Asset prices are grossly inflated globally

I am suggesting that in the fourth year of an economic expansion, near-zero interest rates will lead to a further mis-allocation of capital. I thought the U.S. market would have a 20% correction last fall, but it didn't happen. I also said the market might explode to the upside before the correction occurred. We might be in the final acceleration phase now. The Standard & Poor's 500 is at 1650. It could rally to 1750 or even 2000 in the next month or two before collapsing. People with assets are all doomed, because prices are grossly inflated globally for stocks, bonds, and collectibles.

Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

Policy mistakes by The FED

I doubt Keynes [British economist John Keynes] would approve of current policies. Neither would the late economist Milton Friedman, even though Bernanke invoked him to justify his actions. The neo-Keynesians would argue that if the Fed hadn't flooded the system with money, things would have been much worse. That might be true, but they would have been worse for a shorter period of time.

Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

Marc Faber on The Asian markets

Three other Asian markets—Japan, Vietnam, and China—performed miserably for most of last year. I'm not keen on Chinese equities, but if conditions worsen and China prints money like crazy, the currency will weaken and stocks will rise. I own some issues in Hong Kong, but without great enthusiasm. I own Swire Pacific, Hang Seng Bank, Sun Hung Kai Properties, and Fortune REIT which owns shopping malls. One China play I like is China Mengniu Dairy.

Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

Rich will be targeted in a big reset

At some point, there will be a big reset. In the democracies of the Western world, large numbers of people will vote against the well-to-do. Throughout history, minorities have been targeted. Now the rich will be targeted through some kind of wealth tax or significantly higher tax rates. Eventually there will be so much antagonism against well-to-do people that it won't be comfortable.

Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

The U.S Will Default

"For a while, yes, but at some point people will wake up and realize that the U.S. will default through a depreciating currency—in other words, through printing money—or by not paying the interest on the bonds. I don't think the U.S. will stop paying the interest, but printing more money will weaken the currency and produce higher inflation in consumer prices, asset prices and commodity prices. So being in U.S. government bonds will result in losses to investors through currency depreciation." - in The AUReport:

Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

People With Financial Assets Are All Doomed

As Barron's notes in this recent interview, Marc Faber views the world with a skeptical eye, and never hesitates to speak his mind when things don't look quite right. In other words, he would be the first in a crowd to tell you the emperor has no clothes, and has done so early, often, and aptly in the case of numerous investment bubbles. With even the world's bankers now concerned at 'unsustainable bubbles', it is therefore unsurprising that in the discussion below, Faber explains, among other things, the fallacy of the Fed's help "the problem is the money doesn't flow into the system evenly, how with money-printing "the majority loses, and the minority wins," and how, thanks to the further misallocation of capital, "people with assets are all doomed, because prices are grossly inflated globally for stocks and bonds." Faber says he buys gold every month, adding that "I want to have some assets that aren't in the banking system. When the asset bubble bursts, financial assets will be particularly vulnerable." - in Zero Hedge

Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

Gold is Very Oversold

"Well, right now equities, bonds and gold are very oversold. They can easily rally on the S&P. We could rally 43, 50 points, but I don't expect a new high. Just in case a new high would be achieved in the next two months or so, it would not be confirmed by the majority of shares. In other words, very few stocks would lead the advance. In terms of bonds, they are also incredibly oversold. Where the sentiment about equities is actually still rather positive and all of these super bulls still predicting the market to continue to rise into 2014, 2015. In bonds and gold, sentiment is by historical standards incredibly negative. As a contrarian, I would rather buy bonds and gold than equities."
Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

Marc Faber Likes Bonds, Gold More Than Equities

 "If you believe that Bernanke means what he says," says Gloom, Boom, and Doom's Marc Faber, "then you believe in Father Christmas." Faber adds that, "we are going to see QE99," and while he states that equities, bonds, and gold are "very oversold," he prefer to buy bonds and gold than equities. Marc Faber also warns that "the S&P could drop 20-30% from the recent highs – without much of a problem."

"The only thing that I know is that I want to own some physical gold because I don't want all of my assets in financial assets."

Marc Faber thoughts about the markets:

"Well, right now equities, bonds and gold are very oversold. They can easily rally on the S&P. We could rally 43, 50 points, but I don't expect a new high. Just in case a new high would be achieved in the next two months or so, it would not be confirmed by the majority of shares. In other words, very few stocks would lead the advance. In terms of bonds, they are also incredibly oversold. Where the sentiment about equities is actually still rather positive and all of these super bulls still predicting the market to continue to rise into 2014, 2015. In bonds and gold, sentiment is by historical standards incredibly negative. As a contrarian, I would rather buy bonds and gold than equities."

His comments on bonds and QE tappering:

"If you say that if he means what he says, then you believe in Father Christmas. He said if the economy does not meet the expectations of the fed in one years' time, they will consider additional measures. In other words, if the economy has not fully recovered by mid-2014, more QE will be forthcoming. As I said already three years ago, we are going to go with the Fed to QE99."

Is Marc Faber worried about inflation?

"Well, I think investors have a misconception about what inflation is because it is essentially an increase in the quantity of money and credit. We have wage deflation in the world in real terms, for sure. In other words, real wages are going down and the cost of living everywhere are going up. That is why you have social unrest in North Africa, in the Middle East, in Turkey, in Brazil, and it will spread because the average person on the street hasn't participated in the huge asset inflation that has been going on in high-end properties, Mayfair properties, Fifth Avenue, Madison Avenue, the Hamptons and in equities and until recently in bonds and commodities."

Marc Faber on gold down moves:

"To that I respond there are many people out there, they never owned an ounce of gold in their lives. They were bearish about gold at $300, bearish about gold at $700, bearish about the stock market in 2009 when the S&P was at 666. Now, they are bullish about stocks and they are still bearish about gold. The commercial hedgers - these are professional miners, mining companies and people involved in gold trading. They have the lowest short exposure, since 2001 when gold was at $300. Similarly, in the silver market, the commercial hedgers, again, the professionals have the lowest short exposure since 2001. I would rather bet on the commercial miners, the commercial hedgers than on some forecaster who knows about the future of prices as little as I know. The only thing that I know is that I want to own some physical gold because I don't want all of my assets in financial assets."

Comments on the US economy and stocks:

"First of all, I believe that today we are talking about the global economy. The U.S. stock market has just about outperformed any other market around the world in the last 6 to 12 months. We have big trouble coming into emerging economies. The emerging economies are not performing well, There is no growth at the present time. The Chinese economy, maximum is growing at four percent per annum. We have multinationals in the S&P. Their growth and global growth came from the last four years from the recovery in the emerging world. If the emerging world does not grow, the global economy will not perform well and corporate profits, as we just saw today from Oracle, will disappoint and stocks won't be the best investment in the world... I think the market is on the high side, corporate profits are inflated and we could easily, from the recent high, May 22 at 1687 on the S&P, drop by 20% to 30%, easily."

Marc Faber prediction on where gold will be by year end:

"Well, I think we will be higher by year end but I am not worried where we are. I have said that I buy gold regularly. I just bought today at $1300 and I will buy more at $1200 and I will buy more at $1100." "I don't know, I am not a prophet, I don't know exactly where the price will be on a month by month basis, but I want to have some wealth, some of my assets in physical gold. I can see a lot of problems coming into the world including expropriation through taxation or through regulation or even through revolution and social strife."

His thoughts on where 10 year yield is going:

"I am tempted to buy a 10 year treasury at a yield of 2.5%. I think we will rebound in the treasury market. Yields will go down first, and if they go up further, it will kill the economy including the housing market."


Marc Faber is a great contrarian investor and publisher of the Gloom Boom & Doom Report. He is well known for his accurace predictions of stock market crashes and other correct calls on different investment assets.
 

 Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.