Dr Marc Faber, respected economic historian and author of the respected monthly newsletter, the ‘Gloom, Boom and Doom Report’, has warned that 2015 is set to be very volatile, urged international diversification and owning “physical precious metals stored outside the U.S.”
In another insightful and witty interview with Bloomberg Television’s In the Loop, with Betty Liu, Erik Schatzker and Brendan Greeley, the ever charming and affable Dr. Marc Faber reaffirmed his long-standing preference for investing in emerging eastern economies, his lack of faith in the dollar and advised Americans to own gold.
Faber fails to recommend a single U.S. stock in 2015 and when asked whether recent events in Greece were a buy or sell signal, Faber began by pointing out that persistent intervention by central banks into markets had made making predictions far more complicated.
Some commodities have soared in the last six months, wheat has doubled, while the price of oil and natural gas had collapsed indicating great volatility. Forecasters surveyed by Bloomberg had been consistently bearish on bonds for years, until this year since treasuries outperformed the S&P in 2014.
Hedge funds generally only generated returns of around 1%. In light of these discrepancies and central-bank induced distortions to the market, Faber emphasises the need for real diversification.
When asked whether he had maintained his “discipline” when oil prices crashed he surprised his interviewers by saying that he actually trades very little to avoid commissions and charges and he indicated that he was so broadly diversified that the oil crash had little impact on his portfolio.
He went on to warn regarding U.S. stocks. “Sentiment about stocks in the U.S. is much too bullish, much too optimistic” and suggested that U.S. ten-year treasury notes yielding 2.2% were the best of a bad lot given the abysmal returns being offered on the bonds of other developed economies.
Dr. Faber was then challenged on his forecasts from 2008 where he referred to the dollar as toilet paper and denounced quantitative easing.
“Now if we stuck with that view”, the interviewer asked, “where would we be today with the S&P 500 trading north of 2000 and ten year yields, as you pointed out at 220?”
Faber responded with a laugh “Yes, the toilet paper status is still ahead of us……for all paper currencies – not just the U.S. dollar.”
He then pointed out how he had advised owning Asian stocks in 2014 and in recent years and how the stock markets of emerging economies have substantially outperformed U.S. stocks in 2014. He cites China’s stock exchange up 45%, India up 25%, Thailand up 14%, Indonesia 18%, Philippines 21% and Pakistan up 40%.
He also draws attention to the fact that just being invested in U.S. stocks was not enough to guarantee decent returns:
“As of early December there was about as many stocks on the New York stock exchange that were down 10% as up 10% and as many stocks down 40% as there were up 40% so we have a huge diverging performance.”
When asked directly which U.S. equities he would own, “what specific companies would you own in the U.S.?” – he declined to give a single recommendation. Instead he signalled that Americans should be getting their wealth out of the U.S. and into gold stored abroad.
He sagely and pointedly added:
“I have to say that sentiment about precious metals is incredibly negative and all these “experts” are predicting the gold price to drop to $700. Well, understand, these are experts that never owned a single ounce of gold in their lives!”
“So they missed the five fold increase since 1999!”
“But they all know that the price of gold will go to $800, they write about it with a lot of authority.”
Dr. Faber is a long time proponent of owning physical gold. He has consistently urged people to act as their own central bank in acquiring bullion coins and bars as financial security and he believes that to store gold in Singapore is the safest way to own gold today.
Our recent investment advice webinar with Dr Faber can be seen here
The Bloomberg interview with Dr Faber can be watched here
Today’s AM fix was USD 1,199.25, EUR 986.55 and GBP 769.84 per ounce.
Yesterday’s AM fix was USD 1,186.50, EUR 976.54 and GBP 764.50 per ounce.
Spot gold climbed $15.00 or 1.27% to $1,198.80 per ounce yesterday and silver rose $0.50 or 3.17% to $16.27 per ounce.
Gold fell after overnight gains in Asia today as global equities fell as risk-averse sentiment returned to the market, triggering safe-haven gold buying.
Buying on quarter end and year end weakness has proved a profitable trade in recent years and traders and gold buyers looking to increase returns are positioning themselves for possible price increases again in January.
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