Marc Faber Warns "Insiders Are Selling Like Crazy... Short US Stocks, Buy Treasuries & Gold"

Tyler Durden's picture

Beginning by disavowing Mario Gabelli of any belief that rising stock prices help 'most' people ("Fed data suggests half the US population has seen a 40% drop in wealth since 2007"), Marc Faber discusses his increasingly imminent fears of the markets in this recent Barron's interview.

Quoting Hussman as a caveat, "The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak. There's no calling the top," Faber warns there are a lot of questions about the quality of earnings (from buybacks to unfunded pensions) but "statistics show that company insiders are selling their shares like crazy."

His first recommendation - short the Russell 2000, buy 10-year US Treasuries ("there will be no magnificent US recovery"), and miners and adds "own physical gold because the old system will implode. Those who own paper assets are doomed."

Via Barron's,

Faber: This morning, I said most people don't benefit from rising stock prices. This handsome young man on my left said I was incorrect. [Gabelli starts preening.] Yet, here are some statistics from Gallup's annual economy and personal-finance survey on the percentage of U.S. adults invested in the market. The survey, whose results were published in May, asks whether respondents personally or jointly with a spouse have any money invested in the market, either in individual stock accounts, stock mutual funds, self-directed 401(k) retirement accounts, or individual retirement accounts. Only 52% responded positively.

Gabelli: They didn't ask about company-sponsored 401(k)s, so it is a faulty question.

Faber: An analysis of Federal Reserve data suggests that half the U.S. population has seen a 40% decrease in wealth since 2007.

In Reminiscences of a Stock Operator [a fictionalized account of the trader Jesse Livermore that has become a Wall Street classic], Livermore said, "It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight." Here's another thought from John Hussmann of the Hussmann Funds: "The problem with bubbles is that they force one to decide whether to look like an idiot before the peak, or an idiot after the peak. There's no calling the top, and most of the signals that have been most historically useful for that purpose have been blaring red since late 2011."

I am negative about U.S. stocks, and the Russell 2000 in particular. Regarding Abby's energy recommendation, this is one of the few sectors with insider buying. In other sectors, statistics show that company insiders are selling their shares like crazy, and companies are buying like crazy.

Zulauf: These are the same people.

Faber: Precisely. Looking at 10-year annualized returns for U.S. stocks, the Value Line arithmetic index has risen 11% a year. The Standard & Poor's 600 and the Nasdaq 100 have each risen 9.4% a year. In other words, the market hasn't done badly. Sentiment figures are extremely bullish, and valuations are on the high side.

But there are a lot of questions about earnings, both because of stock buybacks and unfunded pension liabilities. How can companies have rising earnings, yet not provision sufficiently for their pension funds?

Good question. Where are you leading us with your musings?

Faber: What I recommend to clients and what I do with my own portfolio aren't always the same. That said, my first recommendation is to short the Russell 2000. You can use the iShares Russell 2000 exchange-traded fund [IWM]. Small stocks have outperformed large stocks significantly in the past few years.

Next, I would buy 10-year Treasury notes, because I don't believe in this magnificent U.S. economic recovery. The U.S. is going to turn down, and bond yields are going to fall. Abby just gave me a good idea. She is long the iShares MSCI Mexico Capped ETF, so I will go short.

...

What are you doing with your own money?

Faber: I have a lot of cash, and I bought Treasury bonds.

...

Faber: I have no faith in paper money, period. Next, insider buying is also high in gold shares. Gold has massively underperformed relative to the S&P 500 and the Russell 2000. Maybe the price will go down some from here, but individual investors and my fellow panelists and Barron's editors ought to own some gold. About 20% of my net worth is in gold. I don't even value it in my portfolio. What goes down, I don't value.

...

Which stocks are you recommending?

Faber: I recommend the Market Vectors Junior Gold Miners ETF [GDXJ], although I don't own it. I own physical gold because the old system will implode. Those who own paper assets are doomed.

Zulauf: Can you put the time frame on the implosion?

Faber: Let's enjoy dinner tonight. Maybe it will happen tomorrow.

...

There is a colossal bubble in assets. When central banks print money, all assets go up. When they pull back, we could see deflation in asset prices but a pickup in consumer prices and the cost of living. Still, you have to own some assets. Hutchison Port Holdings Trust yields about 7%. It owns several ports in Hong Kong and China, which isn't a good business right now. When the economy slows, the dividend might be cut to 5% or so. Many Singapore real-estate investment trusts have corrected meaningfully, and now yield 5% to 6%. They aren't terrific investments because property prices could fall. But if you have a negative view of the world, and you think trade will contract, property prices will fall, and the yield on the 10-year Treasury will drop, a REIT like Hutchison is a relatively attractive investment.

...

Faber: The outlook for property in Asia isn't bad because a lot of Europeans realize they will need to leave Europe for tax reasons. They can live in Singapore and be taxed at a much lower rate. Even if China grows by only 3% or 4%, it is better than Europe. People are moving up the economic ladder in Asia and into the middle class.

Are you bullish on India?

Faber: I am on the board of the oldest India fund [the India Capital fund]. The macroeconomic outlook for India isn't good, but an election is coming, and the market always rallies into elections. The leading candidate is pro-business. He is speaking before huge crowds.

In dollar terms, the Indian market is still down about 40% from the peak, because the currency has weakened. In the 1970s, stock market indexes performed poorly and stock-picking came to the fore. Asia could be like that now. It is a huge region, and you have to invest by company. Some Indian companies will do well, and others poorly. Some people made 40% on their investments in China last year, but the benchmark index did poorly.

I like Vietnam. The economy has had its troubles, and the market has seen a big decline. I want you to visualize Vietnam. [Stands up, walks to a nearby wall, and begins to draw a map of Vietnam with his hands.] Here's Saigon, or Ho Chi Minh City, the border with China, and the Mekong River. And here in the middle, on the coast, is Da Nang.

...

Faber: I recommend shorting the Turkish lira. I had an experience in Turkey that led me to believe that some families are above the law. When I see that in an emerging economy, it makes me careful about investing.

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fonzannoon's picture

The Trifecta! Gold vault, Simon Black and Faber in the same day! Let's top it off with 20 reasons why rabble rabble rabble from the economic collapse guy where we quote the vault article, Simon Black and Faber...all while the S&P futures blow through 1,800.

"Faber: I recommend the Market Vectors Junior Gold Miners ETF [GDXJ], although I don't own it. "

Ho Le Shit

fonestar's picture

Is economic collapse guy M.C. Ruppert?

fonzannoon's picture

Let me ruin a thread for a change please

fonestar's picture

Okay, let me know if you need a hand...

James_Cole's picture

Faber isn't that bad really, sometimes he's annoying but his calls are pretty good. Just never buy miners unless you really know what you're doing. 

Freddie's picture

I used to read Barrons but it is trash now. The whole thing is a joke. I stopped reading around 2006. The best ones on the Roundtables were Faber and  Felix Zaulauf.

Jack Napier's picture

Never buy miners, period. The only way they will be profitable is if metal suppression ends, and by the time that happens they will have already been nationalized.

ReactionToClosedMinds's picture

exactly ...... this is a dangerous game going on ..... many do not like Bernacke .......but he is leaving (and I suspect he is glad to get out of the manipulative hot seat)

junior miners are THE least loved equity sector geniuses here ....   some say time for a change  

guesss there are a lot of Ichan followers & Putin followers here ....... buy Apple ....and go whole hog ......buy the insider sales from Goldie or Faceplant.......... tech is the new era remember !

Squid-puppets a-go-go's picture

remember always that Yellen has the track record of championing monetary accommodation. That is why she is the perfect candidate for the oligarchy to finish the bait and switch and get her to put the brakes on QE HARD

the idea of her reversing taper and QE to infinity - while sensible from the vantage of keeping the status quo - just seems so damn obvious

this is the point where the 0.1% cut the rest of the 1% off at the knees

HelluvaEngineer's picture

Shouldn't you get a perl programming job by now?

SWRichmond's picture

I had an experience in Turkey that led me to believe that some families are above the law. When I see that in an emerging economy, it makes me careful about investing.

But that behaviour is de rigueur in the "developed" world, so is it OK to invest there?  Now I'm confused.

Keyser's picture

Rather ironic Marc said that, considering where he lives... Much like whistling while walking through a cemetery... 

 

cnmcdee's picture

This market may go up till September, but I do not have *any* doubt that within 2 years it will have collapsed.

Lindsey Williams spoke in detail that as soon as the Obamacare is setup they have a deliberate currency reset / debt reset planned.

But along the way Obama is going to seize all retirement accounts nationalizing them.

The wild card is Israel.  I estimate that by April 2014 she will go to war against Iran backed by logistical support from Saudi Arabia.

This will lead to false flags, and a global war.

Obama is a hard core supporter of the Muslim Brotherhood, his brother RAN the financing department of the Muslim Brotherhood.  He doesn't work for the United States, he answers to Saudi Arabia.

 

 

cnmcdee's picture

In the end - GET OUT OF THE MARKETS NOW (Like do not hesitate get tfo now...)  We don't know when this craphouse will implode, it could be very very soon, any day.

An earthquake to affect 17 states is also lined up to occur (Madrid Fault Line).

new game's picture

lindsey is one hellova bullshiter that sounds serious and has extraordinary power from above, and, oh yea, his comections which he never reveals-ha...

Metal Minded's picture

Same as Jim Willie, who is more to my taste, but only a matter of taste.

fonestar's picture

In the end - GET OUT OF THE MARKETS NOW

 

Was anyone even in these "markets" to begin with?  I only got into this stuff back in 2008 because I lost my job as a result of the great repression and started reading about it.

ReactionToClosedMinds's picture

fonestar ..... on this I am with you

suggest you read Schumpeter's Capitalism, Democracy & Socialism .... while written in late 40s perfect fit for now ....... Schumpeter's masterful 'admiring' take-down of Marx is an eternal highlight ..... but may seem dated ( I do not think so as bolsheviks are nothing more than more heavily committed socialists).

Most who never read the book in all its entirety hide behind the 'destructive creation; concept of Schumpeter in this book .......but to me ( and many others) that is the fourth or fifth order of conceptual magnitude sitting in this treatise.

The absolute genius of C,S & D by Schumpeter is his articulation of busnessmen, intellectuals and the cynical collapse when economic stress hits....... Thomas Sowell more recently addresses this  .... it is the key to understand why 'good conscience' biz folk constantly since time eternal get the political rug pulled out from them by the politicla class....... especially when they are members of the lucky sperm club versus building their businesses from scratch with no outside help (<<<<<hint......crony capitalsim ala Bill Gates et all....... doubt me ........ go 'study' the actual record of how Microsfot obtained the 'OS' code.......... a buy-off of the Democratic leaning antitrust bar in the form of Gates' father)

AngelEyes00's picture

I wouldn't listen to anything Lindsey Williams has to say.  The last video I watched of him, he was claiming 'Smart Meters' were emanating special brain waves to make us docile (weak followers), between 3-4 AM.  WTF?!

He claims there will be a currency reset - uh duh, what does he think happens every business day at the currency exchange?  I emailed him and never got a response.  He's definitely a quack.

RaceToTheBottom's picture

"I had an experience in Turkey that led me to believe that some families are above the law."

Is Turkey part of WS?

epicurious's picture

Traveling through Turkey 50 years ago it was very clear to me that life in the 13th century was a long way from catching up to the rest of the civilized world.  As far as I can tell things have moved ahead about 50 years.

Squid-puppets a-go-go's picture

i know a few who travel to and from turkey over the last few decades who reckon it has come a long way with its infrastructure.

Culturally - well, thats a different story

MillionDollarBogus_'s picture

I wonder what Faber thinks about bitcoin as an investment..??

 

fonestar's picture

He said he "prefers physical gold to Bitcoin".  So both him and Schiff don't get it... they're both good and have lots of good points but they're set in their ways.  Old dogs, new tricks and whatnot....

vulcanraven's picture

They may be old dogs but with age comes wisdom.  Maybe they just haven't yet been convinced that Bitcoin is the real thing. Youngsters and Millennials (I assume) like yourself trolling internet forums to pump Bitcoin isn't going to be enough to get the more skeptical investors to jump in head first.

Call people ignorant or "late adopters" if you will, but the more you talk about Bitcoin, the less I want to put any money into it. You really should give it a rest and let it do its thing, just my two ¢

fonestar's picture

Would you talk to your accountant about installing a new transmission?  Or go to your mechanic for advice on markets and retirement savings?  Face it, there's not many people out there with the combination of financial and technical skills to properly discuss Bitcoin.  Trace Mayer, Max Keiser and very few others come to mind. 

vulcanraven's picture

So people should just blindly trust some anonymous kids on internet discussion boards? In all honesty, I haven't looked much into Bitcoin, and most of the exposure I have had to it has been from yours and a few others commentary on here. To tell you the truth, I would have been more optimistic if you didn't come across as such a fanatical zealot about the whole thing.

Flakmeister's picture

Likewise, you would not listen to a blowhard on Fox News about anything having to do with Climate Science...

in4mayshun's picture

Seems a little ignorant to single out FOX. I wouldn't trust any MSM outlet on....well, anything.

Flakmeister's picture

True, but I don't get my science from the MSM. But I can judge a portion of the MSM by the quality and honesty of their coverage of science related issues...

I suppose if you aren't aware of a lot of things it is easy to get confused like you appear to be...

Freddie's picture

He probably watches TV like the other serfs. Fox, CNN, MSNBC< NBC - who cares. All Op Mockingbird.  Oh and Global Warming (sic).  Two words the GW cultist can never answer - solar radiation.

X_mloclaM's picture

I can judge a portion of the MSM by the quality and honesty of their coverage of science related issues

 

lmfao

Flakmeister's picture

Funny thing is that I can also also get insight in a persons mendaciousness the exact same way....

It's pretty clear that you are either an ignorant fool or a lying sack of shit, likely both...

Squid-puppets a-go-go's picture

"Face it, there's not many people out there with the combination of financial and technical skills to properly discuss Bitcoin"

and you think bitcoin will gain widespread trust, acceptance, and usage because.......?

jerry_theking_lawler's picture

fone....what happens when the electrical grid goes down? I know what I will do....I will frolic around in my phyzz au ag....

Malachi Constant's picture

I have been working in advertising which is a dying industry for a very simple reason: Uninvited help is called invasion. No matter how brilliant or convincing you think your info-droppings are, what you are doing is raping my mind. If I explicitly ask a question, your answer is the only acceptable advertising. No astroturfing, no forum activity, no reviews, no guerilla marketing, no viral kitties - only an answer to an explicitly asked question.

You talk a lot about BitCoin without anyone asking. You think you are making BC look hip and bleeding-edge. something that only staunch old farts won't appreciate. In doing this, you are making a huge disservice to whoever pays you for your attempts at marketing: you imply that BitCoin is not to be doubted, which makes it a religious cult.

Yet you think that your explanations are solid and flawless; your metaphors sniper-sharp and all in all you project an aura of sensibility and merciless fact-based authority. Deplorably, your words are a mix of emotion and veiled insults with no added reason. The chasm between your illusion and reality makes your whole exercise pathetic. You demonstrate that BitCoin is a refuge of the jealous, restless and/or not too bright.

If you stop talking about BitCoin, its image will slightly improve, which is what you're after, isn't it?

Metal Minded's picture

Andreas M. Antonopoulos

Why Bitcoin Terrifies Big Banks | Interview with Andreas Antonopoulos (13:02)

http://tinyurl.com/o6txqh6


 


Papasmurf's picture

When you're as wealthy as either of those folks, Then I'll believe you "get it".  Until then,  I'll follow the smart money.

fonestar's picture

Oh, they're smart alright... smart with their money.  So if you happen to be selling gold coins, gold backed credit cards, gold storage facilities how smart would it to tell your clients to look into Bitcoin?

howenlink's picture

I generally agree with Schiff on economics, but I have an arguement for Bitcoin that I have not heard Schiff or others consider.  I liken Bitcoin to a fiat currency of a foreign country.  By that I mean it has limited acceptance among those who use it.  And like a foreign currency, you are likely to need to convert it to another currency in order to spend it in other area.  Unlike a foreign currency, it is not geographically bound to one state.  In this respect I think Bitcoin is legitimate as an alternate currency.

 

Disclaimer: I do not own any Bitcoin mainly because I believe short-sighted government thugs will outlaw it.

 

X_mloclaM's picture

sorta true, but it has added:

1. public ledger for tracking (5eyez via IP)

2. electricity needs, for spending and valuing

3. Temporarily limited supply, to lure techie would-be phyzz buyers

4. Time-decay to profits, decentralization of miners/clearers become pools, then bought-out, then cartelized

5. Time-decay to deflationary (limitation of supply) impulse inappropriate to an expanding world economy -- only market production of money works here -- red herring ALERTTTTT (30 years early)

6. Majority miner/clearers can swap code, once adoption is sufficient, and deflation boogeyman is 'slain' with the new supply (and all shall rejoice) -- now u Volker'ed once again, this time, more than regional

 

Ar-Pharazôn's picture

lol. Faber sit on bilions.

 

you?

Kirk2NCC1701's picture

Guys like Faber, Schiff, etc. made their money in stuff other than bitcoin, so they stick to talking things they know about.  And so they should!

Caveat Emptor applies to them also: Beware of an 'expert' who is waxing lyrically (dispensing advice) on something outside their field of specialty (field of max. competence).

I'm not shilling bitcoin here, but I totally discount these 'experts' (old dogs, old tricks) who make doomsday predictions about bitcoin's future.  They simply do NOT have a crystal ball good enough to know the future of cyber-currencies.

If cyber-currencies is something that interest you, treat it like any "speculative commodity":  With caution, by limiting your allocation/exposure.  Another way to look at it:  If you go to Vegas (a casino) for fun, make sure you've decided beforehand how much you want to 'risk', and treat it like a game.  The scary 'investors' are the ones who bet the farm on a single bet (who allocate poorly) -- whether on Wall St, Bitcoin or Vegas.  --> A fool and his money...

TheReplacement's picture

Naw.  They just don't assume that there will always be a cyber anything.  If you really believe things are going to fall apart to the degree that bombs drop or the system just grinds to a halt then you cannot put faith in bitcoin or any other asset that relies on multiple other things just to exist.  Even with paper you can burn it to start a fire to keep warm. 

It may be something in the middle instead of an extreme die off but the seemingly high potential for a mass die off is a siren for physical assets.  Bonds and miners are the hedge (above).