In the last Faber post [1] that I did, I did not comment on Faber's view on US stocks. Faber is one of a handful great economists who we at bhc investment like to play a devil's advocate with -- is an honour. Readers should know that we have publicly stated a few times that we do not agree with Faber on Hyperinflation [2, 3]. In addition, after watching his recent interview on Bloomberg, we found ourselves once again in disagreement with Faber's view on US stocks, just as our disagreement with Buffett's [4, 5, 6, 7, 8]. To this end, let me share with you a piece by Peter Cooper [9]:
“Apologies to my old friend and colleague Dr. Marc Faber but not all his calls are right. Last autumn he recommended buying US stocks just as they started a plunge that ended with the S&P at 666, the devil’s bottom in March.
Today listeners to Bloomberg heard a repeat of the same optimism from the editor and publisher of the Gloom, Boom & Doom Report. His logic is a repeat of last autumn.
‘Where there is inflation in the system as defined by money supply growth and credit growth, you have currency weakness, he said. ‘Stocks can easily go higher. If you print the money, they can go anywhere.’
Nice theory but wrong
It is a nice theory but then it did not prove correct last year, and I checked in the GBD report for the reference and there it is in print. Dr. Faber seems obsessed by Ben Bernanke as a ‘money printer at the Fed’ and foresees hyperinflation like Weimar Germany where stocks soared ever higher as the economy collapsed.
In the Gloom, Boom & Doom Report last September he said stocks were the best investment for US investors just as the market headed for a crash comparable in many eyes to 1929.
The rally since March has also followed the course of the rally seen in 1930 both in percentage strength and duration. And there has not been a single occasion in 100 years that such a rally has not ended with a dramatic correction.
Is it really so different this time? Yes, the US government has vigorously pumped money into the economy, and the Chinese have done even better.
But is all this state spending going to compensate for the collapse of trade, consumer spending and the global private sector including the banks? It is a hole of 1930’s dimensions, actually bigger, and real damage has been done to the real economy.
Now tell me why stocks should be valued so highly in these circumstances that are a disaster for business profits now and in the future?
Bubble trouble again
This is once again such an obvious bubble waiting to pop. And yes that is what this website said a year ago.
The disconnection between the financial markets and the real world has never been bigger, not even last autumn.
Surely there is also a limit to how much money that can be injected into the system before it begins to backfire in terms of devaluation and inflation? And with interest rates virtually at zero there is no further room to lower rates again.
So once again I heartily disagree on the autumn outlook with Dr. Marc Faber who seems to have given up on business cycles and thinks this time is different. He is a great student of history and ought to know that we are doomed to repeat the errors of the past.
On one point I would certainly concur and that is that gold will outperform stocks over the next year.”
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1 comments:
It's easy to predict market downturn during any Bull market. You seem miss a important fact here, timing! The key question is when? You can keep saying stock will go down when market is at 7000, 8000, 9000 or even 10000. Market will eventually come down anyway. So, all your points made here are seem to be irrelevant.
Also, tired of looking at "bhc vs xxx", I don't even think bhc deserves the comparison. The best way to compare is via bank account, as WB once said, Fortune is a measurement of men capacity. If there's a day you are richer than Faber or WB, then you compare.
You don't have to be a rocket scientist to know sometimes comments made by these fellows are political or strategical influenced, what they say and do could be different stories.
Looks like you are very naive in getting these sort comment and even use their words to compare your analysis. This is the Funniest thing I've ever seen.
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