Cheery thoughts from Marc Faber... Not!

Investors expecting some good predictions for next year may be dissapointed to hear Marc Faber predict a catrastrophic economy next year. However, I think there is some inconsistency in Faber's predictions. He is expecting bad things all around yet is bullish on all the cyclicals such as commodities. He also seems to favour emerging markets, which seem like a bizarre bet if you are bearish on the world economy. Faber keeps dodging the China question. He keeps saying that the situation could get worse but doesn't come out and say to short China. He also seems to favour gold mining companies, such as exploration companies.

He thinks the markets are likely to rally since they are oversold but doesn't expect it to be anything significant. For what it's worth, Faber relies on technical analysis for these calls and I tend to dimiss it for the most part. Oversold or overbought has little relevance to my thinking.

I think the 'inflationists' are going to be wrong. I don't have a strong opinion or evidence yet but I have a bad feeling. I'll post my views after I have formulated by thoughts for the next year.

Comments

  1. Kevin December 23, 2008 at 2:08 PM

    i am interested in hearing why your feeling that the "inflationists" are wrong. inflationists are basing their predictions on what happens to economies as they print money with abandon.
    kevin

    www.bullinachinmarket.com

    ReplyDelete
  2. Sivaram VDecember 23, 2008 at 2:28 PM

    I have to do a lot more research on that issue because it is difficult to figure out. But the reason I am skeptical of high inflation is for the following reasons:

    (i) Why can't USA follow what happened in Japan in the last 20 years? Japan has printed huge amount of money and/or spent a whole lot by borrowing; yet no inflation to be seen in Japan. Even if you assume that capital flew out of Japan (through foreign direct investment and Yen carry-trade, and other means) where did the inflation go? Where is the high inflation caused by the Japanese actions?

    (ii) The other reason I'm skeptical of the pro-inflation view is because it is, indirectly, a pro-growth view. I am still not confident that the world economy will recover any time soon. Even if we "recover," the growth will be fraction of the past decade due to decline in trade and decline in leverage/debt usage.

    (iii) I think there is a high chance of the US$ strengthening or at least maintaining its value. I don't have any proof of this other than simply being a contrarian sentiment. Gold has done really well lately and for the last 5 to 10 years, and I wonder if it is an overcrowded investment.

    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 >>>

Hugh Hendry discussion at the Alternative Investment Conference

Thanks to Value Investing World for bringing this Hugh Hendry interview to my attention. I may not agree with all the things—short-term orientation of hedge funds is actually worse IMO; the sharp pencil effect doesn't always work—but Hendry is a true contrarian and worth listening. Like Marc Faber or Jim Rogers, you also can't take everything Hugh Hendry says seriously. I had always felt Hugh Hendry was firmly in the deflation camp but I get the feeling that he is now opening up to high-inflation possibilities. Otherwise, his stance appears to be similar to past opinions.
✖ READ MORE >>>