Monday, August 13, 2012

MARC FABER on Current and Future Asset Bubbles

EB: With more monetary easing by central banks around the world – where do you think valuation will be skewed? Which stock markets are going to be most prone to ‘bubble-like’ characteristics?
MARC FABER : Given that given that zero interest rates are in the US in nominal terms and if I take say a more realistic view of cost of living increases. Last week, NY taxi prices went up 19%. If I consider that, I think that US stocks may for the time-being actually rally but I have doubts that they will rally above the highs at 1422 we saw in April of this year on the S&P.
I think that it’s possible that the US may rally as the whole world thinks that the US has natural gas and there will be a re-industrialisation in America. The mood amongst international investors is that the US is the least bad choice.
I’ve always said if you give me the choice to buy a 10 year treasury at the yield of 1.5% or Johnson&Johnson, I’d rather buy Johnson&Johnson with a ten-year view. But as I said, if I look at all the options that I now have, I can see that European stocks are now terribly depressed.
I still own Asian shares and again the reason I own them is we have next to zero deposit rates and my portfolio of Asian shares has an average yield of say 5-6%. If I look at my investments, I think that they might go down 30% but I don’t think there will be massive dividend cuts – some here and there but not across the entire portfolio.
I still keep a lot of cash because if the markets drop another 30% - which I hope they will do – I will then invest in equities. - in citywire


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