Stocks, Real Estate, and Commodities Overvalued According to Marc Faber

Bloomberg conducted an interview with Marc Faber (click on the link on the top-right for the video) and he doesn't seem to link any assets right now:

Stocks, property and commodities are overvalued as an economic slowdown and inflation will curb earnings growth and erode the value of assets, investor Marc Faber said.

Oil may have peaked after a 43 percent increase this year, said Faber, the Gloom, Boom & Doom report publisher, in a Bloomberg Television interview today. He said he favors the dollar against the euro, as well as gold.

``I don't see any compelling value in equities, real estate or commodities,'' Faber said from Zurich. ``Contrary to the last 25 years, we are in a period of de-leveraging. Corporate profits in particular are still far too high for 2009 and have to be adjusted downwards, and valuations become less compelling.''


Although I don't follow everything Marc Faber says or necessarily agree with his militant stance against central banks, I have been following him for a few years. He is the ultimate contrarian, who goes into every corner of the investing world, while shunning the popular assets of the day.

He surprised me earlier this year with his bearish view on commodities (he wasn't bearish on soft commodities at that time), after being superbullish on them for 5+ years. Faber also turned short-term bullish on the US$ early this year and it hasn't worked out well (although for what it's worth, the Canadian dollar hasn't appreciated much this year even though commodities have rallied sharply.)

The big risk for investors is that nearly all assets may be overvalued. In the last 5 years, practically everything, ranging from commodities, to junk bonds, to emerging market stocks, to broad market stocks, have risen. On top of it being rare for everything to be correlated so closely (for instance, it would have been unthinkable for oil to quadruple from $25/bbl to $100/bbl while the broad market also went up significantly), it means that there are few hiding places if there is a big correction. I can see almost everything collapsing together; I think Marc Faber is concerned about a similar scenario. The only assets that may do well during a big correction are the ones that have done poorly over the last 5 years. This may mean that the US$, Yen, and US Treasuries may be the only safe areas (given that the US Treasuries have rallied so much recently due to the credit parnic, they are far more riskier than they seem and I would probably avoid them as well.) None of this matters to bottom-up investors (since they are picking specific undervalued companies) but it'll be hard for top-down investors not to get whacked one way or another if this bearish scenario unfolds.

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