Saturday, February 7, 2009 2 comments ++[ CLICK TO COMMENT ]++

Bunch of Bloomberg interviews with Marc Faber (February 6, 2009)

Here are a bunch of Bloomberg interviews with Marc Faber. Most of the interviews overlap and cover the same points so if you just want to hear one, listen to the radio interview listed first.

(February 6, 2009) Bloomberg radio interview
(February 6, 2009) Bloomberg video clip 1
(February 6, 2009) Bloomberg video clip 2

Here is a quick summary of some points he made (nothing new for Marc Faber followers):


  • Marc Faber blames the government for the current crisis. I'm not sure why he doesn't blame the greedy investors or incompetent executives or weak regulators. Like most other AustrianEcon supporters, he is favourable towards the liquidationist views and thinks the megabanks should be allowed to fail. He suggests that depositors should be protected but bondholders, preferred shareholders and common shareholders should take losses. I'm not sure if he is serious but he suggests that the government should protect the good assets while the shareholders and bondholders fight over the bad assets. For what it's worth, I completely disagree with his views. I haven't given it much thought (this is not my interest) but I would prefer if the government nationalizes the insolvent banks who have no chance of becoming solvent.
  • But I do partially agree with his view that the scope of the problem has been made larger due to past governments bailing out failing institutions. If this was a true free market, bondholders will be punished (as happened with Lehman Brothers.) The bond investors clearly kept loaning out money to risky ventures due to a blind faith that the central bank would bail them out. I think bond investors are starting to realize that they are at the center of the credit bubble and some are even starting to panic it sees. Bill Gross, a bond manaqger, has recently called for the government to spend trillions (this is way beyond anything even the so-called liberal fiscally stimulus supporters have suggested.) If the government doesn't spend trillions, bondholders are going to take massive losses. Equity of many banks have evaporated and any further losses will accrue to preferred shares and bonds. I don't know what's going to happen because companies like Citigroup, AIG, and Royal Bank of Scotland, among others, seem to be zombies and further losses will accrue to preferred shares and bonds. If you ever wonder why the bond markets are pricing in a depression it's for possibilities like this.
  • Marc Faber says that his equity exposure is low but he is buying some Asian equities since some Asian markets are down to 20 year or 30 year lows. Dividend yields on some Asian companies higher than bond yields. My thought is that Faber seems to be making a tactical bet rather than anything long-term. In one of the interviews he is asked if he what he says means that he is bullish on Japan and he says he is not bullish but says he is buying due to technical reasons (he justifies by referring to support levels and the like.)
  • He says leading American tech companies like Oracle, Microsoft and Intel will outperform US bonds. No offense to Marc Faber but this has to be his lamest call of all time. I mean, government bond yields are near multi-decade lows and corporate bond yields (except low quality ones) aren't that high either. I don't think beating bonds, going forward, is a big macro call. In any case, I do find it interesting that he is making a bullish call on tech. I like tech from a contrarian point of view (ignoring some high flyers like Amazon/Apple/etc, it has been mostly out of favour since the dot-com bust.)
  • He seems to be bullish commodities but I'm not sure if he is making a long-term bet or if this is short-term trading.

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2 Response to Bunch of Bloomberg interviews with Marc Faber (February 6, 2009)

Anonymous
February 7, 2009 at 7:59 AM

Your current watch list and investments has some real dogs on it. Have you updated this lately?
deo looks reasonably good.

February 7, 2009 at 2:10 PM

Yeah, a lot of the watch list stocks are questionable. But I'm a contrarian and I mostly look at distressed companies. So, one shouldn't use my watchlist as recommendations but as something that they should track and see what happens to those companies.

I'm trying to come up with my investment plan for the year and will post my ideas soon.

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