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Marc Faber: Make Money on Stocks Volatility While Holding Physical Gold
By Dian L. Chu, Economic Forecasts & Opinions
Dr. Marc Faber told investors to buy stocks on March 9, 2009 when S&P reached its low since 1996, and predicted a 20% decline if the index broke a new high.
Now with the S&P down about 13% from that high, Faber talked to Bloomberg on May 24 about his latest call on the markets, economy, and what he thinks are the best places to invest now.
S&P - Support at 1,045, Resistance at 1,200
Faber now thinks the stocks are oversold in the near term on extreme negative sentiment towards the euro and North Korea, but there's strong support around 1,045/1,050.
From a seasonal perspective, a summer rally in June/July could be expected, with a lot of resistance around 1,200/1,220, followed by a downturn and bottoming out in October/November. By then, another round of stimulus could come in and prop up equities as a stronger U.S. dollar and bond market would give the Fed ammunition to ease the monetary policy.
(Note: In a separate interview with Tom Keene on the same day, Faber says S&P could fall another 15%.)
Bearish About Everything, But Quite Happy to Hold Physical Gold
“It’s a race in the purchasing power of paper money to the bottom, and the only assets that will, for sure, keep their purchasing power are precious metals.”
Even though gold has been performing quite well in the last 18 months, it is "conceivable" that gold could go down somewhat more. Nevertheless, envisioning a forthcoming disaster in the next few years, Faber says he is quite happy to own physical gold after looking at all asset classes.
Asian Equity Still Reasonable
Faber said investors may still buy a basket of Singapore, Thai or Hong Kong shares with about 5% dividend, which would be good for a long term portfolio.
On the U.S. Economy
“Stocks could go up and the economy can deteriorate...Government official should stay out of the economy... Mr. Obama and his clowns around him don't understand... they're going to destroy the economy."
The fiscal deficits will go up instead of down and Faber is not sure a recovery ever happened. The economy will eventually settle at a lower level than pre-crisis-- the New Normal --according to Faber. Meanwhile, huge fiscal and monetary stimulus, coupled with private sector credit contraction, will ensure high volatility in economic and financial activity.
Make Money on Volatility
In a typical Faber fashion, he ended the interview with the following remark:
"In the long term, as I always said, we are all doomed, but in the meantime, because of the volatility in the markets, you can make money. The key is to know when to stop, and when you stop, how and where to allocate assets."
My Take on Gold & Stocks
The rally in the past couple of days, instead of a bona fide "recovery", is primarily from shorts covering after China reiterated its commitment to keeping the euro in its estimated $2.4 trillion of reserves, and big fund managers in the U.S. held onto equities while cutting bond holdings.
Most of the technical indicators of SPX are not decisively bullish either. The StochRSI is at 0.666 (a bad omen, I might add). close to 0.80, which is the level that could signal a pullback. (See Chart)
Gold and equities have been trending mostly in tandem, while inversely with the euro since late last year. The current market sentiment most likely will not react kindly to any bad news or rumor about Europe or anything investors perceive that may negatively impact global economic or political stability.
Although uncertainty typically buoys gold as investors seek store of value by selling stocks and buying into gold, a deep retreat of stocks could trigger enough margin calls prompting a selloff of other asset classes, including gold.
Meanwhile, gold, now at around $1,212, close to its all time nominal high of around $1,230 an ounce reached earlier this month, could be subject to some near-term profit-taking and technical correction as well.
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Are not the interviewer's the most annoying f..ks? Or is it just me?
Tell me what a paper gain in a paper currency will be worth in a year and I will tell you how much effort I will put into making one.
We need to finish today strong and show a weekly gain.
The headlines are already there and the articles have been written to support that sentiment.
Let's see how they pull it off.
How does one "take advantage" of the volatility when a few others control when is up and when is down?
Sell the rally, buy back the oversold or something?
walküre
Better yet, if everything is being manipulated and controlled, what reason is there to trust anything?
Everyone assumes the markets are being manipulated.
Everyone assumes the Government is manipulating the market and big business.
Everyone assumes that big business in manipulating the markets and government.
Everyone assumes that Gold exists in a pristine void totally lacking in manipulation.
Looks like a big blind spot to me.
With gold/silver the thinking is that the system can be bypassed. One could bypass the manipulation by simply trading goods for gold, or gold for goods. A silver dime for a loaf of bread for example.
The problem might be in the event of a major economic collapse and thus lack of trust, if I'm the guy with the bread, I might (acutally would) prefer to eat it myself since I have no assurance that anyone would accept either my gold or silver or even how to determine the price which requires functioning markets. However, if I have skills/supplies in medicine, engineering (fixing/making things) etc. then its much more likely I could trade my work for food, fuel etc. So, real skills (no lawyers, accountants RE agents need apply etc) are the ultimate insurance policy in a currency crisis where there is no functioning market system either in fiat or otherwise.
In such conditons base metals like lead and reloading supplies (primers, powder, casings) are much more tradeable and useful.
utter. horse. shit.
it's never been like that in a single economic collapse.
guns and ammo have NEVER been more valuable and gold has never been valueless.
Does your comment relate to all the economic collapses you have personally lived through? By that I mean the collapses of 2008, 2002, 2000, 1993, 1987....
walk,
"Everyone assumes that Gold exists in a pristine void totally lacking in manipulation.
Not on this site, we know it's manipulated..............problem is, it's the only thing that is not anothers debt,retains it's value( however set), and has over 6000yrs.
Gold has never had a value of ZERO,( except before mankind) and will only have that value when one more thing happens........
Everything else you said is right, except the word "ASSUMES", should be "KNOWS".
Never in our History, have so many seen the inner sanctums workings to this degree..........the fact that we have should scare the shit out of all of us.
Or, set your Jaw.
Suspicion towards a currency, once awakened, develops insomnia. - James Dines
With 5% intraday swings and constant interventions, only a gambler or a moron would be in these markets. Faber will take either one as he unloads his positions.
+1000
i know, that's why anyone with working neurons is in physical gold and silver....
and has taken delivery.
I know, right?
I mean, I'd be buying gold at 1000 an ounce instead of buying BAC at 3 bucks and WFC at 9, right?
Oh wait, I didn't do that...
"in the end, we're all doomed" ....... that made my day !
A broken clock is still right twice a day!
a broken clock is right twice a day a johhny bravo wrong each hr of the day ,
out of work ,, giving lessons to grown ups . fancy this a house with out foundation a straw pushing elephants.
Can you tell which two times it is right from the others?
Actually, it's not. It's just a broken clock -- worthless. You should recognize that.
RockyRacoon
In a void all clocks are relative.
lol - that reminded me of that Thompson quote from "Where the Buffalo Roam": "Mr. President, what are you doing for the doomed? You see, there are two kinds of people in this world... the doomed, and the screw-heads..."
i don't think any "people" are buying anything.
we're down to these guys with HFT models tossing the hot potatoes back and forth until they discover who has been the designated cootie.
Faber is a hypocrite as well. Was saying stocks are undervalued (short term) on Bloomberg.
He throws in his short term calls just to make the day traders happy.
Since when is calling it as you see it hypocrisy? He thinks people will be buying near term until it crashes again.
how can there possibly be a recovery? we have a consumer-driven economy....and Bennie Boy forgot to give the peasantry any money and any way to get any.....
jesus.....we all need to understand what's going on here. the banks are gradually "gathering" all the assets. the public is being literally drained dry.
to pretend that somehow, magically its all going to get better is ludicrous now. bloomberg's articles on the "recovery" sound more foolish every day.
i talked with the head of social services in our town yesterday. she is overwhelmed by the need >> from people with skills, trades, education.....and most are now so deep underwater, it will take them years to recover, if they ever do.
its over. i used to say if the banks were reined in, we'd have a chance, but its over. the financial reform bill showed us that. its over. they won. they are going to get it all, destroy the economy and the country and walk away scot free.
When i was younger, studying finance, i wondered how things could always go up: prices creep up, inflation creeps up, taxes creep up. It seemed unnatural. In nature, there is the inbreath and the outbreath, the waves, the seasons, the ups and downs.
Now I see that the govt plays the childrens' game of "how long can you hold your breath?" Inhale, inhale, inhale.
Now, as a result, set to pass out from the strain, in one long exhalation.
From what I remember Faber was pretty adamant there is no recovery as opposed to "not so sure" that there was one.
what i always think is fascinating about these comments on gold vis a vis its technicals is....
thanks to JPM, the CTFC, and the Comex, it hasn't traded freely in well over a decade. Same with silver.
So we have no way of knowing what the real value of gold or silver is...
and in that, the technical analysis is inherently flawed.
its nuts, but.....that's the way it is. let gold and silver free (hello CTFC, what's your job again?) and then see where the price settles....
and then let's do the technicals.
Yes, JPM, the CTFC and the Comex have no idea what the "true" value of gold is.
Cheeky Bastard, with his 50000 an ounce prediction is right, however.
If anything, the technicals are skewed bullishly by all the Glenn Beck hysteria and commercials to buy gold every time there's a commercial break on Fox or CNBC.
Of course, nobody here would believe that. They all think that we're going to see hyperinflation, as they are not educated in economics.
minus 1000
a zit head playing in the sand box ,
distorting whats said , using glittering generalities and straw men to bolster flaying in the wind.
a third grader in the company of adults
"Cheeky Bastard, with his 50000 an ounce prediction is right, however."
You don't know the difference between cheeky bastard and gordon gecko.
You're not paying attention. So you will get what you didn't pay for.
Enlighten us all-wise and knowing Johnny Left Hand.
You are not educated in basic human psychology.
I am Chumbawamba.
You seem to be under the illusion that a debt owed between governments and banks in printable paper somehow instills more value in that unit of debt than a debt between governments and banks made in unprintable rocks. The thing that bugs understand is gold never left banking just because government paper was taken off the gold standard.
Johnny Bravo
Automatic Earth has been warning Deflation followed by Inflation and Hyper inflation.
Too mnay theories kind of like worrying if Jesus or Odin ends the world.
It is said that in an inflationary environment that the people who first have access to the excess funds are the ones to profit the most. It seems that the "banks" these days have first access to the computer generated fiat money. How does your "education in economics" see this view?
Correct. That is how the fiat/fractional reserve banking system works....Those (banks/special interests/Gov't/etc) who get the money first after it has been created out of thin air benefit and those who get the money later suffer--the value of the currency is consistently depreciated over time through inflation--they get to spend it before the effects of the inflation (defined as an increase in the money supply) take hold (rising prices are an effect of inflation)....So, if I get the money early in a business cycle--at the beginning of a bubble I benefit more than the sucker (greater fool) I give the money to later.
I don't think you understand what technical analysis means. It's simply a tool to forecast what the price momentum might do based on the market's previous actions. In that sense, technical analysis always works because it always shows you what the price action has done in the past. The problem is it's not a leading indicator (ie. it doesn't predict). So even if the metals were at its "real" price, technical analysis would still give you that information.
Also your definition of "real" is flawed. The "real" price simply is a measure of supply and demand. Even if supply was artifically high and thus the price artifically low, the fact is, someone is willing to buy at the lower prices and someone is willing to sell lower prices. Not all people, but enough to make that price "real". The fact of the matter is, price is an abstration that is based on an agreement between buyer and seller. There is no "real" price for anything. Once you understand that, you'll see that something even as "precious" as gold can be worthless when the only thing that's priceless is something that is truly life sustaining, not a bartering medium such as money.
If the day comes that silver or gold is needed it won't matter what you paid for it.
On the day it saves your family it is in fact priceless.
On that day it won't matter how much you paid for it. What will matter is how many ounces you have in your hand.
That's why I own some. As to "investing" in PMs with an eye to turning a profit, who knows what's going to happen. If it goes down, I'll pick up a bit more - and keep it close by.
Correct. PMs are more of an insurance policy, rather than a straight up "investment" with a target ROI. If you trade GLD chances are you can't get delivery anyway. Just take those FRNs you make on the trades and go buy some PMs from your happy local vendor. Like insurance, you put away a little every month to cover you in case the house burns down. And if your house burns down, there's no way to buy insurance after the fact (unless you're GS). When the economy catches fire (in the bad sense) there will be no outlets to acquire PMs. If everything turns out hunky dory economically, then you at least have some cool and impressive xmas/bday gifts for the kids.