Saturday, August 9, 2014
Marc Faber Warning : 87 Crash All Over Again
Q: You have been emphasizing that tech stocks are overvalued. Could you be more specific?
A: I think that Social media stocks are in a bubble phase. I also think that a lot of biotech stocks are in a bubble phase. Aside from the fact that the entire market is in a bubble phase, these are two sectors that I would regard as highly priced. In the tech space, anything to do with cloud computing is overvalued. There is a lot of competition that will come in and depress prices for these services. I wouldn’t buy these stocks.
Q: In terms of asset allocation, what would you recommend to individual investors?
A: I would have a diversified portfolio holding roughly 25% of my assets in equities, 25% in real estate, 25% in cash and bonds, and 25% in gold.
Q: With second-quarter earnings season underway, how do you believe the S&P 500 will perform given the speculative, precarious market that you believe we’re in?
A: We could be entering a similar environment like in ’87, where we have a blow-off and a more serious bounce in the second half of the year. Since 1929, we’ve had 15 bear markets. We have a bear market approximately every six years. Do you know how much each bear market has given back in terms of price gains? On average, it’s given back 21 quarters of price gains, or five years. Let’s consider that all the bulls are right and the market goes up for the rest of the year, and then you give back five years! Then we are in 2015 at essentially the 2010 level.
Q: What’s your outlook on global asset allocation?
A: If I were to buy stocks, the valuations in the United States are currently the highest, followed by Europe. The cheapest markets are in emerging economies at the given time, such as Asia. I have some protection, and at least a cash flow at the moment. The risk-reward of buying today is not particularly favorable.
Q: Is there anything that you are positive about in this market?
A: I recommended buying stocks on March 6, 2009, when everybody was very bearish. Many strategists were arguing that the S&P 500 would fall to 400. Since then, I haven’t recommended to short any stocks until earlier this year, and most of them have worked out — until June.
Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.
Posted by Nicole Bourbaki