Tuesday, January 6, 2009 0 comments ++[ CLICK TO COMMENT ]++

Marc Faber 2009 Outlook

Bloomberg interviews Marc Faber and we get a sense of his 2009 outlook. For the first time ever, he seems to favour leading technology stocks--but not just that sector but leading companies of all industries. This is actually consistent with Jeremy Grantham, who incidentally uses a totally different approach, and thinks high quality large caps will beat other styles over the next few years. As usual, lots of polemic attacks and arguments, most of which I disagree with :)

Here are some points he made, along with my opinion thrown in...

  • I completely disagree with his Austrian-influenced view of economics. Way too much emphasis on mistakes by central bankers and government agencies, and very little acknowledgement of mistakes by free market actors, such as investors, bankers and executives. Similar to how they blame the central bank for the problems during the Great Depression, while completely ignoring how credit was skyrocketing in the 20's under their cherished gold standard, I haven't seen them criticize private bankers and investors for investing in dubious real estate bonds or questionable private equity deals, among others. The government didn't force any of them to act that way. But, of course, if someone actually started considering how the freer a market gets, the greater the damage caused by greed, then their views might be different... another big flaw with AustrianEcons, although they do not consider it a flaw, is that they completely ignore the fact the economics is intertwined with politics. It's easy to say that letting the economy collapse is the best thing while ignoring how humans won't easily take it so kindly.
  • Marc Faber likes industrial metals and gold miners as a trade
  • Also likes gold... I have a completely opposite view. I still need to do more work but I'm starting to get really bearish on gold. If gold hits $1000 and hasn't entered a specular boom, I would seriously considering shorting it.
  • Thinks long-term oil outlook is good
  • World War III has started LOL ;) I completely disagree with his outlandish comment but I agree with him that USA is going to get bogged down in Afghanistan. Because the US government shifted policy towards an open war (primarily a Bush doctrine) it will be hard for USA to extract itself from there. In contrast, USA can leave Iraq with little impact on their national policies or losing much more face. I have been against the invasion of Afghanistan by Canada and hope we leave ASAP. But I'll note that, of all the countries USA invaded in the last 30+ years, Afghanistan is the only just invasion. Given how a state was harboring someone who attacked Americans, the invasion is ok according to my morals. Unfortunately, America likely fell into a trap set by Usama Bin Laden. Even if they get rid of Usama Bin Laden, USA can be stuck for many decades (because they are caught in a battle between warlords/druglords, no different than how the DEA and FBI is at times caught in a battle between druglords in USA, Mexico or Colombia.) The only positive thing for USA right now is that they are not deploying much of a force in Afghanistan, but it still doesn't prevent a slow drain--particularly their ever dwindling political strength and influence.
  • Leading companies in every industry should do well... he says the leaders can spend money on R&D and do well while the weaker players decline... he actually likes tech names like Intel, Microsoft, Oracle, and so forth. Wow. This is the first time I have seen anything positive from him about any technology stock in more than 5 years (but do note that I don't have access to his newsletter so I have no idea what he recommends there.)
  • Likes Asia long-term...and likes it as a trade here... mentions some top companies from Asia (I'm not familiar with them and couldn't get the names)
  • Bearish long-term... 5 years for world recovery
  • Thinks shorting US treasuries is the short of the year... I disagree and am mildly bullish on US Treasuries (it's not worth buying but I consider a short quite risky.) I just don't see how he, or other bond bears, can be bearish on government bonds while also having a bearish economic outlook. If the world economy takes 5 years to recover, as Faber speculated, bond yields can take 5 years to start rising meaningfully as well.


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