Dr Doom says its time to cash up now!

[diesel]

Marc Faber seems to have turned very bearish now. He turned bullish mid last year on tech and large cap US stocks.


Dr Doom says it's time to cash up now
Monday January 15, 2007

Marc Faber
Marc Faber, who predicted the US stock market crash in 1987, says global assets are poised for a "severe correction" and it's time to sell.
The founder and managing director of Hong Kong-based Marc Faber Ltd, and publisher of the Gloom, Boom & Doom Report, advised buying gold in 2001, which has since more than doubled.
The bullish outlook of traders in bonds, equities and commodities, real estate and art suggested valuations were peaking, Faber said.
Last year, the Morgan Stanley Capital International World Index of developed stock markets jumped 18 per cent, while a Wall St survey predicted US Treasury bonds would post the best gains in five years during 2007.
Faber recommends steering clear of the biggest developing economies. "Emerging markets could get kicked in the next three months so I'd be careful of buying Russian shares. I'd also be careful of buying China and India shares now."
Singapore and Vietnam are Faber's top picks in Asia because stocks in Singapore aren't "terribly expensive compared with interest rates" , while Vietnam's equities have "incredible potential in the long run".
- BLOOMBERG

[rffrydr]

Lookie thar, $1000buck gold from the goldbug. That even beats me by $200!

http://www.cnbc.com/id/44667027

More to the point, china can stand still and still be in a recession:

"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."

This black swan can cut both ways. Black crude.

"In China at least deficits and government intervention is leading to infrastructure spending. There are overcapacities but ultimately these will be used," he said.

This.....is very debatable. Many of their "hard assets" are steel foundries et. al. and empty cities.
_________________
Today is the Tomorrow you worried about Yesterday!

[mtvk]

His future predictions:

http://www.marketwatch.com/news/story/dr-doom-has-dollar-death/story.aspx?guid=%7BFA8E4D3A%2DFEB9%2D4ABC%2D89D0%2DA074A63DD895%7D&dist=TNMostRead

20% ups and downs would be common for US stock market, as per him.

[Rubedo]

http://www.ameinfo.com/150044.html

A tribute to Marc Faber, part one: US dollar, Nasdaq, gold and oil
Dr Marc Faber once said that any journalist could write a positive or negative article about him by picking out his good or bad calls. But just as Nury Vittachi could sit down in the late 1990s and pen a whole book that sided with the postive view of Faber, AME Info has scanned over 100 articles and reached a similar opinion.
Sunday, March 16 - 2008 at 00:05

So what did Dr Doom get wrong in the 2000s? Not a great deal really, but actually his biggest error was a repeat of the error of pessimism he committed in the 1990s about the length and durability of the US stock market upturn.

What he missed entirely was that the start of the Second Gulf War in spring 2003 would be a 'Bottom War', marking the bottom of the US stock downturn that began in early 2000. He thought US stocks were down and would fall still further.

His record on the US dollar was much better, and in February 2003 he was perfectly correct in saying: 'In the course of 2002, we have repeatedly warned that US dollar weakness was only a matter of time.

Since the summer of 2002, the dollar has weakened considerably and we feel that the 1995-2002 bull market has definitely come to an end and that, after a brief technical rally, more dollar weakness should be expected in 2003, as the US economy continues to disappoint.'

What actually happened was that the nominal US stock market rally was then supported by the declining value of the US dollar, and the value of US equity investments if denominated in non-US dollar currencies drifted sideways.

So in that sense Faber's pessimism about the performance of US equities throughout the 2000s was proven correct as US stocks went nowhere in foreign currency terms.

Nasdaq spot-on
He was also right as regards the Nasdaq. In October 2000 his AME Info column noted: 'This Nasdaq 5000 level may very well turn out to be as much of a 'milestone' in financial history as the Nikkei 39,000 level reached in December 1989.

'When the Nasdaq reached in March the 5000 level, this Index consisted of about 4,800 stocks with a market capitalisation in excess of US $6 trillion. Based on combined Nasdaq earnings estimates for the year 2000 of US$25bn, these stocks had, in March 2000, collectively a P/E of about 240!

'Now, let us assumes that the Nasdaq with its $6 trillion valuation can grow its earnings at a compound rate of 20% per annum for the next 10 years 'without interruption.' At the end of the period, in 2010, let us also assumes that the P/E of the Nasdaq will be twice its earnings growth rate (of 20% per annum). In other words the Nasdaq will sell for 40 times earnings.

'Since the S&P 500 sells for about 28 times earnings, the assumption of a P/E of 40 for the Nasdaq is quite realistic. Under this scenario, the Nasdaq's current $25bn in earnings will grow to $155bn in 10 years time and with a P/E of 40, these $155bn would have a value of $6.2 trillion. In short, even under this extremely and, in my opinion, totally unrealistic scenario, the Nasdaq would at best be in 10 years time where it was in March of this year.'

With the benefit of hindsight this is a superb application of sober investment analysis to the dot-com boom folly that still held some investors fixed like rabbits in a car headlights in late 2000. And as we now know even seven years later the Nasdaq was still only worth half of its 2000 peak.

Gold tipped in 2001
But his most brilliant call was undoutedly to buy gold in early 2001, way ahead of most other market commentators and following a 20 year bear market that had left the gold market in a mood of deep depression and dispondency. It was an incredibly radical call, and first appeared in an article in February 2001 with a groundbreaking fundamental analysis of the gold market.

'Today, I should like to advocate the purchase of a group of stocks, which has over the last 20 years been the worst under-performer. This group consists of gold mining companies around the world, all of which have a combined stock market capitalisation of only $30bn.

'In other words, you could buy the world's entire gold mining industry for just $30bn. A bargain when you consider that Cisco and Microsoft alone had earlier last year a combined stock market capitalisation of more than $1 trillion, and that Amazon.com was valued at its peak at $35bn.

'Every year in the 1990s, physical gold demand has exceeded the annual supply of approximately 2,500 tons - valued at present at about $35bn - by about 300 to 500 tons. Compare this to the annual supply of bonds in the world, which amounts to about $3.5 trillion and it becomes evident, how small the supply of gold is.

'Then consider this. In the year 2000, Indians bought about 850 tons of gold. In other words, in India, where the GDP per capita is only $300 per annum, every man, woman and child bought almost one gram of gold each. If gold became one day as popular as platinum or the Nasdaq is at present, and every person in the world bought just one gram of gold, it would generate an annual demand of 6,000 tons, which is about 2.5 times its annual supply from mines.'

Probably nobody has written a better assessment of the fundamental case for investment in gold, and at the same time Faber also correctly called for an emerging market stock rally based on a resurgent China that also had an important message for the commodity markets in general:

'As more and more foreign companies start to produce in China, its domestic economy will remain robust and lead to rising property prices in the long run. In this respect, I believe that Shanghai properties are one of the most interesting investments at the present time.

'In India, I can see that the software industry will continue to grow. The Indian software industry will not only penetrate the domestic market but it will also gain market share from software providers in Europe and the US thanks to its cost advantages.

Investment classic
Indeed, by the middle of 2001 Faber had made the critical market judgments that would be the subject of his own classic investment book, 'Tomorrow's Gold' published at the end of 2002. This book correctly forecasted the bull market in commodities, particularly for oil and gold and the growth of emerging markets.

No review of Faber's popular column on AME Info could be complete without also looking at his assessment of the oil market which in 2004 forecast continued strength in the oil market, and as with the earlier gold item gives a superb summary of the bullish long term case for oil. In fact, as far back as 2000 he suggested that oil would hit $100 a barrel.

In 2004 he said: 'Since its last major low in 1998 at $12 (when 'The Economist' published a very bearish piece about oil), crude oil prices have climbed to around $50 at present. The question, therefore, arises whether oil prices are headed for a sharp fall, as most analysts seem to think, or whether far higher prices could become reality in the years to come.

'Over the last two years we have repeatedly explained how rising demand for oil in Asia would likely lead to higher prices - this especially because we took the view that the oil producing countries in the world were unlikely to be in a position to increase their production meaningfully.

'At $50, one might, however, be tempted to think that oil prices are substantially over-bought - certainly from a near term perspective - and ready to decline again. Therefore, I have noted that numerous market participants have been shorting oil futures in the hope of a sharp fall…Still, I maintain the view that we may see sometime in future far higher prices than anybody envisions.

Oil outlook
'First of all, if we look at oil prices in real terms - that is oil prices adjusted for inflation - the real prices is right now still about 50% lower than it was at its January 1980 peak. In fact, oil is now not much higher than it was in the early 1970s, when the last big oil bull market got underway.

'But, what is important to understand is that whereas the 1970 oil price increases were coming from a supply shock, which was driven by OPEC cutting its production all the while large production excess capacities existed, the current oil bull market is purely a function of increased demand coming principally from Asia at a time global oil production has practically no spare capacity which could lead to much higher production than the current 80 million barrels per day. So, whereas we can say that the 1970s oil shock was 'event driven', today's oil price increase is structural in nature.'

It is hardly any wonder that Marc Faber remains a popular commentator with his successful investment calls far outweighing his occasional mistakes.

[rffrydr]

Doom doesn't like our "confetti currencies" but sees inflationary cycle "sparing" housing:

http://ftalphaville.ft.com/blog/2007/10/04/7797/dr-doom-on-confetti-currency-and-the-allure-of-gold/

Joined in this gloom by Milken, a man who knows about fallen assets:

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ahu42IMcNL3E
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Today is the Tomorrow you worried about Yesterday!

[probtrader]

Mr. Faber prediction record according to CXO Advisory: http://www.cxoadvisory.com/gurus/

[diesel]

Doctor Doom says US equities starting new bear market! Says Dow will drop under 12000.


http://www.bloomberg.com/apps/news?pid=20601087&sid=aeYtlAQSOkSk&refer=home

[rffrydr]

Farmland: the door is closing on that one too, see REIT on the Cob

http://marketthoughts.com/forum/reit-on-the-cob-t3861,highlight,reit+crop.html

In Argentina the wine industry is exploding, beef expanding and the chinese are ALL OVER the soybeans. Austrailia there's no water ergo no farm.

On China he refers to the notion of "catch-up" vis-a-vis other emerging markets. But China was one of the first in the early 90s and first to feel the pain. That a real bubble will command up to 50X depends alot on where you start and what you're really measuring. Everyone's talking about it because the math: double digits per month at 45 X earnings and banks worth more than Goldman.... No-one can bet on it (I only found a lonely little mutual fund in Australia claiming Class-A holdings); no-one can get sqeezed or caught out. The sentiment that matters is that of the players--and that is different than this. 4444 and I'm short.

I like newly low-end Detroit high-end real estate.
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Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Marc Faber cites Spanish property, EM stocks, commodities, art, collectibles, etc., all being in bubbles, but that the "bubble" in U.S. equities is not as big.

States that China is also in a bubble, but since this is the consensus among most retail investors, he states that China can and should go higher than anyone thinks before it pops.

Also states that the whole world will suffer when this bubble pops. Says there is nowhere to hide since pretty much all tradeable assets are now highly correlated with each other.

However, there are undervalued assets, such as Middle Eastern stocks (which are down anywhere from 50% to 70% from their highs) and properties in Detroit. Others include farmland in Brazil, Argentina, and Australia.

Not exactly sure on what will be the trigger but states that this time around, the lowering of interest rates and money-printing would not help, as this will only drive up consumer prices and crash bond prices.

[rffrydr]

Faber on Bloomberg talking universal bubbles and sticking his neck out. But may not include China.
_________________
Today is the Tomorrow you worried about Yesterday!

[diesel]

Hi Guys,

Yes thats a roman coin from the days where the romans were slowly debasing the currency etc.

Got caught out during the crash the other day 100% long, stopped out at 1434 S&P. Re-entered long the Dow 13234 basis June Futures. Also got stopped out long gold and stopped out short the 10 year. Bad week for me.

Regards..

[rffrydr]

That's a roman coin and you can buy them on ebay for not too much cash, hunh Diesel?

Just listened to interview: talkin' the Master's talk, searching for relative value in world of overvalued assets and pro-infrastructure (criticises our airport tardiness, and talks about "cuckooland"--now THAT'S german!) And dollar supportive on rising rates--especially as the fed gets into cutting.

I'll say I have to agree with this point in particular: assuming the Fed cuts, bonds will rally first and then sell, sell, sell.
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Today is the Tomorrow you worried about Yesterday!

[lion hunter]

I think Faber is Swiss and i can appreciate his fascination with Thailand.
Thai women are great.

Where's the coin from diesel?

[rffrydr]

Trotted out on Bloomberg today. My fellow permabear might give us a tradable bottom. Sees summer rally on Fed cuts and extra bearish on India and China. Likes Thailand on value basis. Worries about death of King. Germans have a "strange" fascination with Thailand.

I like his relative outperformance of Japan vs. X; Thinks japanee retail repatriation may come back.

Time, I think, to give credit where credit is due.


ps Always long gold. Likes it on 10% pullback.
_________________
Today is the Tomorrow you worried about Yesterday!

[diesel]

Here is a interview with Marc Faber.

http://www.financialsense.com/Experts/2007/Faber.html

Makes a case that brokerage and emerging market weakness would be a sign to be very careful in the equity markets. He is also bullish short to mid term on the US dollar against the Euro. As always he is bullish on gold and silver.