Marc Faber On the Present Markets

For those interested, Bloomberg has a short interview with Marc Faber. Like anyone making macro calls, it's so easy to be wrong (how many were saying $200 oil early this year?) but Marc Faber has been mostly right so far this year. He turned bearish on industrial commodities earlier in the year and that has proven correct. He also took a totally contrarian view that the US$ may rally this year and that is starting to unfold.

Here are some notes about his thoughts:

  • Global economy in recession... Decline in oil prices is signalling a global slowdown. I totally concur and this is one reason the stock market may sell off by the end of the year. The market is rallying on weak oil prices but is ignoring the looming decline in corporate profits.
  • In relative terms, US economy better than the rest of the world. Faber says Europe and emerging markets are weaker than perceived. He isn't investing in the US but if he was forced to pick, he likes the US better than other parts of the world.
  • Still long-term bullish on commodities... Thinks they can drop 50% by the end of this year but they will start rising in the future. I find it contradictory that he says this but later, before being cut off, says he would avoid all the hot stuff from the last few years (such as steel, iron ore, etc.) So would he just avoid them in the short term or is it the end of the bull market for some of them?
  • Bullish on US$
  • Bullish on Japan... Too bad the interviewer cut him off but I am curious where he is investing in Japan. Most value investors are looking at the companies that are trading at low valuations (say, below book value) but someone more into macro investing like Marc Faber may look at different things. The thing is, I don't know what bullish macro trend is worth hitching a ride on. A lot of the trends there are very negative right now.

Comments

  1. Dennis ManganAugust 10, 2008 at 2:15 PM

    There's a good VIC write-up on RHJI, a holding company invested in Japan and cash, currently trading at about 50% of NAV.

    ReplyDelete
  2. Sivaram VAugust 13, 2008 at 4:26 PM

    Thanks for the suggestion Dennis. I took a quick look and am going to stay away from it for the time being. It's not my game.

    RHJI is a holding company that takes controlling positions. This basically means you are betting on the management/portfolio managers of the company. That's really not my style; I would rather bet on something where I don't have to trust management. This would be sort of like investing in Berkshire Hathaway.

    Perhaps if the discount is 50% (I haven't confirmed that) it may be attractive but, again, you need to be sure that the portfolio managers aren't going to squander that away.

    ReplyDelete

Post a Comment

Popular Posts

Thoughts on the stock market - March 2020

Image
Right now, DJIA has a P/E of 16.8 and forwand P/E of 15.1, whereas S&P 500 is at 20.1 with forward P/E of 15.8. Source: WSJ market Data If you ignore interest rates and inflation expectations--both of these influence valuations but depends on your macro call-- the market is not cheap. Long-term P/E is around 15. Trailing P/E is around 20% (Dow) to 40% (S&P500) higher than average. Forward P/E is in line with long term average but that assumes a strong V recovery. Consensus forecast is for profits to drop 1.2% in 2020. In 2008, it dropped 25.4% so current forecast is a very mild recession. Covid-19 coronavirus is not going to last more than a few months but these forecasts are still too rosy in my opinion. So I wouldn't rely on forward P/E. The richly valued (mostly tech or high quality) have not fallen much but the distressed ones have. So if you want to outperform in the long run, I think one’s choice right now is to: • Wait for market to fall another, say
✖ READ MORE >>>

Warren Buffett's Evolution and his Three Investment Styles

Image
A Young Warren Buffett In a comment to one of my posts , Mark Carter, who incidentally appears to have a  good blog worth checking out , asked: "Buffett Prime is 1970's to early 1990's" Could you elaborate? I have vaguely indicated how I view Warren Buffett in the past, but I thought I would detail my view of his investing behaviour. This is more of an opinion piece and many others would disagree with me (if you do, I'm curious to hear your thoughts). I don't follow Warren Buffett as closely as many value investors so I may get some facts wrong. My view is that Warren Buffett went through three different phases, with each consisting of different investment techniques. The overall investment theory remained the same—what people call value investing—but his execution, tactics, and strategy differs across the three phases. Some people may break up his career into additional periods but my feeling is that the three I will describe essentially capt
✖ READ MORE >>>

Charlie Munger: Stock market as a pari-mutuel betting system

The model I like to sort of simplify the notion of what goes o­n in a market for common stocks is the pari-mutuel system at the racetrack. If you stop to think about it, a pari-mutuel system is a market . Everybody goes there and bets and the odds change based o­n what's bet. That's what happens in the stock market. —Charlie Munger, "Art of Stock Picking" Although I don't share the same views on politics, I am probably closer to Charlie Munger than Warren Buffett when it comes to how we view the world. Warren Buffett is almost singly focused on business and investing, and is not very opinionated, indeed possibly not knowledgeable, in other areas. In contrast, I am closer to Charlie Munger in the sense that I have diverse interests—you can probably tell by the articles I link to or write about—and have an opinion on almost anything. There is one big difference though: I am not into the field of psychology quite like Munger. So it may be surprising to see me rarely
✖ READ MORE >>>