Wednesday, December 26, 2012

We could goto 1500 on the S&P500

 If investors continue to 'stick with what's working' and also bid up some oversold stocks, the market could rally. "We could go to 1450 or even 1500"

Monday, December 17, 2012

Capital preservation

Marc Faber has just released his latest newsletter the Gloom Boom Doom Market commentary for December 2012.

Marc Faber suggests that 2013 will probably not be the greatest year for asset holders and one should focus on asset, capital preservation. The reason being that the equity market has already had a very strong rally since March 2009.

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

Thursday, December 13, 2012

Ben Bernanke

I keep in my toilet a picture of Mr. Bernanke. And every time I think about selling my gold, I look at it and I know better

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

Wednesday, December 5, 2012

S&P500 could goto 1200

Stocks could correct to 1200 within a few months.

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

Thursday, November 29, 2012

Helicopter Bernanke

Ben Bernanke can drop as many Dollar bills as he likes into this room," he told the LBMA conference in Hong Kong, but what he doesn't know is what we will do with them. His helicopter drop will not lead to an even increase in all prices. Sometimes it will be commodities, sometimes precious metals, collectibles, wages or financial assets.


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

Wednesday, November 28, 2012

Gold not yet a bubble

Gold is not anywhere close to a bubble stage.


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

Monday, November 26, 2012

Commodities Will Continue To Fail near term

Marc Faber thinks that industrial commodities will remain under pressure due to the fact that the Chinese economy is slowing down considerably. If China were to cut its demand prospects from something like copper or steel, it could have devastating impacts on the commodities themselves, according to Faber's theory.


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



Tuesday, November 20, 2012

Corporate profits declining

The market is actually going down because I think that corporate profits will begin to disappoint, and that the global economy will hardly grow next year, or even contract.

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

Tuesday, November 13, 2012

Debt burden increase

The debt burden in the U.S. and other Western countries will continue to increase. The timeframe would be within five to ten years you have a colossal mess … everywhere in the Western world.


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

Monday, November 12, 2012

Sensex may not cross 21000 levels anytime soon: Marc Faber - EconomicTimes

Edited excerpts from The Economic Times Now interview with Marc Faber, Editor & Publisher of The Gloom, Boom and Doom Report, for his take on the global and Indian markets. Marc says that there can be a year-end rally, but he does not see new highs in the markets.

ET Now: Do we brace ourselves for a year-end rally or a year-end fall, given the risk from a fiscal cliff in the US?

Marc Faber: We have peaked out recently a couple of weeks ago and we are in a downtrend. Eventually, the markets will be down 20%, but will be oversold in about 10 days' time to two weeks' time. So there can be a year-end rally, but certainly no new highs in the markets.


ET Now: How real is the possibility of a Euro break-up considering that Spain and Greece are still looking as vulnerable as before?

Marc Faber: Yes, it is a possibility. I do not think it will happen right away because the politicians want to keep the Eurozone intact, but the situation in Portugal, Greece, Spain, Italy and even France is actually unsustainable in the long run because of the unfunded liabilities. So a Euro break up will probably happen sometime in future, but not for another three or five years.



ET Now: Has your stance changed on India because of the slew of reforms that we have seen and do you see the recent announcements call for a rerating of the region?

Marc Faber: Not necessarily. While the government has announced some reforms, there is a huge execution risk in India. A lot of implementation is still to happen, and it will be interesting to see as to what extent they will be implemented and their actual impact on the economy. At present, there is high level of economic activity in India as well as China and Southeast Asia, but India is not growing anymore. Hence, I will take a relatively cautious stance towards the Asian markets.



ET Now: How do you see emerging markets manage the inflation versus growth equation?

Marc Faber: Like in Western countries, Asian central banks will also ease over time and they have done that already in some countries. There are not many countries in the region that are as disciplined as Singapore. I believe that even though there will be some inflationary pressure, but because of the overall weakness in the global economy the energy prices will come down somewhat. Moreover, food prices are already somewhat down after having risen so much, and are currently not as high as they were a few years ago.



ET Now: What do you see in terms of the returns on Indian equities over the next one or two years? Should investors adjust their return expectations?

Marc Faber: I am not exactly a prophet, but we have rallied strongly from the 2009 lows and the outlook for large capital gains at this level is very limited. The high in 2008 and the high last year was around 21000. I do not think we are going above 21000. I would rather expect the market to ease again from here.



ET Now: What regions are you seeing as the most and least attractive for investment right now?

Marc Faber: The Chinese economy is slowing down rapidly. In my opinion, it is not growing at any more than 4% now. The market was at 6000 in 2007, and today we are down to around 2000. Clearly, the market has already discounted a lot of bad news and if a junk country like Greece could rally from the lows of 65%, we can expect a trading rally in China of 20%-30% over the next four or five months. Additionally, the Japanese Yen has begun to weaken and that should be a positive trigger for Japanese equities.

Friday, November 9, 2012

My medicine for the U.S. is reduce government

The debt burden in the U.S. and other Western countries will continue to increase, Marc Faber, author of the Gloom, Boom and Doom report told CNBC on Monday, leading to a “colossal mess” within the next five to 10 years.

“I think the regimes will try to keep the system alive as it is for as long as possible, which means there’s no “fiscal cliff,” there’s a fiscal grand canyon,” Faber told CNBC’s “Squawk Box.”Faber argued that the political systems in place in the West would allow the debt burden to continue to expand. Under such a scenario of never-ending deficits, the Western world would rack up huge deficits.

One day, the system would break, he said. “Eventually, you have either huge changes occurring in a peaceful fashion through reforms, or, usually, through revolutions,” he said. The U.S. is getting closer to such a revolution, he said, as is Europe.

 “I think the timeframe would be within five to ten years you have a colossal mess … everywhere in the Western world,” Faber said. “I think the deficit here (in the U.S.) — irrespective of who is in the White House — will stay above a trillion dollars per annum for at least as far as the eye can see.”

Bureaucracies in the U.S., as well as Europe, are far too big, he said, and are a burden on the economy.

 “My medicine for the U.S. is: Reduce government by minimum 50 percent,” he said. “The impact would be immediately an improvement in the economy.”



Oulook for Stocks

 Faber believes the Chinese and Japanese stock markets could see a rebound, while in the U.S. the S&P 500 is likely to see a 20 percent downward move.

“I think here we’re going to go down 20 percent from the recent top at 1,470. The technical position of the market is poor and the corporate earnings are worsening. And I believe that if the statistics were precise – which they aren’t – (…) I think there’s hardly any growth,” Faber said.

 Four months ago, Faber turned his attention to European stock markets, attracted by the low valuations.
 “Greece, Italy, Spain, France, Portugal, they were four months ago at the 2009 lows or even lower,” he said.


Faber recommended buying European stocks at the time and for the first time in his life bought them himself.

 “I did it simply because the valuations were low. Since then, Greece is up 65 percent,” he said.

He would no longer buy European stocks, he said. “I expect a correction but no new lows,” Faber said.

 Now he is focusing on Asia.?

“In Asia, Thailand from the 2009 lows is up 250 percent. Other markets like the Philippines, Indonesia, Malaysia, Singapore, are up by a similar amount,” he said. The Chinese benchmark index on the other hand was at 6,000 in 2007, now it is at 2,000.

 “I think China and Japan could have a rebound here. If Greece could rebound by 65 percent the greatest garbage could rebound by 65 percent,” Faber said.

Tuesday, November 6, 2012

What is the cause of the crisis?

 Equities are a much better investment than bonds despite the rally in the debt of some emerging markets, according to Marc Faber, the bearish investor and author of The Doom, Gloom and Boom Report. Investors have been snapping up sovereign bonds issued by emerging and frontier countries as they search for yield after quantitative easing – massive money printing – in the US, Japan and Europe.

 “I would not own sovereign bonds. Maybe in some Asian countries, as they have been more prudent with their fiscal situation,” Faber told Emerging Markets in an interview. “People are chasing yields but I think there is a risk in sovereign bonds. I don’t care what other people do, that’s what I do,” he added.

 Stocks rise more in times of inflation, which is already happening in parts of the world, and therefore “between now and the eventual outcome [of the crisis that started in 2007], which will be a disaster, you’re better off in equities than in bonds,” Faber said. He has long argued that quantitative easing measures, taken in order to counteract the deflationary effects of the financial crisis and of the eurozone debt crisis, will lead to high inflation and said prices were already on the rise.

 “The costs of living have increased for most people and are higher than the official figures,” he said.

“Some economists say that there is little consumer price inflation. But there is, because the money-printing has lifted asset prices like those for luxury property, art, equities or bonds. There is inflation in the system but it’s not obvious.”
 
Faber said he found stocks in the debt-ridden eurozone countries “rather attractive” as “a lot of bad news” was discounted in these markets. Faber said he bought stocks in Greece, Portugal, Italy and Spain when they were low and was looking to buy more if markets fall again.


Faber said he was pessimistic about the outlook for the world economy and the recent rounds of quantitative easing were adding to the problem.

 “To intervene with monetary measures is negative to start with, and right now the same goes for fiscal measures because large fiscal deficits are undesirable,” Faber said. “What is the cause of the crisis? We have too much debt. To create more debt is not solving the problem.”

Monday, November 5, 2012

Markets could fall down 20 percent


By now all traders have heard of Dr Marc Faber and that he's a really smart investor/trader. This is why his recent comments will have shook us all up a little bit. According to Faber, there could easily be a 20 percent decline. “I believe globally we are faced with slowing economies and disappointing corporate profits, and I will not be surprised to see the Dow Jones, the S&P, the major indices, down from the recent highs by say, 20 percent.

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

Monday, October 1, 2012

100 percent chance of a recession

Marc Faber says there's a 100 percent chance of a global recession and that stocks could suffer a big sell off.
And he is bearish about  all assets near term I think we’re entering a correction time where there will be some disappointments, where stock markets, from the recent times can easily drop 20%.


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

Profit taking risk

Im bearish about practically all assets near term we’re entering a correction time. Faber further states that equities, gold, and other commodities “will face some profit taking.”


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

Monday, August 13, 2012

Avoiding Philippines, Indonesian Stocks; Buying European stocks

On Phillipines and Indonesian stocks
“I don’t think there is particularly good value at present time. He says the Chinese slowdown and European recession will make it difficult for Asian nations to grow from present levels.
Will the Chinese be able to stimulate consumption? Faber says it depends on consumer confidence, which he does not think is very high.

For the first time in his life, Faber says he has been buying European stocks.


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

Sunday, July 15, 2012

About Kyle Bass, Marc Faber

You may have heard or if you havent certainly you must be wondering who is Marc Faber, and Kyle Bass.

About: Marc Faber:
Marc Faber is a Swiss financier who predicted the Wall Street Crash in 1987. He is the editor and publisher of the “Gloom, Boom & Doom Report,” author of many books including the best selling “Tomorrow's Gold: Asia's Age of Discovery." Faber advised investors to buy gold in 2001 and he is still extremely bullish on gold and silver and believes that gold will rise in all economic circumstances – a global inflationary economic boom, stagflationary environment or even in a global deflationary recession or depression.

About Kyle Bass:
Kyle Bass is the erudite Texan investor who saw the financial crisis coming and made a fortune in the sub-prime collapse – first from America's sub-prime mortgage crisis and then from betting that Greece would default. Now he’s positioned and ready for the collapse of entire countries, having bought credit default swaps on Greece, Ireland, Italy, Spain, Portugal and, interestingly, Switzerland.

Tuesday, July 10, 2012

Gold Cartel In Act Again

Marc Faber, now believes the gold market has reach the bottom range of its cycle lows.

“I’m not sure that Gold will not make a new high this year, but I think we’ve bottomed out and some gold mining shares have become very very inexpensive compared to the reserves they have,” Faber told Bloomberg Television this week.  “And I think that in the current environment where it is clear that the worse the economy becomes the more the money printers will be at work, that to own a currency whose supply can not be increased at the will of some clowns that occupy the central banks is a desirable investment,” he added.

Monday, July 9, 2012

If I Were Germany, I Would Have Abandoned Eurozone Last Week – Faber -Wall Street Pit

Excerpts from Bloomberg

Faber on the eurozone crisis:
“If you put one or 100 sick banks in a union, it does not change the fact that they’re sick. In my view the markets are rallying because they were grossly oversold. When markets are grossly oversold, especially markets of Portugal, Spain, Italy, France, then any news that is not disastrous news propels stocks higher. I think that combined with seasonal strength in July, the rally has carried on somewhat. But it is another cosmetic fix, a quick fix that does not solve the long-term fundamental problem of over investment in the euro zone. And what it does, basically, it forces Germans to continue to finance people in Spain and Portugal and Greece that are living beyond their means.”
“If I were the Germans, if I were running Germany, I would have abandoned the eurozone last week…It is a costly decision, but losses are there and somewhere, somehow, the losses have to be taken. The first loss is the banks. In the case of Greece, one should have kicked out Greece three years ago. It would have been much cheaper.”

On whether he’s picking up European equities:
“Yes. In Portugal, Spain, Italy, and France, the markets are either at the lows of March 2009, or lower. Along with bad companies and the banks, there are also reasonably good companies. Stellar companies, but they have been dragged down. I see value in equities, regardless of whether the eurozone stays or is abandoned.”
“[I’m buying] anything that has a high yield, or what I perceive to have a relatively safe dividend. In other words, I do not expect the dividends to be slashed by 90%…I am not buying banks, but maybe they could rally. I am just not buying them because I think there will be a lot of equity dilution and recapitalization. I’m not that keen on banks.”

On whether he’s going long on the euro:
“No, I’m not going long on the euro because I’ve always maintained a diversified currency portfolio. I have U.S. dollars, euros, Singapore dollars, some Canadian dollars, and even some Australian dollars. And I have a lot of Asian currencies, Malaysia, Thai baht and so forth.”

View the original article here

Sunday, July 8, 2012

100 sick banks in a union is........

If you put one or 100 sick banks in a union, it does not change the fact that they're sick. In my view the markets are rallying because they were grossly oversold. And when markets are grossly oversold, especially markets of Portugal, Spain, Italy, France, then any news that is not disastrous news propels stocks higher.

And so I think that combined with seasonal strength in July, the rally has carried on somewhat. But it is another cosmetic fix, a quick fix that does not solve the long-term fundamental problem of over investment in the euro zone. And what it does, basically, it forces Germans savers to bailout and to  continue to finance people in Spain and Portugal and Greece and so forth that are living beyond their means."

Faber said he is buying European stocks in Portugal, Spain, Italy and France, and is buying "anything that has a high yield, or what I perceive to have a relatively safe dividend. In other words, I do not expect the dividends to be slashed by 90%." Faber is however avoiding the banks.


Sunday, July 1, 2012

Gold Bullion "Has Bottomed" Says Marc Faber - BullionVault

The PRICE of Gold Bullion has now bottomed out, according to leading investment author and precious-metals advocate Marc Faber. "I'm not sure that gold will not make a new high this year," Faber told Bloomberg in an interview earlier this week, "but I think we've bottomed out. "Some Gold Mining shares have become very very inexpensive compared to the reserves they have."


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

Wednesday, April 11, 2012

Ease Up on Stocks, Gradually Accumulate Gold: Marc Faber - Yahoo!Finance (blog)

"Where investors were overly negative last year, they are now overly optimistic about the prospects for the U.S. economy," Faber says, pointing to the ''huge bull run'' we have had since 2009. "I think the (stock) market is very overbought."

While he still supports gold's long term opportunity, he feels the precious metal is "still in correction phase" and that "individual investors should gradually accumulate gold" because of the outlook for continued money printing by the Fed and other central banks around the world.

His advice to investors is ''to hold some cash, hold some precious metals, hold some equities, and hold some real estate," he says, adding that "if one asset class or the other declines substantially move money into that asset class."


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

Sunday, April 8, 2012

MARC FABER: Beware The Unintended Consequences Of Money Printing

Marc Faber worries about the unintended consequences of money printing. Beyond currency devaluation, it creates malinvestment that leads to asset bubbles that wreak havoc when they burst. And even more nefarious, money printing disproportionately punishes the lower classes, resulting in volatile social and political tensions.
In the short term, it has been working to some extent in the sense that equity prices are up and interest rates are down. And, so companies can issue bonds at extremely low rates. But every money printing exercise in the world leads to unintended consequences at a later point. And, this is the important issue to remember. We don’t know yet for sure what the unintended consequences are.

Wednesday, March 7, 2012

Gold Will Be Taken by the Government

Marc Faber still buys physical gold and warns that at one point the government will take the gold away from physical gold owner as it happened back in the 1970's.



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

We Will See QE3

QE3 depends on the S&P, if the S&P drops 100-200 points, then yes, for sure we will have QE3 but if the S&P stays here or even goes up, the likelihood of QE3 diminishes

“The S&P went up from 666 on March 6 2009 to 1,370 [currently] so it has more than doubled and that has to do with QE1 and QE2,” he said.

Faber expects to see high volatility in all asset classes over the next few years, says the ideal asset allocation for the moment is 25 percent each in equities, real estate or real estate related equities, cash and gold. “I don’t think (investors) should be shooting for huge gains, but rather for preservation in capital,” he said.


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

Monday, February 27, 2012

Lower standard of living expected

Marc Faber talks about the standard of living in the western world: "One day we will notice that the standards of living have really gone down, and the employment situation won’t improve.”







Friday, February 24, 2012

Private equity firm bets on Asia's frontier markets - Moneycontrol.com

As investors chase yields by investing in high growth emerging markets, private equity firm Leopard Capital is looking beyond traditional economic powerhouses like China and India, to less talked about frontier markets including Myanmar, Bangladesh and Cambodia based on their future growth potential.

"Myanmar will be one of the great investment stories of 2013, it`s changing very rapidly now. This is a country, for 50 years that missed out on the whole Asian miracle," said Douglas Clayton, Founder and CEO of Leopard Capital, which is in talks to launch a fund there.

"It is going to catch up very rapidly as the reforms take place.... everything is being changed, (from) the foreign exchange regime to the foreign investment code, and so on," he added.

Cayman Islands-based Leopard Capital was set up in 2007 to invest in "pre-emerging" markets. The firm`s consulting partners include veteran investors such as Marc Faber and Jim Walker.

In terms of investment opportunities in Myanmar, Clayton says the firm is looking at sectors which represent the "essentials of life" including power, Internet, agriculture and financial services.

However, he notes that the lack of a stock exchange in the country means that it is difficult for institutional and retail investors to gain exposure to the market now. According to local media sources, Myanmar`s government has committed to developing a viable stock exchange in the country by 2015, and will start selling shares in state-owned enterprises this year.

Emerging manufacturing hubs

In addition to Myanmar, Clayton says Bangladesh and Cambodia, both of which are emerging manufacturing hubs and have growing consumer markets, look attractive.

"Bangladesh is one of the cheapest places to manufacture in, and as China gets more expensive, factories are rapidly moving down into places like Bangladesh and Cambodia," he said.

In Bangladesh, the potential lies in traditionally "Indian-dominated" sectors such as textiles, pharmaceuticals, technology and outsourcing, he said. "We have a chance to `relive` the now foregone India play."

According to Clayton, the best ways to invest in Bangladesh are via the stock market, the Dhaka Stock Exchange, which slumped over 35% in 2011, or private equity funds. Leopard Capital is currently putting together a USD 100 million fund for Bangladesh.

In Cambodia, where the company manages the country`s first private equity fund worth USD 34 million, sectors including financial services, consumer goods, power and telecom infrastructure and property, are the main focus, he said.

He said the 35 banks and 11 cell phone operators in Cambodia, most of which are international companies, illustrate the vast potential of the market.

While there is huge growth opportunity in these frontier markets, there are also risks to conducting business there, the most "daunting" being the lack of in-depth managerial experience within most of the local companies seeking capital, he said.

"Our team has to provide intensive operational support to help bring some portfolio companies up to international best practices," Clayton said.



Thursday, February 23, 2012

Marc Faber Likes U.S. Real Estate & Tenants

Marc Faber was back on Fox Business, Friday, with his latest thoughts on Greece, China, stocks, U.S. real estate, and some creative ideas for male real estate investors during these troubled times.

“It’s a symptom of a wider problem that we have over-indebted governments in the Western world and Japan, and this is just a small plate, a small appetizer to much larger problems and a much larger crisis,” Faber said about strained Greece negotiations with the EU.  As for stocks, generally, the Swiss pony-tailed expat from Thailand believes the rally from the December lows has been too strong to jump on board, yet, especially during the seasonally weak month of February for equities.  He also has been watching the weakest sectors of the economy (home builders and banks) for clues to the overall market direction for the coming weeks.

“Basically, what has happened, the market peaked out last May in 2011, then it dropped to 1,074 on October 4th on the S&P.  Now we’re up 25 percent,” Faber explained.  “The market is very overbought right now, and any excuse for profit taking is now being taken.  And I think February is traditionally a weak seasonal month, so we’ll go down first for a while.

“I would just wait a little bit [before buying stocks] because, take for instance the home builders and the banks: the home builders, in some cases, are up 100 percent from the lows, last October [and] November; the banks are up 60 to 70 percent from the December lows.  I would just wait here a little bit because, we don’t know how bad the correction will look like—could be 100 points on the S&P, could be 200 points.”

Faber likes high-yielding foreign stocks, especially in the area of the world that which Faber is most knowledgeable and comfortable—Asia.
“Well I bought some shares in November [and] December of last year, and I’m not going to sell them because they are high dividend shares in Asia, and I quite like the Asian markets.”

Faber especially likes “Singapore REITs and real estate related companies in Thailand, because they knocked off the industrial park companies following the flooding of the Thai … some Thai industrial states,” adding, “and some shares in Hong Kong.”

Following the lows in December, globally, stocks have move up in tandem as the so-called ‘risk-on’ trade drew investors off the sidelines back into stocks, as investors anticipated a loosening of monetary policy among the world’s dominate central banks.

Moreover, India, whose currency took a mini-crash last year of approximately 20 percent within a one-month period, has rallied back from its nearly 54 rupee level low against the U.S. dollar at the end of 2011, now trading at the 49 handle, as the risk-on trade flows back more strongly into emerging markets once again.

“Actually, what is interesting, in this rally, since early January, emerging markets have done best,” Faber pointed out.  “India is up 14 percent, and the currency has strengthened.  So you’re up almost 20 percent, in essentially, a month’s time.  So all these markets have become overbought—near term.”

Generally, Faber doesn’t like stocks in the U.S.; he likes the battered down residential real estate market, instead.

“I like real estate in the U.S…  Just buy a house,” he chuckled.

In typical Faber style, he went on to share an anecdote from his most recent destination.  This time, the vignette takes place in Phoenix, a city among the worst hit by the across-the-board U.S. residential real estate crash.

“I was in Phoenix the other day,” Faber began.  “Then, the taxi driver took me to the hotel, nice hotel, Fairmont.  And then he told me the person that I just drove before you—I drove him to a five-bedroom house.  He told me he just bought it for $120,000.  Where in the world can you buy a five-bedroom house for $120,000?  I would buy it, live in one bedroom and rent out four bedrooms to concubines.”

But he wouldn’t rent out spare rooms to any foursome of concubines, according to Faber; the concubines must pay rent to him so that the property would throw off cash.

“If you take a very bearish view of the world, then at least—if you own property, you still own it—you pay for cash and get the cash flow as I suggested [from the concubines].  And if you are very bullish about the world, it means the demand for real estate will go up.”

Faber continued, sharing his observation from his earlier stop in Miami.  There, Faber said he witnessed the ‘crane index’, firsthand.

“I was three days in Miami.  Three years ago, I counted 47 cranes, building highrises,” he said.  “This time around, I counted one crane, destroying a building.  So, the market has cleared, actually, in Miami.”

Faber noted the frustrations that foreigners across the globe face when seeking overseas bank accounts outside their native countries—which has been a growing trend since the Asian currency of 1997-8, and magnified by the current ruse by many nations disguising capital controls with ‘fighting terrorism’.

“A lot of money has come from Latin America, from Russia because, if you want to open a bank account somewhere, they ask so many questions.  But as a foreigner, you can go buy a condo,” Faber said.

Globally, Faber is less concerned with the drama playing out in Greece.  His concern focuses upon the only economy primarily responsible for driving global growth (mostly from resources purchases) since the collapse of Lehman Brothers in 2008.  That country, of course, is China (NYSEArca:FXI).

“When we talk about Greece, the major issue for the world economy is China,” he explained.  “And China has been slowing down.  Industrial production is down; electricity consumption is down; exports were down; and cement production is down; steel production is down.  So, many indicators point to a meaningful slowdown in the [world] economy.”

According to Faber, the countries of Australia and Brazil are most vulnerable to a marked decline in Chinese consumption, especially of raw materials—which has recently given rise of talk among some analysts that the Aussie dollar and Brazilian real may be due for a decline due to a China slowdown.


Monday, February 13, 2012

Profit From Singapore's Growth With EWSS - TheStreet.com

In Barron's annual roundtable issue recently Marc Faber was very upbeat on Singapore for its valuations and dividend yields. For many years the only ETF to access Singapore was the iShares MSCI Singapore Index Fund (EWS). In the last couple of weeks iShares launched the MSCI Singapore Small Cap Index Fund (EWSS).

Similar to the large EWS the small cap Singapore ETF is very heavy in financial stocks at 48% of the fund, followed by industrial stocks at 18%; industrials have a similar weighting in the large cap EWS. The new fund has mid-single digit weightings in the other sectors like energy, tech and consumer staples.
The fund has 37 holdings and will charge a 0.59% expense ratio. It is unlikely that the stocks owned in the fund will be familiar but with such a large weighting to financials what that really means is the fund owns a lot of real estate companies.
Singapore is very difficult for the extreme volatility of that country's stock market. In the last 10 years EWS has had four years where it was up or down 30% or more and three of those four years the move was actually 40% or more. Fundamentally the country is on very firm ground; GDP growth is consistently strong, the unemployment rate is in the low single digits and its housing market did not experience anywhere near the kind of meltdown that occurred in the U.S.
In 1997 there was a market event that has been labeled the Asian contagion which caused a fast panic in all global markets. And although the actual crisis was centered in Thailand EWS was down 43% for that calendar year. This type of volatility should be expected to continue.
Despite the volatility the long-term annualized returns have been outstanding. The annualized 10-year return for the index underlying EWS has been 11.46% compared to 2.92% for the S&P 500. According to data from iShares the 10-year annualized return for the Singapore small cap index has been 17.09%.
Faber mentioned in Barron's that yields in Singapore can be found in the 5% to 7% range. EWS has always been a high-yielding ETF with the trailing yield at 4.05%. While it is too early to know what the small-cap EWSS will yield it is likely to be fairly high given the large exposure to financial stocks.






Wednesday, February 8, 2012

Faber Says 'Weak' Euro Nations Should Leave the Currency Union -BusinessWeek

Faber comments on the weaker Euro nations dragging down the stronger countries:

“It would be good if weak countries were kicked out or left the currency union,” Faber said in an interview in Zurich today. “It would be the better solution than denial.”
European leaders are struggling to contain the debt crisis, which forced Greece, Ireland and Portugal to seek external aid. German Chancellor Angela Merkel has made a deficit-control treaty the centerpiece of efforts to combat the turmoil, counting on stiffer fiscal rules to restore investor confidence in public finances across the 17-nation region.

“Last year, we have seen high volatility, large swings,” on equity and bond markets, he said. “I expect this volatility to remain or maybe even increase this year. Shares are more attractive than bonds overall.”
Faber said the ECB will “probably continue to print money in a direct or indirect manner,” and that the “worst part of the crisis is still ahead of us.”


Tuesday, February 7, 2012

Dr. Doom, says the most overlooked asset class currently is equities

Dr. Doom: Economist Marc Faber may see an upside in equities, but he doesn't shun other assets such as bonds either. Investing is often a humbling experience, he says. Even so-called experts can be wrong. "It's not advisable to be overly dramatic and say, 'I'm going to be very bearish about equities and very bullish about bonds.' There will be times when you need to be in equities, times you need to be in gold and times you need to be in bonds," he says. "I don't know when, so I'm diversified, as I pointed out, because I like to sleep at night -- ideally with someone."

The darker side of Doom: During his talk in Winnipeg, Faber demonstrated how the rise and fall of commodity prices correlate to war and peace over the last few hundred years. "It may strike you that commodity price peaks always occur during wartime, so people could conclude that wars lead to higher commodity prices," he says. "That's not correct. Rising commodity prices are symptoms of shortages, and most wars were fought over shortages of commodities because countries wanted to secure the supply of commodities." In the past, once war has broken out, commodity prices go "ballistic," he says. Unsurprisingly, Faber has a bleak outlook on the future of global peace. Given that commodities will be even more in demand due to population growth, combined with overuse of interventionist monetary policy that artificially drives up prices, war breaking out on a global scale is a possibility. "I think over oil there could be a conflict developing," he says. "The Chinese are surrounded by American military bases, and 11 aircraft carriers and 95 per cent of oil to China comes from the Middle East." China's demand for oil has tripled in 15 years, and it will continue to grow rapidly in the near term. So, too, will India's need for the commodity. "The U.S. has gotten closer to India. In the meantime, China, which has always had close relationships to Pakistan, has gotten closer," he says. These competing interests, combined with the Arab Spring -- or as Faber calls it, Arab Winter -- make for a lot of political, economic and social instability. "I don't want to go into the details of war-cycle theories, but I can tell you the conditions for war are much better today than they were 10 or 20 years ago."

With a nickname like Dr. Doom, it's not hard to figure Marc Faber might have a pessimistic take on investing, the economy and the state of the world.

Faber, a Swiss-born economist living in Thailand, is one of the world's leading investment contrarians. His investment newsletter, the Gloom, Boom and Doom Report, is widely recognized for finding good reason to be gloomy about popular investment classes while discovering opportunity in undervalued, unfashionable ones.

These days, however, contrarian viewpoints are broadly fashionable, which is both good and bad for a noted contrarian such as Faber.

On the one hand, he is more popular than ever, travelling the world on speaking engagements, including a recent stop in Winnipeg at the 47th annual CFA (Chartered Financial Analyst) Winnipeg Forecast Dinner.

On the other hand, how does an expert who makes a living talking negatively about markets differentiate himself when almost everyone is feeling much the same?

He certainly doesn't do an about-face, giving rousing speeches of unbridled enthusiasm about markets' upside.

Instead, the ponytailed Faber has taken aim at Keynesian interventionist monetary policies, the popular choice these days of governments and central banks around the globe, including here in Canada.

For those who don't remember high school social studies, British economist John Maynard Keynes is one of the grandfathers of modern monetary policy. Basically, this model calls for government intervention when economic conditions get ugly, usually after a stock market bubble bursts. Amid the fallout and uncertainty, businesses are reluctant to spend. Governments step in to save the day, spending money to stimulate the economy until it starts to grow.

But this prescription for a sickly free market has side-effects.

"The problem is Keynesian policies have always aimed at solving structural problems with short-run fixes or by creating new bubbles," he says.

Lowering interest rates, quantitative easing (a.k.a. printing money) and other measures that encourage economic activity are Band-Aid fixes.

"It just postpones the problem, but it doesn't solve it," Faber says.

He admits these policies do have their uses. It was necessary for the U.S. Federal Reserve and other central banks, including Canada's, to flood the markets with money following the 2008 credit crisis, when billions in bad subprime debt that the world's largest bankers held froze lending, bringing economic activity to a standstill. The alternative, a complete system collapse, would have been worse.

But these measures are becoming more extreme with each crisis because in the long run, they make the problems they're intended to cure worse.

"It is like giving more drugs to a drug addict or more alcohol to an alcoholic," he said. "It relieves you temporarily -- at least it does in my case."

Though a pessimist, Faber isn't dour and serious. In his mid-60s, he still enjoys a good night out on the town, and even his market analysis isn't all gloom and doom.

If he didn't find an upside somewhere, high-net-worth investors wouldn't hand over money to his advisory and investment management firm, Marc Faber Ltd. He might be cynical, but Faber has a knack for finding overlooked, undervalued assets before they become favourable and overvalued.

The overlooked asset class of the moment is hiding in plain sight: equities.

Ironically, it's loose monetary policy that makes investing in stocks favourable.

Why? The quick answer is inflation. Because central banks increase cash in the marketplace, the value of money -- in real terms -- decreases.

Goods and services haven't increased in value intrinsically, but the cash chasing them has. The effect is inflation, and that's really what governments -- and their at-arm's-length central banks -- are often trying to create. They pour money into the market to encourage growth so prices increase rather than decrease, which has a nasty habit of further slowing economic activity.

For consumers, this is both good and bad. It's good because most people stay employed; it's bad because their money buys less. For investors who hold shares of a company, however, inflation can be beneficial.

If you own shares in a good company, their price will increase over time because a buyer will need more money to buy them because the value of the currency is worth less in real terms.

The effect is the same with commodities such as copper, gold, oil and grain. When governments lower interest rates, for example, to stimulate borrowing so business can expand and consumers can borrow to buy homes, cars and other goods, demand increases and so do prices of commodities used to manufacture the goods. For central bankers, this is the intended effect. But Faber says when governments put too much money too often into the marketplace, that money pushes prices too high too quickly, creating bubbles with increasing frequency. The bubbles eventually burst, leading to equally rapid price drops.

Markets become more unpredictable and manic as a result.

That's exactly what has happened over the last decade.

The Fed cut interest rates after 9/11 and the tech bubble, and the easy money flowed into housing, consumer goods and oil. Consumer goods stayed relatively stable, but only because the money from consumers flowed to the nations producing those goods, such as China. But oil and homes hit record highs.

"The Fed cuts interest rates to stimulate consumption and support the consumer, but at the same time, oil prices go ballistic and double, and so the consumer pays an additional $500 billion for oil, which is like a tax on the consumer," he said.

By 2008, housing and oil peaked and crashed. Many investors lost money; a handful got richer. Average folk got spanked, and the world's poor sank deeper into poverty."

"That is an unintended consequence of the Fed's actions: It punishes savers, decent people who have all their lives saved and said, 'I don't understand anything about the stock market; I'll just keep my money in the bank,' " Faber says. "Now they can't live off their deposits."

Today, GICs and other interest-bearing investments yield next to nothing, but commodities and equities have ascended -- just not like anything resembling a straight, gently sloping line. They increase rapidly and tend to decrease rapidly as well -- and then repeat.

Making matters more precarious, governments become ever more indebted as they repeatedly stimulate the economy to manage the increasingly frequent crashes. If they carry on long enough without increasing taxes and/or cutting spending, they risk a very dire consequence.

Excessive government indebtedness and loose monetary policy can lead to hyperinflation, as it did during the 1980s in Mexico when an oil bubble burst and falling prices crushed the Latin American nation's oil-based economy. The peso fell in value against the U.S. dollar by 98 per cent in less than 10 years.

While bad for the Mexican people, investors in its stock market eventually made money. Mexico's stock market increased from 1,000 to a peak of 343,000.

"There was the October crash in '87, and it closed at 139,000," Faber says.

"So the index went up by 139 times while the currency plunged by 98 per cent."

Now, Faber says that doesn't mean the same thing will happen in Canada or the U.S., but governments printing money distort prices all the same, and in the long run, those owning assets should preserve their wealth.

"It's not that I'm highly bullish about equities," he said. "I'm just saying that if you're as bearish and suicidal as I am, you're probably better off in equities than government bonds."

View the original article here

Monday, February 6, 2012

Faber Says Stocks May Disappoint After April, May - Bloomberg

Marc Faber, publisher of the Gloom, Boom & Doom report, talks about the outlook for global financial markets, Europe's debt crisis and his investment strategy. Faber also discusses Facebook Inc.'s initial public offering and reports Glencore International Plc is nearing an agreement to combine with Xstrata Plc. He speaks with Susan Li and Rishaad Salamat on Bloomberg Television's "Asia Edge." (Source: Bloomberg)

Stocks may “disappoint” after April or May after a “strong open,” Marc Faber, publisher of the Gloom, Boom and Doom report, said in a Bloomberg television interview from Hong Kong.

Tuesday, January 31, 2012

Relax, Stocks Will Not Collapse

Stock markets have already discounted "some very bad news" and there is no reason to fear stocks will sink, despite gloomy prospects for the global economy.


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

Marc Faber: US Credit Ratings Should Be Lower - Wall Street Pit

Marc Faber, the author of the Gloom, Boom & Doom Report, believes most European nations should be rated triple-C and downgraded even further.

Standard & Poor’s one-notch downgrade to AA+ announced by the French finance minister was “insufficient” in terms of addressing ongoing systemic stresses in the country’s economy, Faber told CNBC on Friday.

France — Europe’s second-largest economy, behind Germany — now has the same credit status as the United States, which S&P downgraded in August. France’s triple-A was the most high-profile move from S&P, which also on Friday cut Portugal’s credit to junk and downgraded Italy and Spain two notches. Austria, Cyprus, Malta, the Slovak Republic and Slovenia also saw downgrades.

Faber said he wouldn’t buy French bonds “and I wouldn’t buy any U.S. bonds either.” According to Faber, the U.S. “should not be a triple-A-minus but a BBB or junk bond,” based he said “on the unfunded liabilities that will come due in future.”

Germany “is ok,” Faber said, but it too also “has large, unfunded liabilities.”

Faber predicts the S&P’s downgrades in Europe won’t have any significant effect on the world’s stock markets.

“Much of any downgrades has [already] been priced in,” he said of Europe.

Sectors in which Faber would invest include commodities, real estate and gold.

Monday, January 30, 2012

Bond Bubble? Marc Faber Says Time to Move Into Equities - NASDAQ

In a recent interview with Bloomberg Television, publisher of the Gloom, Boom & Doom Report Marc Faber certainly had gloom and doom to say when asked about the direction of US bonds. The good news, however, is he believes equities should benefit (at least in the short term).

When asked about whether he would choose Spanish or Italian debt over US Treasuries, he said (paraphrased):

I would take the U.S. because they can print themselves out. I would not take them as a good investment because I think you have today a yield on the 10-Year of around 1.7% and on the 30-Year around 3%. I think eventually in the next few years yields will be much higher and the purchasing power of the dollar will have depreciated significantly.

Faber is actually quite bearish about the entire financial system, as he indicates in the interview. However, even in this doomsday scenario, he believes investors are better off in stocks than debt:

Relative to government bonds, equities are attractive. If you really think it through and you are bearish as I am and you think the whole financial system will one day collapse, maybe three years or five years or 10 years, one day there’ll be a reset and everything will be essentially started anew. Then you are better off in equities than in government bonds because a lot of government bonds will either default or they will have to print so much money that the purchasing power of money will depreciate very rapidly.

Oil to go up

EDMONTON - The theme for this year's annual forecast dinner put on by the Edmonton CFA Society of financial analysts could have been dubbed "gloom, boom, doom and kaboom."

Marc Faber, who writes the Gloom, Boom & Doom investment newsletter based in Hong Kong, delivered the message that intervention by governments in economic policy intensifies volatility. And things aren't about to get any better.

Helima Croft, a director of commodities research with Barclays Capital in New York, and former senior economic analyst with the Central Intelligence Agency, gave her top five list of military hot spots in the Middle East and North Africa that could explode, taking the price of oil skyward with them.

Faber, famed for his "glass half empty" viewpoint of investing, hammered away at his theme that "continuous government interventions in the free markets through mostly monetary and fiscal policies have actually, instead of smoothing out the business cycle, led to more economic and total financial volatility, and have numerous unintended and unfavourable consequences.

"When you drop the dollar bills into the system you don't know where they go, and this time around they went to the housing market. The destructive nature of dropping dollar bills is you create bubbles in one sector of the economy."

The pumping of cash into the system came at the same time central banks were keeping interest rates forever low, exemplified by the U.S. Federal Reserve's announcement that it plans to keep rates near zero through 2014.

"With negative interest rates, your money in the bank doesn't give you any return, and it forces people to speculate, on things like real estate, equities and government bonds," Faber said. "That creates bubbles. And in a bubble, the majority of people lose money, but the insiders make money."

A new study by CIBC World Markets shows that the percentage of Canadians aged 45 and older who they measure as heavy borrowers rose from 36 per cent in 2007 to 44 per cent in 2011, while overall, 34 per cent of Canadian households hold three-quarters of total debt.

"Until a few years ago, nobody paid attention to excessive credit growth," Faber said. He cited a major difference between the Great Depression and the recent recession: "In 1929 we didn't have social security, Medicare, Medicaid and the unfunded liabilities we have now. The U.S. will print money, the ECB (European Central Bank) will do the same, and that will have an impact on the purchasing power of paper money. And that has an investment implication for bonds and equities."

Looming inflation will only stir up the Occupy movement more.

"Every society that went through high inflation rates, whether it was the U.S. in the 1980s or Zimbabwe or Germany, it always benefits people with a lot of assets, and people without assets are hurt. So inequality increases. That leads to a redistribution of wealth through taxation, or through social revolution it leads to poverty for everyone."

The global saving grace during the past decade has been growth in China.

"It has never happened before that a country's share of commodity consumption for aluminum, copper, zinc and nickel goes from 10 per cent in the year 2000 to 30 or 40 per cent in just 10 years. It's an unbelievable change in the balance of demand for raw materials.

"A consumer-driven economy is much less cyclical than a capital-spending economy. If the Chinese economy experiences a significant slowdown, it will have a huge impact on the demand for commodities."

Looking forward, Faber stresses the importance of diversification in investing, spreading your assets among cash, bonds, real estate, precious metals and equities, the latter especially in Vietnam, India, all of Southeast Asia, Latin America, Africa and Russia.

Oh yes, "as a hedge, I would own some weapons industry stocks."

"You can't invest based on World War III, but the tensions are rising very rapidly and I'm very concerned about this for long-term spending. Whatever happens in the Middle East, future regimes will not be as Western-friendly as the current regimes."

That dovetails with the viewpoint of Croft, who sees oil prices rising due to geopolitical uncertainty, with West Texas Intermediate going from the current $99.13 US a barrel to $110 at year's end, while Brent Crude rises from $109.73 to $115.

Her list of potential military hot spots this year includes, in order: Libya, Saudi Arabia, Iran, Iraq and Nigeria.

She said the power vacuum in Libya could prevent the resumption of oil production halted during the recent uprisings.

"If we do get some kind of nasty situation, production will suffer and Western oil companies will take their work out of the country," Croft said.

She said Saudi Arabia pumped oodles of cash into its system, through a first-time unemployment insurance program, 500,000 new housing units, and scholarships.

"In 2009 we saw the Saudis take four million barrels off the market in an effort to boost oil prices," and now they face concerns about domestic unrest and a potential looming political succession issue."

Iran is threatening to cut off oil transportation routes.

"If things go wrong, if we get military confrontation in the Straits of Hormuz, that could push oil prices north of $150 very quickly. The last couple of months we have seen a serious deterioration in U.S.-Iranian relations. I think certainly you could see a tit-for-tat ratcheting up over the course of this year, between Western nations and Iran, that will keep the oil price elevated. The chance of military confrontation is 20 to 30 per cent."

She said Iraq has the potential for significant oil production gains, "but this will all be contingent on having a stable security environment in Iraq."


Saturday, January 7, 2012

Real Estate Forecasting for 2012 - Investment Property Sector to SeeGrowth - San Francisco Chronicle (press release)

Professionals Realty Group USA (ProsUSA) President Glenn Melton reports that the recent Chinese government's liberalization of restrictions on investing capital outside of the country will have a positive trickling down affect on real estate brokers and agents' business in the United States.

"The relaxing of Chinese foreign investment policies will create an influx of Chinese investment capital overseas," states Melton. "This will spur investments in the Asia Pacific regions, as well as the United States; especially given the concern that central government intervention to contain overheated domestic housing prices will lead Chinese investors to seek other opportunities abroad."

U.S. Congress is also actively finding new ways to spur international investment in the U.S. A new legislative bill introduced by Senators Charles Schumer (D-NY) and Mike Lee (R-UT) proposes to offer a temporary residency visa to immigrants who spend at least $500,000 on a home in the United States.

So what does this mean for real estate brokers and agents in the U.S.? According to Melton, "The real estate investment sector is rapidly evolving with more investors interested in real estate portfolios than one-off transactions - and we will truly see its fruits in the next 18 to 24 months. Real estate brokers and agents have an opportunity to be ahead of the curve and take a bigger position in the investment real estate space, whether foreign or domestic."

He adds, "Establishing easy and safe access to American real estate now will position real estate professionals for a natural flow of investment business down the line."

Friday, January 6, 2012

Marc Fabers Holiday Cheer – The Whole Derivative Market Will Go toZero

With his usual holiday cheer Marc Faber’s most recent interview had him slamming the derivative markets. In an interview with Reuters he went over his predictions for 2012 which calls for more monetary easing, QE 3 etc. He also continues to worry about the growing EU sovereign debt crisis and the lack of real solutions. This was confirmed today after the ECB announced more banks than previously known tapped liquidity lines to the tune of $600 billion.

Of course his long-term views are decidedly bearish. He thinks people in 5 years time will have maybe 50% of their money. This wealth loss will be due to either equity collapses or inflationary pressures due to monetary easing. Obviously political solutions are out of the question at this point. One can look at the US government and see utter dysfunction. The GOP led house has refused to extend a tax cut due to lobbyist pressures on certain pet projects. Then in the EU you have France and the UK with increasingly cold diplomatic relations.


“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.”

Looks like 2012 is shaping up to be another interesting year. The Mayans may be wrong about the end of the world, but if Marc Faber is right we won’t be able to tell the difference.


The State of the World Markets for 2012

It's not the markets but the governments in which those markets exist that bear watching, for this year in particular, says Marc Faber in Prieur du Plessis'
Investment Postcards from Cape Town.
Investors in the Indian market are not a happy lot as it crashed 24% in 2011. The new year does not begin on a very happy note, either, and experts still see India in a danger zone.

In an interview, Marc Faber, editor and publisher of The Gloom, Boom & Doom Report
, warned that the Bombay Stock Exchange may bottom out between 12,000 and 15,000 levels. Expecting further weakness in the emerging markets in the initial part of 2012, he is not so positive on India. Faber is looking at an entry into India in the next six to nine months.
There is, however, a bit of good news for foreign investors interested in the Indian market. The government will now allow individual foreign investors direct access to its stock market from January 15.

Foreign fund inflows, a major driver of Indian stocks, dried up with net outflows of about $ 380 million as of Wednesday, a far cry from record inflows of more than $29 billion in 2010 that had powered a 17% rise in the benchmark index, following an 81% surge in 2009.

Below is an edited transcript.

What are the expectations you would have of 2012 from equity markets, given how bad last year was for equities worldwide?

We have to clarify the statement about how bad it was for equities worldwide, because the US market was flat and it significantly outperformed most other markets in the world, in particular emerging economies' stock markets. This resembles the underperformance we had in 2008 that made the major buying opportunity.

What we will have in 2012 is initially maybe some maybe further weakness in emerging economies against the US market, and then a major low in emerging stock markets, including India. I was looking for India to bottom out the Sensex between 12,000 and 15,000, and we are getting there slowly.

It's not just India but all the BRIC markets fell off between 20% and 30% in dollar terms last year. Are you expecting significant outperformance from those markets relative to the US in 2012?
What we had in 2008 was the outperformance of the US and emerging economies' stock markets and commodity markets got hit very hard, but it led to a major low in emerging stock markets that bottomed out between October 2008 and March 2009. After that, emerging stock markets outperformed the US until the end of 2010.

So I think we may get a similar picture. That's why when I read all the strategies that say we should invest in the US, I say maybe that's correct for the next three months or so, but I would rather be looking at an entry point in markets like India over the next six to nine months.

Equity market performance was driven by what happened in the currency market. For this year, what will you say is the likely outcome on parameters such as the dollar index, what happens with the euro-dollar exchange, and how currencies are impacted by that?

To make forecasts about free markets is very difficult. The free market and the perfectly functioning market is a market where no market participant has dominated the market...but today you have a manipulated market.

It is the governments which intervene continuously to influence the price of money—in other words, interest rates and fiscal policies. So to make any predictions of political issues, we can't know exactly how far the ECB in Europe will monetize and at what stage QE3 will come about in the US.

But if the S&P drops another 10% you can be sure that there will be more QE in the US. So the markets would be supported by additional liquidity injections.

Where does all this leave the commodity markets for 2012? If you had to take calls on gold and crude, how do you think they will do this year?

We have to distinguish between precious metals and industrial commodities. My concern is that the Chinese economy is going to be weaker than is expected and that the demand for industrial commodities will probably disappoint. So I am not particularly keen on buying industrial commodities at this stage.

In the case of gold, as you know we had a ten-year bull market and we peaked out in dollar terms on September 6 at $1,921 per ounce, at which stage the gold price had somewhat overshot on the upside and we are in a correction phase.

I happen to think that the correction phase is not completely over, but recently sentiment on both silver and gold have turned very negative. We may have a trading rebound rally, and then some further weakness into possibly February or March, and then probably a major low. Then the question will be whether the precious metals rally again, and will they exceed the peak of 2011 or not.

By how much would you postpone expectations of a big up move for equity markets? When do you think there will be a clean resumption of the trend or possibly the potential for markets to get into a bull phase again?

This is a good question, because essentially what you could get in the world is worsening geopolitical and economic conditions.

Let's say Israel attacks Iran. It's a negative event, basically, but it could be countred by monetization everywhere in the world—in other words, liquidity injections. So stocks could go up while conditions worsen. This usually happens when you massively inflate the quantity of money.

But a mentally sound market in my opinion will only come about when the system has been cleaned and moved down after the financial crises of 2008. It's essentially just painting the building with fresh paint, but we haven't addressed the fundamental problem of the Western world, which is an over-indebted society.

Marc Faber: 2012 could see a major low in emerging markets

In an interview on CNBC-TV18, Marc Faber, editor and publisher of The Gloom Boom & Doom Report, said although there could initially be some further weakness in emerging economies against the U.S. market, he expected a major low in emerging markets later this year. “I think we should invest in the U.S.; I say maybe that’s correct for the next three months or so but I would rather be looking at an entry point in markets like India over the next six to nine months,” he said.

Thursday, January 5, 2012

2012 could see a major low in emerging stockmarkets

“I think we should invest in the U.S.; I say maybe that’s correct for the next three months or so but I would rather be looking at an entry point in [stock] markets like India over the next six to nine months,” he said.

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

Sensex may hit 12k-15k, to enter India in 6-9 months: Faber

Investors of Indian market are not a happy lot as it crashed 24% in 2011. The new year too does not begin on a very happy note and experts still see India in a danger zone.

In an interview to CNBC-TV18, Marc Faber, editor and publisher, The Gloom, Boom & Doom Report warned that the Sensex may bottom out between 12000-15000 levels. Expecting further weakness in the emerging markets in the initial part of 2012, he is not so positive on India.

Faber is looking at an entry into India in the next six to nine months. There is some bit of a good news for foreign investors interested in Indian market. The government will now  allow individual foreign investors direct access to its stock market from January 15.

Foreign fund inflows, a major driver of Indian stocks, dried up with net outflows of about USD 380 million as of Wednesday, a far cry from record inflows of more than USD 29 billion in 2010 that had powered a 17% rise in the benchmark index, following an 81% surge in 2009.

Below is an edited transcript. Watch the accompanying video for more.

Q: What are the expectations you would have of 2012 from equity markets given how bad last year was for equities worldwide?

A: We have to clarify the statement about how bad it was for equities worldwide because the US market was flat and it significantly outperformed most other markets in the world in particular emerging economies stock markets. This resembles the underperformance we had in 2008 that made the major buying opportunity. What we will have in 2012 is initially maybe some maybe further weakness in emerging economies against the US market and then a major low in emerging stock markets, including, India. I was looking for India to bottom out the Sensex between 12,000 and 15,000 and we are getting there slowly.

Q: It?s not just India but all the BRIC markets fell off between 20% and 30% in dollar terms last year. Are you expecting significant outperformance from those markets relative to the US in 2012?

A: You right way but what we had in 2008 was the outperformance of the US and emerging economies? stock markets and commodity markets got hit very hard but it lead to a major low in emerging stock markets that bottomed out between October 2008 and March 2009 and after that emerging stock markets outperformed the US until say the end of 2010.

So I think we may get a similar picture. That?s why when I read all the strategies that say - I think we should invest in the US, I say maybe that?s correct for the next three months or so but I would rather be looking at an entry point in markets like India over the next six to nine months.

Q: Equity market performance was driven by what happened in the currency market. For this year, what will you say is the likely outcome on parameters such as the dollar index, what happens with the euro dollar and how currencies are impacted by that?

A: To make forecasts about free markets is very difficult. The free market and that perfectly functioning market is a market where no market participant has dominated the market but today you have a manipulated market.

It is the governments which intervene continuously to influence the price of money in other words interest rates and fiscal policies so to make any predictions of political issues we can know exactly how far the ECB in Europe will monetise and at what stage QE3 will come about in the US but if the S&P drops another 10% you can be sure that there will be more QE in the US. So the markets would be supported by additional liquidity injections.

Q: Where does all this leaves the commodity markets for 2012? If you had to take calls on gold and crude, how do you think they will do this year?

A: We have to distinguish between precious metals and industrial commodities. My concern is that the Chinese economy is going to be weaker than is expected and that the demand for industrial commodities will probably disappoint. So I am not particularly keen on buying industrial commodities at this stage. In the case of gold, as you know we had a 10-year bull market and we peaked out in dollar terms on September 6. 2011 at USD 1,921 per ounce at which stage the gold price had somewhat overshot on the upside and we are in a correction phase.

I happen to think that the correction phase is not completely over but recently sentiment on both silver and gold have turned very negative. We may have a trading rebound year -trading rally and then some further weakness into possibly February-March and then probably a major low. Then the question will be whether the precious metals rally again and will they exceed the peak of 2011 or not.

Q: By how much would you postpone expectations of a big upmove for equity markets? When do you think there will be a clean resumption of trend or possibly the potential for markets to get into a bull phase again?

A: This is a good question because essentially what you could get in the world is worsening geopolitical and economic conditions. Let?s say Israel attacks Iran. It?s a negative event basically but it could be counted by monetisation everywhere in the world in other words liquidity injections. So stocks could go up while conditions worsen.

This usually happens when you massively inflate the quantity of money but from the mentally sound market in my opinion will only come about when the system has been cleaned and moved down after the financial crises of 2008 is essentially just painting the building with fresh paint but we haven?t addressed the fundamental problems of the Western world which is an over indebted society.


View the original article here