Marc Faber's June Outlook: Deflationary Collapse or Inflationary Bust

Marc Faber is out with the latest issue of his famous Gloom, Boom, and Doom Report which is always a must read for serious investors. Unlike most of the other talking heads, Faber has an excellent track record. He predicted the top in the equity markets in Nov 2007 and caught the bottom in March 2009, making his subscribers a lot of money. Let's see what he is up to in June 2011:

1. Stocks--Faber is still cautious on equities, believing that a more significant market correction is around the corner. However, shorts should beware because they are fighting the Federal Reserve. If you have to be in the market, stick to consumer staples like MO, JNJ, KO, PG, etc. For the ultimate contrarian investor, take a look at some select housing stocks (TOL,LEN, KBH), but only if you have a high risk tolerance.

2. Bonds--Likes Treasuries for a trade. Says 10 year yields could fall to 2.5% during a stock market correction. Longer-term Faber hates Treasuries and dismisses Albert Edwards call for sub 2% yields for the 10 year.

3. Commodities--Stay away from industrial commodities. Global growth is slowing, which means weaker demand and lower prices.

4. Gold--Still likes gold and recommends a gradual accumulation despite market fluctuations. Says that longer-term gold can only go higher because of negative real interest rates. Even a deflationary collapse is unlikely to hurt gold because the Fed will simply debase the dollar to get nominal prices higher. If the Fed gets it right and successfully re-inflates asset prices, then inflation will be in the double-digits, which would be bullish for gold.

5. Dollar--Any temporary bounce in the dollar (say 10-20%) would be met with more money printing by Bernanke and Co. This factor limits any sustainable gains for the dollar. In fact, the only scenario where you could see a much higher dollar would be nothing short of a worldwide financial collapse.

5. Macro--Faber says it is very hard in this environment to predict what will happen in the markets. The Fed's manipulation of asset prices has caused large distortions. However, one thing is clear: the Fed will not let the markets fall too much. This is why Faber thinks the stock market will trend higher (in nominal terms) or at least trade sideways for the forseeable future. 

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Marc Faber's June Outlook: Deflationary Collapse or Inflationary Bust

Marc Faber's February Outlook--Still Looking for a Correction

Legendary investor Marc Faber is out with his latest issue of the Gloom Boom and Doom report. Here are a few highlights:

1. Stocks---Still cautious on US and developed markets and expects a short term correction. In particular, Faber points out that while the Dow made a new high, the transports have not yet confirmed the move, which is bearish. Another warning sign is the failure of the Russel 2000 small cap index to make a new high. This is important because it has until now lead the general market. Furthermore, the internal market breathe (NYSE new highs) has been steadily falling, despite a rising market. Longer-term, Faber is pretty constructive on the stock market as the Fed will simply not let the market decline very much.

2. Emerging Markets--Faber remains very bearish on emerging markets in general (Brazil, India, etc). He notes that many failed to make new highs in January, despite favorable market conditions, which could indicate a major top in some emerging markets. Faber thinks emerging markets could fall between 20-30%. In fact, this would be a great buying opportunity for investors.

3. Commodities--Faber is concerned about commodities, as they are currently very overbought by almost any measure. He goes on to say that commodities seem to have reached the parabola stage--going straight up, which is usually the very end of the move. Yes, it could last longer than anyone expects, but at some point prices will collapse again, as they did back in 2008. This cycle, Faber notes, always occurs as higher prices lead to an increase in supply, which eventually overwhelms the market causing prices to fall. The cycle is longer for industrial commodities compared to agricultural prices as it is harder to build a new copper mine than it is for a farmer to plant more soybeans. This cycle will play out even with the Fed's money printing. Investors should prepare for some downside volatility in commodity prices.

4. Gold and Silver--Long term Faber is still bullish on the metals, but he thinks they could fall in the short term with the general market. Gold could fall to the $1,100-1,200 area. For investors this should not cause any alarm because with the fiscal problems of the US and further monetization, the future for gold  is still bright. Faber would use any decline to add to his positions.

5. Real Estate--No, Faber is not calling a bottom in US real estate, but he points out that relative to other asset classes, real estate is cheap. He would consider buying a home as long as you are prepared to live in it for a while. Faber also postulates that if housing continues to decline, commodities and stocks may sell-off even more.

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Marc Faber's February Outlook--Still Looking for a Correction

Thoughts From Marc Faber--- Aug 1

Legendary investor Marc Faber is out with his monthly report which discusses the US economy, QE 2, equity markets, China's property sector, and the EU debt crisis. Here are a few highlights:

1. Stock market outlook is uncertain. Faber is less confident that markets will fall to 850-900 because of the inevitable money printing (aka QE 2), which will boost asset prices. Possible trading range developing with 1040 as the bottom and 1170 as the top for the S&P 500. Even so he would be reducing equity exposure on any stock market strength.

2. Euro is likely to bounce around erratically between 1.25 and 1.35. Faber hates the dollar and euro but likes undervalued Asian currencies.

3. If you have to buy stocks make it Asian equities and REIT's in Thailand, Singapore, and Malaysia. They have high yields and are attractive compared to 3% 10 year treasuries. Asian economies will continue to grow at a healthy clip even with weakness in the US and Europe, which makes them good investments.

4. China's economy will continue to do grow even if the property market declines sharply. The growing Chinese middle class will support increased domestic consumption. Wages in China have gone up giving hundreds of millions of people increased purchasing power.

5. US municipal debt will likely become a major problem in the future. As of the 1st quarter of 2010 there is an estimated $2.8 trillion in outstanding municipal debt, which can never be repaid and will require a federal bailout. Another issue is state and local government pension plans, which are severely underfunded.

6. Gold is a buy after its seasonal bottom usually in September. Long term trend is up and as long as Bernanke is Fed Chairman, gold will do well.

7. Likes agricultural commodities and related stocks (but says avoid commodity ETF's because of the roll). In particular Faber likes wheat, rice, and soybeans. He also likes the fertilizer and seed stocks.

8. Faber expects rising agricultural prices will lead to civil unrest and violence in some countries.


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Thoughts From Marc Faber--- Aug 1

Marc Faber Predicts more Money Printing by October 2010

   Marc Faber was interviewed on Bloomberg yesterday and predicted that due to weakness in the economy, the Federal Reserve would begin a new round of Quantitative Easing (money printing) by October 2010 to prevent deflation. His outlook for the economy is not positive.

Here is a link to the video: Click Here

   If Faber is correct and the Fed prints $2-3 trillion more this wold be a boon to gold and other hard assets. However this money printing will eventually lead to hyperinflation despite what the deflationists say. I think history is pretty clear that the Federal Reserve will never allow deflation even though it is a natural part of the credit cycle.  

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Marc Faber Predicts more Money Printing by October 2010