should $1,500 not hold. Faber said he wouldn't be surprised to see a 40 percent drop in gold.

While Faber said short-term market action might push gold higher, he's still bearish on the long-term potential for gold and equities. He said a longer slow down will follow the current recovery.

Faber says markets slumping can be traced to a slowdown in China. "You have a capital goods level where capital spending increases dramatically and companies keep spending to a high level, but because of the acceleration, it can lead to recession simply by the economy growing at a steady rate, and I think we are at this point in China," Faber said.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Monday, August 1, 2011

Invest in Gold, Silver

Well I think investors are gradually realizing that it’s unusual, with all of the problems in Europe that the euro is actually relatively strong against the US dollar.  They are realizing US holders don’t want to hold euros because they don’t trust the euro and the Europeans don’t want to hold dollars because they don’t trust the dollar.

Marc Faber is a famous contrarian investor and the publisher of the Gloom Boom & Doom Report newsletter.

Thursday, July 28, 2011

Property bubbling in China: James Chanos - NDTV

Ten years ago, James Chanos made the first substantial bet that energy giant Enron was on the brink of financial ruin. He proved bang on target. His latest prediction is that the Chinese real estate market is headed towards a similar fate. Mr Chanos is the founder and president of the hedge fund Kynikos, which means ‘cynic’ in Greek. His firm manages roughly $6 billion and specializes in investments against assets that it considers overvalued, which means short selling in the financial lingo.

Here is the complete transcript of Mr Chanos' exclusive interview with NDTV's Prashant Nair.
NDTV: You have been famously shorting 21st century's greatest economic story. Do you still believe that 'China is on a treadmill to hell'?
Mr Chanos: Well, the 21st century is only about one-tenth through. So far, it’s the story of the 21st century. Look, China is a very dynamic country. It’s going to be a great power. It’s been a great power. But that doesn't mean, there can't be some pretty major speed bumps along the way. And I think that we are probably looking at a very very large pot hole -to mix a metaphor in that. China in the past few years is increasingly relying on a property bubble to spur its GDP growth. And I think that's going to be problematic going forward for not only China but possibly countries in the region as well as countries that export to China, particularly industrial commodities.

NDTV: From the time you started calling China's property/construction led GDP boom a big bubble, the government & the central bank has acted. Do you still believe China is a story of 'overheating and overindulgence'?
Mr Chanos: I think that they have tried to tamp down the property growth. But in fact, the fixed asset investment as a percent of GDP is actually still increasing ironically. So as much as they try to tamp down the price increases in the property market and try to restrict mortgage availability, it appears to be popping up elsewhere. And much of this is due to the fact that there are two governments in China. There is the central government in Beijing which is desperately trying to cool off inflation and cool off the property market. But then you have the local governments, who are in bed with the developers, and who basically sell land to joint ventures increasingly backed by risky debt as we now know in order to fund these real estate ventures. And I think that's the problem. They are still going, as we say, pedal to the metal. They are going full bore at the local level while the central authorities are trying to restrict the growth out of Beijing.

NDTV: Ok, if we are talking about the debt bomb, when does China's bubble burst? You had called for the unraveling by 2011-end and we are pretty much there. Would you want to put a new timeline?
Mr Chanos: Well, look China has been despite what some of my critics say, China has not been a bad place to be a bear in the last year and a half. The Chinese market over the last year and a half is down. The property developers and banks, which we were primarily short, are down. Most western markets with the exception of Spain and a few others are up over that time frame. Certainly the S&P 500 is. So if you are a bear China has not been a bad place to be hanging out for the past 18 months. I want to clarify that. Second of all, a year and a half ago people pooh poohed the fact that there was even a property bubble. I mean, there was...I was attacked for not speaking Mandarin...for never having been to the mainland. And as I pointed out, no length of residency or number of visas can compensate for a lack of judgement. There were plenty of Miami natives who lived in Florida their whole lives, who lost everything in the Florida real estate bubble bursting. So, I think again a lot of people attacked me...but not the argument. As 2010 has moved into 2011, I think it’s becoming a little more obvious to the mainstream press that there is a bubble. And the question seems to have shifted, not is there a property bubble, but what do we do about it. And does it deflate gently or does it pop.
NDTV: Your timing on Enron, Tyco and the subprime crisis has been impeccable. So, do you think in the next ten years or so, we might get to see a big change in the world economic order? If it happens - what do you think we are looking at?
Mr Chanos: The challenge for the Chinese government, as for a lot of developing economies, is to transform from primarily an investment led economy to a consumer led economy. And that is what everybody is counting on. The problem with that argument is that it’s been made for years now and consumption as a percent of China's GDP is declining, not increasing. And so I think they are going to get there but I think there is going to be some pain along the way. And as all great developing economies including the USA in the 19th century and early 20th century, I mean those are histories of booms and busts. It’s often led by capital investment where investors get wiped out and a whole new group of investors come in and the economy continues to progress. And that's my only caution here. China might do very well. But western investors in China might not do very well. As a famous historian quipped to me fairly recently, he said, boy, the only westerners who have got their money out of China were the 19th century opium dealers and they had the Royal Navy behind them. And there is certain truth to that.
NDTV: If the Chinese bubble bursts, how do you think commodity prices will pan out?
Mr Chanos: Well, I would tell your viewers in the iron ore market back in India to lock in whatever they can. I think, for example that industrial commodities it’s no secret that India along with China is probably on the margin the largest driver of demand. And it’s all due to the construction boom. So things like copper, iron ore, to some extent steel, these are all being buoyed by the construction boom in China. And you know what we know about these things historically is that there is no gradual end in demand. The demand just ends and falls off a cliff. And so you know, I think it behooves the commodity makers to try and lock in as much as they can. But you know, will their contract be held unviable. Who knows? As they say, with construction going full bore and the amount of commodity production that is now gearing up to meet that construction, if that ends at some point or even begins to decelerate reasonably well, price drops could be enormous in some of the commodities.

NDTV: Gold is consistently making record highs. Is it the only safe investment in current times? How much of a precious metals bull are you?
Mr Chanos: Well, I notice you said investment and not money, and that was the big controversy last week with Mr Bernanke. No, we don’t have a view on the gold market. That's a monetary phenomenon. And it’s hard to analyse the sentiment. We are doing work on the Chinese property market and deriving our investment ideas on the short side from that, which we can analyse. I can’t really analyse all the factors in gold. I'll leave it up to someone else.

Saturday, May 21, 2011

The Dollar And Gold: A 20-Year Perspective

Gold continued its upward march in a time of global financial tumult, closing above $1,500 an ounce Thursday for the first time as investors seek safe haven in the metal....
The reason for gold's ability to do well in any market lies in its recent role as a haven from concerns about the dollar, inflation and shocks in Europe, the Middle East and Japan.

Today the WSJ observes that the Dollar's Decline Speeds Up, With Risks for U.S.

The U.S. dollar's downward slide is accelerating as low interest rates, inflation concerns and the massive federal budget deficit undermine the currency.
With no relief in sight for the dollar on any of those fronts, the downward pressure on the dollar is widely expected to continue.

With these two WSJ articles as a context for the recent behavior of the Dollar and Gold, let's take a look at the highly inverse correlation between the two over the past twenty years.

Barry Ritholz, who occasionally warns of main-stream media contrarian indicators, commented yesterday on the WSJ gold article: "Front page stories are not great usually for investments — although this is the WSJ, not Time or Newsweek. It has much less of a contrarian indication."

I'm inclined to agree with Barry, and I have the same opinion of the Dollar article. A short-term reversal is certainly possible for either of these assets. But the looming battle over the U.S. budget, with a particular focus on the debt ceiling, underscore the potential for an even weaker Dollar and increased demand for Gold.

Faber: Bulls to Get Slaughtered as Stocks Plunge

Contrarian investor Marc Faber says stocks will fall sharply in May, turning the recent breakout in stocks into a trap for the bulls.
The markets are due for a correction and the technicals point to a weak market, Faber tells Wall Street Pit. In particular, he points to the decline in new 52-week highs as evidence of an unhealthy internal market.

Right now, Faber advises investors determined to buy stocks to stay away from cyclicals, tech stocks, and banks, sticking with safer plays such as consumer staples.

Marc Faber, publisher of The Gloom, Boom and Doom report, likes gold as a long-term investment.

He’s more cautious when it comes to silver because of its recent runup in the price, and expects a 20-percent-plus correction in the metals complex because the inflation trade has become too crowded.

Faber says copper and the S&P 500 are highly correlated, and finds he fact that the stock index reached a new high while the metal didn't is another signal that stocks could follow commodities lower in the short-term.

Faber says the U.S. housing market has another 10 percent to fall, but valuations are now attractive and housing hasn’t been this cheap since the early 1980s. In a serious inflation environment, Faber would rather own housing than paper dollars.

Faber also expects the United States will run trillion-dollar budget deficits for the next 10 years and the Federal Reserve will have to at least partially monetize this debt to keep interest rates low.

But not everyone agrees with Faber. Another notorious equities bear now says he's bullish. David Rosenberg, senior strategist and economist at Gluskin Sheff in Toronto, is telling clients that the stock market isn't headed for a crash.

The market has been rallying since March 2009, yet Rosenberg has been wary of the trend, defending bonds against "inflationistas" and warning that deflation remains the far greater danger, CNBC reports.

Skies seem bluer. "This is not about throwing in the towel," Rosenberg writes in a letter to clients.

"It is an acknowledgment of what the market internals are flashing at the current time from a purely tactical and technical standpoint."

Faber: Do Like a Central Bank and Buy Gold

John Paulson has done it, George Soros has done it, and you should do it too, says Marc Faber, publisher of The Gloom, Boom & Doom Report – buy gold.
Investors "should be their own central banks and gradually accumulate gold reserves as a currency," rather than just buying gold as a speculative position, he tells CNBC.

Once the Federal Reserve’s latest quantitative easing operation (QE2) ends in June, pressure will build on the central bank to implement QE3. While that may produce a temporary rally for the dollar, the long-term outlook for our currency isn’t pretty, Faber says.

"The value of the U.S. dollar will be precisely its intrinsic value — namely zero, precisely zero," he says. That means full steam ahead for the precious metals.

Gold has hit $1,500. Rising interest rates in emerging markets also will buoy gold and silver, Faber says. Both India and China have been lifting rates, with China ordering its banks to boost reserves Monday.

Faber recommends holding physical gold over exchange-traded funds (ETFs) and stocks of gold miners.

Others are bullish too. The latest supportive news for gold is that Standard & Poor’s has shifted its outlook on the U.S. credit rating to negative.

“The perception that a downgrade would even be possible for the U.S. is driving the gold market,” Frank McGhee, head dealer at Integrated Brokerage Services tells Bloomberg.

Gold futures for June delivery rose $2.20, or 0.1 percent, to settle at $1,495.10 at 1:38 p.m. on the Comex in New York. Earlier, the price climbed as much as 0.5 percent to the record. Gold for immediately delivery was little changed at $1,495.35 at 2:33 p.m. New York time. Earlier, the price rose as much as 0.3 percent to an all-time high of $1,499.32.

Can Doctor Doom call the ups as well as the downs?

The high profile investment analyst and economist Marc Faber earned the ‘Doctor Doom’ soubriquet after being one of the few investors to foresee the financial crisis and the extent of the ensuing fallout.

The Swiss national is a long-standing and regular commentator in the media having initially rose to prominence back in 1987 when he told his clients to sell out of equities a week before October crash.

Although he is sanguine about the difficulty of timing the market- he branded his call that year ‘accidental’- he has cemented his reputation over the last decade by also accurately calling the rise of Asia, the decline of the dollar and the commodity boom. Here we put the recent predictions of the founder of Marc Faber Ltd and author of the Gloom, Boom & Doom Report newletter to the test.

Retail spending to drop off a cliff

‘Short retailers except Walmart, perhaps using the consumer discretionary SPDR ETF- [expect a 10% correction by the year end].’

Verdict: In keeping with his negative overall view on the economy, Faber expected non-essential consumer spending to plummet as the housing market dive gathered momentum and equity markets started to roll over. The consumer discretionary ETF was close to an all-time high when he made his call and it subsequently fell from $40.17 to $30.84 by the year end, far higher than his anticipated 10% correction and troughed at $17.53 the following February. Walmart meanwhile fell by 10% over the following two months before ending the year just under 5% down and rallying by over 40% overall in the 12 months following his call.

Sell risk assets and beware inflation

‘In the next few months we could get a severe correction in all asset markets. In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate. I am not a great buyer of assets now. We might be in a situation where consumer price inflation comes back and will have a negative impact on the valuation of assets.’

Verdict: The S&P actually rose by a further 8% over the next two months, but then began the precipitous slide that saw the market more than halve from 1,561.8 to 683.38 the following March. Although interest rates began their downward spiral, investors backing Faber’s calls would have preserved capital well as the financial crisis began to take hold.

Back silver, gold and other hard assets

‘You want to be in gold, silver, platinum and also oil. If you believe in a recovery of asset prices as a result of money printing, you should be in hard assets, particularly precious metals. If you want to own shares, I would own some resource companies- I would also own some Asian shares.’

Friday, May 20, 2011

Marc Faber: Dollar to turn zero; invest in gold and silver

Global investment guru and commodities expert Marc Faber says the best and most enduring currency in the world is gold and silver. He also said that the value of the US dollar will fall to zero in some years.

Beware the False Breakout in Stocks

Swiss investor Marc Faber has just released his latest issue of the Gloom, Boom, and Doom Report where he discussed his outlook for the stock market, gold, emerging markets, and other financial topics. Here are a few highlights from the report:

1. Equity Markets – The markets may be giddy about stocks hitting new highs, but contrarian investor Marc Faber is having nothing of this. He is concerned that stocks will fall sharply in May and that the recent breakout in stocks will prove to be trap for the bulls. The markets are due for a correction and the technicals point to a weak market. In particular, Faber points to the decline in new 52 week highs as evidence of an unhealthy internal market. Right now, Faber would stay away from cyclicals, tech stocks, and banks. If you have to own stocks make sure it is something safe like consumer staples (MO, JNJ, PEP, KO, etc).

2. Gold & Silver – Still likes gold as a long-term investment and recommends dollar cost averaging every month regardless of the price. However, when it comes to silver, Faber is more cautious, noting the recent run-up in the price. He expects a 20%+ correction in the metals complex because the inflation trade has become too crowded.