Marc Faber: Investors Shouldn’t Be Buying
Marc Faber spoke to Bloomberg Television by phone earlier today and had the following to say:
Obviously, the economy is already in recession. Corporate profits will disappoint. In particular, the consensus earnings for 2009 are still far too high. And after jobs creep downward, obviously valuations look less compelling.
Well, I would say, what we are in, is kind of a water-torture bear market. A lot of stocks peaked out already in 2005, like to homebuilders. And in 2006, the subprime lenders. Then in 2007, all financial stocks… And I think the cyclicals, and the energy, and the materials stocks, like steel and iron ore companies, they will now all come under pressure… but I think other sectors of the market that have held up well are now vulnerable.
On what investors should be buying, Dr. Faber, who is known for advising clients to get out of the U.S. stock market one week before the October 1987 crash, said:
I think the question should be, what sector should you sell… I don’t see any compelling value in equities. I also don’t see any compelling value, in say, real estate, or in the commodity market. I think asset markets are still inflated. And we are in an environment, contrary to the last 25 years, during which leverage increased. We are in a period of deleveraging.
Responding to the question of whether or not investors should park their money in cash, the editor of the Gloom Boom & Doom Report said:
Well, cash is not desirable in the sense that it loses its purchasing power because you have a money printer at the Fed, Mr. Bernanke… His monetary policy inevitably is inflationary, and as a result, leads to a lower dollar.
When Bloomberg asked if high oil prices were unjustified, the Swiss-born investment adviser said:
My view would be that commodities will rather ease, as some have already done…
(On oil) The big upside is now gone. And so I would be a little bit careful about blindly buying commodities. I think they’re on the high side, the way real estate was on the high side, the way stocks were on the high side. I would not short commodities, but I would be careful about buying them here.The dollar has some upside potential here. But of course, if Mr. Bernanke continues to print money and push down the Fed funds rate to zero, then the dollar won’t go anywhere. As of today, I believe the dollar is relatively undervalued with the euro. I still like gold (transmission garbled)…
Finally, Dr. Faber had this to say when asked to pick one investment for next 6 to 12 months:
Well, I would take a holiday and forget about the speeches of Fed governors, because their economic knowledge, is in my opinion, is extremely limited. And each time they speak, they actually confuse the issues. And so, there is very little sincerity, at the present time.
You can listen to the 8 minute 21 second Bloomberg interview here.
Source:
Marc Faber Interview
Bloomberg, June 9, 2008
