Marc Faber: I'm Buying Gold Because I'm Fearful of a Systemic Crisis
by Constantine Gardner
Business Intelligence Middle East
Dr. Marc Faber
the Swiss fund manager and Gloom Boom & Doom publisher believes
markets will punish central banks, at some stage, for their extensive
monetary easing. This could materialize as a bonds market collapse
or a stock market bubble.
investors should enjoy the rally while it lasts, and says he is
already unwinding his long positions because when 'euphoria' builds
up and everybody is investing, markets turn down. He also thinks
investors who don't own gold are in "great danger".
the phone to CNBC's "Closing
Bell" on Wednesday, Faber told Maria Bartiromo: "I
think it [a correction] can start any day. We are very overbought
but it's also possible that we have a mild correction in February
and then a further increase in stock prices."
He sees a possibility
of a lot of volatility this year in equity prices. "I'm selling
shares at the present time. I'm reducing positions because there
is euphoria building up."
it is difficult to pinpoint the timing of the correction as investors
have no immediate alternative to owning stocks because of plenty
of corporate and institutional money on the side lines. "That
is why, maybe the market goes up first strongly but that would be
a major embarrassment for central banks to have a real stock market
bubble while unemployment isn't going down and the global economy
But the bigger
embarrassment he says, would be when finally the stock markets crashes
because they [central banks] can't cut interest rates any further
or bond prices really sell off, in other words, "for the market
to push up interest rates".
banks aren't going to boost up interest rates, but the market may
boost it up," he reckons.
From a global
market perspective, Faber at the present time thinks "Ukrainian
stocks are very low, Vietnam is inexpensive, and Chinese stocks
are relatively speaking inexpensive.
In terms of
US stocks he sees mining companies and resource companies as relatively
cheap. On the other end of the spectrum, builders and technology
are vulnerable and may lead the sell-off
about stocks when you can't see why they can go down
In a live interview
on CNBC Asia's "The
Call" with Bernie Lo on Thursday, Faber further elaborated
on his prediction of an upcoming market correction: " When
you print money, the money doesn't flow evenly in an economy. It
flows to some people or to some sectors first, and in this case,
it flowed into equities, and until about five months ago, bonds
I believe that markets will punish central banks at some stage through
first time in four years, since the lows in March 2009, I love this
market because the higher it goes the more likely we will have a
nice crash, a big time crash," he added.
"why should stocks go down, everything looks perfect"
calls, Faber explains:
"A year ago, the mood in Europe was horrible and nobody could
see how stocks could go up. Now since May 2012, less than a year
ago, Portugal, Spain, Italy, France, are up 30%-40% and Greece has
of the famous Warren Buffet quote, Be fearful when others
are greedy and greedy when others are fearful," Dr Doom told
Bernie Lo: "You need to buy stocks when there's no reason to
buy them...and I will be careful about stocks when you can't see
why they can go down."
500 has seen its best start to a year since 1997, rising 5.2% last
month and the Dow topped 14,000 today for the first time since October
the US fiscal cliff behind us, but automatic spending cuts due on
1 March, there is a risk that the US equity market will give back
some of its recent gains ahead of the deadline for implementation
of cuts" Mark
McFarland Chief Investment Strategist, Private Banking, Emirates
NBD, the United Arab Emirates biggest lender by assets, said in
quite clear that President Obama does not fully appreciate the extent
to which US welfare and retirement budgets are unfunded on a long-term
basis. This fact alone makes the likelihood of a near-term resolution,
as opposed to a quick fix, much less likely. Thus our US equity
weightings for conservative clients have been paired back to under-weights."
the rest of the article
Marc Faber [send him
mail] lives in Chiangmai, Thailand and is the author of Tomorrow's
2013 Business Intelligence Middle
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