Marc Faber’s latest Gloomboomdoom newsletter — as readable as ever — has turned up on the internet.
We can report that Mr Faber is somewhat puzzled that, so far in 2009, ordinary investors having been doing what they always do — namely buying high and selling cheap.
This year, that has meant buying bonds and ignoring equities, and Mr Faber doesn’t like bonds at all, governmental or otherwise:
Since we had in 2008 the third best annual return (41%) in the last 35 years and since each time high returns were followed by negative returns I would be — regardless of the economic outlook — very reluctant to invest in long term government and also in corporate bonds. In fact, on a further deterioration in economic activity and amidst severe deflationary pressures (as postulated by the deflationists) I would be even more negative about US government bonds than under an economic recovery scenario. Why? Because further economic weakness (inevitable in my opinion) will lead to further fiscal stimulus packages and necessitate further money printing.
He’s in the camp that saw the US Q3 GDP figures as having borrowed from Q4 and he’s generally alarmed at the apparent lack of alternative policy ideas on the part of the Obama administration.
Massive government interventions into the free market have inevitably resulted in extremely volatile (and largely unpredictable) economic and financial conditions, Mr Faber says.
Right now, Dr Doom reckons everything is over-stretched: equities are too high, the euro is over-bought and the dollar is over-sold. Indeed, he’s even cautious about gold:
I should also mention some concerns (for now of short-term nature) I have about commodity prices including gold. A large number of commodities including oil, the CRB Index, and gold broke out on the upside in early October. I would regard a failure to hold above the “upside breakout points” in the period directly ahead with great caution. In the case of gold a decline below $1000 would likely lead to further more meaningful weakness (possibly down to between $800 and $900).
Related links:
Faber on China: Still right after all these years… - FT Alphaville
GloomBoomDoom.com - Newsletter sign-up page
