Monday, September 26, 2016

Marc Faber: I Will Never Sell My Gold

Marc Faber, managing director and founder of Marc Faber Ltd., and Ian Bremmer, president of Eurasia Group, discuss the state of the Chinese economy and the outlook for the U.S. stock market with Trish Regan on Bloomberg Television's "Street Smart."

- Source, Bloomberg

Sunday, September 18, 2016

Why Marc Faber is calling for an ugly stock market crash

Here’s the bad news: The Swiss investor, who publishes the aptly named Gloom, Boom & Doom Report, sees the large-cap benchmark SPX, -0.11% shedding more than half its value, possibly over the next year.
“When it unravels, we are going to go to 1,100 on the S&P 500,” Faber told MarketWatch.

“Maybe we go first to 2,300, then we would have a perfect topping formation. A widening-top formation is about the most bearish technical formation you can have,” he said. Faber is referring to a so-called megaphone pattern, or broadening formation, which usually is associated with a sharp reversal in an upward trend for a security.

Faber has grown increasingly pessimistic as U.S. stocks have climbed over the past several weeks.

The S&P 500 has advanced about 4% from 2,096 on June 10 when MarketWatch last spoke to Faber. And on Tuesday, the Nasdaq Composite Index COMP, -0.08% marked a record close (its second of 2016), while the Dow Jones Industrial Average DJIA, -0.07% and the S&P 500 were mostly quiescent but in positive territory.

His ursine-daubed call shouldn’t be a surprise to market participants who have followed him over the years. The 70-year-old investor has been critical of global central banks and negative on the U.S. economy, lately.

So, why should investors listen to Faber?

For one, the Swiss investor’s concerns about central bank’s propping up global economies and distorting markets echo legitimate worries expressed by smart-money investors like bond guru Bill Gross of Janus Capital.

Now, the Bank of England can be added to the list of central banks rolling out accommodative policies.

Last Thursday, the BOE revived a dormant bond-buying program and cut its interest rate to 0.25%—marking its lowest level in more than three centuries. Similar to the Federal Reserve, the BOE had been viewed as preparing to tighten monetary policy. That changed when the U.K. surprisingly voted on June 23 to exit the European Union, briefly roiling global markets.

The BOE finds itself, presently, on unsteady footing at the same time the European Central Bank and Bank of Japan are jousting with anemic growth of their own.

Faber said central banks“printing money” is a recipe for carnage that could result in “ five years of capital gains” being coughed up by the market. And if we give that back, “we’re around 1,100,” he said.

“We’re all on the Titanic.” Faber said. “When things unravel a colossal asset inflation” will burst.

Faber also gives voice to some of the persistent concerns shared by a host of investors and strategists that argue that the fundamentals of the stock market don't justify its current run-up in price.

- Source, Market Watch

Wednesday, September 14, 2016

Alan Greenspan And Marc Faber Agree The Fed Has Reached Zero Hour

Dr. Marc Faber (PhD in economics, with honors) also known as “Doctor Doom” and publisher of “The Gloom, Boom, and Doom Report.” Alan Greenspan, probably the most loved and successful Fed Chairman in history during the 18 years from 1987 to 2006, a good time for American business and markets. You would think that these two would fight like cats and dogs over just about anything to do with the markets and the economy anytime, anywhere.

These are two smart people. Faber advised clients to get out of stocks before the 1987 crash. In the 2000s, he predicted the rise in oil, gold and commodities in general, and the boom in China. He also predicted the decline in the US dollar since 2002 and also the shorter term dramatic rebound in 2008. He can be wrong (or maybe early) as in his call for a US recession in 2013, but he is right way more than he is wrong.

As for Greenspan, his era at the Fed is thought of as what the Fed was supposed to be, a modulator of cycles and protector of savings. There were nothing but mild recessions for those 18 years. One overall measure of his success is to simply consider the price of gold in 1987 at his start at the Fed and in 2005 at its end – both right at $400 an ounce. One of his famous quotes is,

“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value.”

There was no big “gold standard” debate back then simply because Greenspan had us on a de-facto gold standard anyway...

- Source, Forbes

Sunday, September 11, 2016

The current system in the developed markets is not sustainable

The global balance of economic power has notably shifted over the past decade.

Now emerging and developing economies account for almost 60% of global gross domestic product (GDP).

Understanding the full scope of these changes, and the new roles of these participants in the global economy, is essential for investors looking to position their portfolios for the future.

Marc Faber, editor and publisher of the Gloom, Boom & Doom Report, shared his perspective on these shifting dynamics along with his concerns that policy makers have increased the risk of unintended economic consequences, at the 2016 Financial Analysts Seminar in Chicago.

China occupies an important space in the current economic landscape. The country embraced the infrastructure growth model to catapult itself into a high-growth phase — following the examples set by Japan starting in 1950 and the Asian Tiger economies of South Korea, Taiwan, and Singapore in the 1960s and 1970s — and it has been the driver of substantial economic activity for other emerging market countries, especially in Asia and Africa. The Export-Import Bank of China overtook the World Bank in 2011 as the biggest lender to sub-Saharan Africa, and China is the leading financier of infrastructure projects on the African continent.

Tourism spending has created additional economic links between China and other countries. Outbound tourism expenditures from China reached US$215 billion in 2015, which was a 53% increase over the total recorded by the World Travel & Tourism Council (WTTC) in the previous year. China’s increased travel spending boosted economic activity in other countries in the region, including a “mini-boom” in money spent by foreign visitors in Japan. During his presentation, Faber estimated that China contributed around 130 million outbound tourists each year to the global economy.

As a key driver of economic activity for emerging markets, what happens if China’s economy stumbles? According to some reports, shadow banking activity, characterized as less-regulated lending that could pose a higher risk of default,accounts for as much as two-thirds of China’s economy. Even regulated lending could pose substantial risks: According to Faber, banks in China don’t write-off bad loans, and eventually the chickens will come home to roost. He was quick to emphasize, however, that other Asian nations are ready to pick up the baton if China falls short.

As the emerging market economies in Asia have developed, they have built up their own domestic needs and capabilities. The increased consumer demand within these countries has created investment opportunities for regional partners: In the first seven months of 2016, the three largest sources of foreign direct investment in Vietnam were South Korea, Singapore, and Japan. While productivity in developed markets has stagnated due to excessive regulation and rising levels of unproductive debt, productivity is booming in Asia.

Faber said the current system in the developed markets is not sustainable and will come to a bad end. He declared that the change in hours of work needed to buy one unit of the S&P 500 composite — which climbed from 20 hours in the 1960s to almost 100 today — was evidence of the massive wealth inequality created by monetary policy that has made it more difficult for those on the lower rungs of the economic ladder to climb up.

Faber takes a dim view of central bank activities that have led to a substantial increase in the size of their balance sheets. Although central banks can continue these policies indefinitely, he noted that eventually they will own everything, resulting in backdoor socialism. The present-day reality of central bank activity is that stock market capitalizations relative to GDP are way above historical averages. Consequently, Faber thinks that US investors will be lucky to earn 1% or 2% returns per year.

With so much latent risk in the financial system, one might be tempted to shift substantial amounts of a portfolio to cash. But even cash is risky today. “Cash is the safest investment in normal times,” said Faber. “However, today the most dangerous asset is cash. Cash in bank accounts may be worthless like in Cyprus,” referring to the possibility of a state-imposed bail-in putting deposits at risk.

- Source

Friday, September 2, 2016

China's Unwind Will Be a Disaster

Marc Faber, managing director and founder of Marc Faber Ltd., comments on the state of the Chinese economy. He speaks with Trish Regan and Matt Miller on Bloomberg Television's "Street Smart."

Tuesday, August 30, 2016

Marc Faber: I Will Never Sell My Gold

Marc Faber, managing director and founder of Marc Faber Ltd., and Ian Bremmer, president of Eurasia Group, discuss the state of the Chinese economy and the outlook for the U.S. stock market with Trish Regan on Bloomberg Television's "Street Smart." 

Saturday, August 27, 2016

Marc Faber: Tesla shares are going to $0

Marc Faber, editor of the Gloom, Boom & Doom Report, is well-known his perennially bearish take on the overall market. But there are also some specific stocks of which the investor known as "Dr. Doom" takes a particularly dim view — and right now, prime among those is Tesla.

"What they produce can be produced by Mercedes, BMW, Toyota, Nissan. Anybody in the world can make it eventually, at much lower cost and probably much more efficiently," Faber said Monday on CNBC's "Trading Nation."

"The market for Toyota and these large automobile companies is simply not big enough, but the moment it becomes bigger, they'll move into the field and then Tesla will have a lot of competition."

Faber sees this increased competition causing more than a small dent in the company's business and stock performance.

"I think Tesla is a company that is likely to go to zero eventually," Faber said.

Last week, Bloomberg reported that Mercedes-Benz is entering the electric game in a big way, as it sets to unveil two electric SUVs and two electric sedans under a new line. And in a recent ad, BMW, which makes its own electric cars, tweaked Tesla for making drivers wait around for their vehicles in a recent ad.

Recently, Tesla business development executive Diarmuid O'Connell dismissed the company's competitors as having "delivered little more than appliances," in contrast to Tesla's ground-up method of rethinking how cars are powered and driven, according to Automotive News.

For Faber, the strategy of shorting Tesla is merely a part of his bearish approach to the market. On Monday, he recommended that "if you are an investor with a lot of nerves and you sleep well at night anyway, then you could hedge the portfolio somewhat by selling short some stocks that are overvalued and are likely to go down" — providing Tesla as an example.

- Source, CNBC

Wednesday, August 24, 2016

Marc Faber: S&P is set to crash 50%, giving back 5 years of gains

The notoriously bearish Marc Faber is doubling down on his dire market view.
The editor and publisher of the Gloom, Boom & Doom Report said Monday on CNBC's "Trading Nation" that stocks are likely to endure a gut-wrenching drop that would rival the greatest crashes in stock market history.

"I think we can easily give back five years of capital gains, which would take the market down to around 1,100," Faber said, referring to a level 50 percent below Monday's closing on the S&P 500.

In fact, stocks would need to fall by at least that much in order for some of Faber's calls to be proven correct. In October 2009, when the S&P was trading near 1,100, Faber said on Indian CNBC-TV18 that U.S. and Indian stocks were "very overbought" and "the gravy's out" on the rally.

Since then, Faber has generally only become more and more bearish as stocks have climbed. And on Monday, as Faber made his latest crash call, the S&P 500 touched an all-time high of 2,185.44.

When pressed on what could cause the decline he predicts, Faber responded that "you never know exactly why this will happen," adding that he believes the market's gains are unsustainable.

"The fact is, the market hasn't really been driven by genuine buying, but by stock buybacks, takeovers and acquisitions, and market leadership has been narrowing. It's not that many stocks that have been making new highs. It's quite a narrow growth of stocks that have been very strong," he said.

In fact, market breadth has broadened substantially, and as of Monday's close, 48 percent of the stocks within the S&P 500 have made 52-week highs within the past three months; 6 percent made 1-year highs on Monday alone.

- Source, CNBC

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