Monday, November 10, 2008 2 comments ++[ CLICK TO COMMENT ]++

Pretty good Marc Faber interview at Bloomberg

UPDATE: Fixed the broken link thanks to Vlado. I think I figured out the cause of my link problems. Bloomberg's URLs have a double-quote or something that messes up the link in Blogger.

Bloomberg has a pretty good interview with Marc Faber that you can find here. This is a good interview because Marc Faber is allowed to expound on his worldview. Who knows how correct his views will turn out to be but it's good to hear detailed explanation of why he thinks what he thinks.

Here are some quick notes, with my thoughts (not in any order):

  • Stocks not that attractive since he expects weak earnings for a while.
  • Marc Faber says that high yield corporate bonds are attractive. He thinks bonds with around 13% to 15% yield look more attractive than stocks. Bonds with yields like that are non-investment-grade (probably rated around BB). This is one area I'm looking at. I'm not familiar with bonds so I'm trying to learn what my broker allows me to buy (at reasonable commissions) and which bonds are unlikely to default.
  • Thinks the situation can get much worse. For my sake (and I'm not even talking about investments) I hope it doesn't but whatever happens, happens.
  • Explains how the present is different from the early 70's or early 80's because almost all assets have gone up and are correcting hard. Definitely no place to hide.
  • Points out that the world has lost something like $30 trillion from the worldwide stock market collapse, so the money that is being thrown around by governments are tiny compared to the total loss. I completely agree. This is why it is dangerous to invest on the hope that the market may rally every single time the government announces some plan.
  • GM shareholders aren't going to like it but he cites Jim Rogers' joke that you can short GM at any price (because it is so poorly run and will end up bankrupt anyway.) If GM goes down, it will severely hurt the US economy and the Ontario economy.
  • He says that commodity production and expansion plans are being cut due to the price collapse. He thinks commodities can rally hard when the world economy recovers since capacity is being reduced now. I have to say that I don't buy this. The reason commodities are collapsing is because they were in a bubble. There was simply way too much money being pumped into commodities. The market should be pricing commodities with a long-term view. Oil hit $140, not because of what was going to happen next or the year after, but because of what was projected for the next 30+ years. If you follow this thinking, I just don't see commodities rallying much even if the economy recovers. Yes they will increase compared to recessionary levels but it doesn't have to be anything big. The only way it will rally significantly is if the long term price projections change. The last 10 years were driven by, what I call, China-to-da-moon thesis. Unless you get another such thesis that can convince everyone that commodity demand is going to go up for the next 30 years, I don't see any big rallies. (the only commodity complex that seems attractive is agricultural commodities. If you want to hear the thesis for soft commodities, check out this Barron's interview with Donald Coxe, a commodity superbull (thanks to Random Roger's Blog for original mention.))
  • Says some people are going to be seriously hurt and cites Dubai real estate as an example.

If you are macro-inclined and a contrarian, put Marc Faber on your list of investors to follow. Some may not like his extreme views but he is very original and contrarian.

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2 Response to Pretty good Marc Faber interview at Bloomberg

November 11, 2008 at 4:59 AM

The link is broken.. this is the correct one.

November 11, 2008 at 10:09 AM


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