5money moves ‘Dr. Doom’ is making now

Marc Faber readies for hyperinflation, dollar’s demise and civil unrest

By Jonathan Burton, MarketWatch

SAN FRANCISCO (MarketWatch) — Mr. Market, the doctor will sell you now.

“Dr. Doom,” that is — also known as Marc Faber, the Hong Kong-based investment manager, author, and publisher of “The Gloom Boom & Doom Report,” his monthly musing about the state of global economics and geopolitics.

Faber is to financial-market optimists what the Grinch is to Christmas. He doesn’t often like what he sees, and nowadays he finds even less to like about the world’s economic situation than he did in 2008 — as if that wasn’t bad enough.

Marc Faber.

“Financial conditions are today worse than they were prior to the crisis in 2008,” he said in a telephone interview earlier this week from Thailand. “The fiscal deficits have exploded and the political system [in both the U.S. and Europe] has become completely dysfunctional.”

Certainly, the unprecedented global stock market volatility in this hot August, including Thursday’s rout, suggests that investors and traders alike are looking for someone, somewhere, to take the wheel. Read more: Confidence is collapsing around us.

Pin that against a backdrop of fragile economies, inflationary government policies, high unemployment, social and income disparity, military actions and geopolitical tensions in the Middle East and Asia, and you get a good picture of how Faber sees the investment map.

Faber doesn’t take a contrarian stance in the strict sense; it’s more of a constant vigilance — capital preservation over capital appreciation — so that one can live now to fight for investment gains another day. Read more: 10 investing rules for tough markets.

 

 

“If you’re bearish about the world, you’ll probably be better off in equities than in government bonds and cash.”

 

Marc Faber

“The way I look at it,” Faber said, “I am ultra-bearish about everything geopolitically. In an environment of money printing, we have to ask ourselves, how do we protect our wealth? ... Where do we allocate the money?

Good question, but in fact a fairly straightforward one if, like Faber, you believe that Federal Reserve policy is stoking speculation over savings and debasing the U.S. dollar, hyperinflation is a real possibility, the stock market’s recovery since 2009 has favored the rich and powerful, cash is trash, and gold and land in the countryside are the only true safe havens.

“The Federal Reserve is a very evil institution,” Faber said with characteristic bluntness, “in the sense that they punish decent people who have saved all their lives.

“These are people who don’t understand about stocks and investments,” he added, “and suddenly they are forced to speculate.”

Speculation is the opposite of investing — of which there is little of nowadays from the corporate sector, let alone government and retail stock buyers. Corporations are instead hoarding cash out of concern that slow global economic growth will slam profits.

Such a miserly attitude can become a self-fulfilling prophecy. Faber noted that corporate earnings will likely disappoint stockholders across the board, including commodity shares, with the exception of traditional defensive sectors such as health care, consumer staples and utilities.

Moreover, one of the main ways corporations are spending money — on mergers and acquisitions rather than on hiring and equipment — is ultimately inflationary, Faber said.

“The corporate sector is not spending much money on capital investments and new investments — that’s why they have this huge hoard of cash,” Faber said. “There will be many more takeovers and industry consolidation in the years ahead. It destroys jobs, but this is what will happen. As industries consolidate, they get more pricing power, and the cost of living increases.”

Of course, Faber points out, while such dealings might not be ideal for Main Street, it can sustain Wall Street, which leads Faber to a prognosis for stocks that may surprise the doctor’s patients.

“I’m not that negative about equities,” Faber said. “If you’re bearish about the world, you’ll probably be better off in equities than in government bonds and cash.”

So batten down the hatches, double-check the locks and keep Faber’s to-do list handy:

1. Avoid Treasurys

“It’s a suicidal investment to own 10-year or 30-year U.S. Treasurys,” Faber said.

What about the Treasury rally in the wake of economic weakness, stormy stock markets and investors’ flight to safe havens?

“What does a weak economy mean?” Faber said. “It means collapsing tax revenues. The deficits go up. You have to issue more government bonds.” The abundance of new debt would dilute credit quality, he added, only further sapping investors’ confidence in Treasury debt. Read more: U.S., Europe may be close to recession.

“U.S. government bonds are junk bonds,” Faber said. “As long as they can print, they can pay the interest. But another way to default is to pay the interest and principal in depreciating currency.

“For that reason I would advocate a wide basket of diversification out of dollar-based assets,” Faber added. “The dollar may rally somewhat, but clearly in the long run the dollar and other paper currencies — the euro is not much better — will have a depreciating tendency vis-a-vis honest money: gold and silver.”

2. Cash is trash

Given his bleak assessment of the U.S. dollar, it’s no surprise that Faber doesn’t recommend holding cash as a long-term cushion against portfolio shocks.

“It would be very dangerous to say ‘I don’t trust stocks, gold, real estate, I want to keep my money in cash.’ That’s a way to end up losing a lot of money,” Faber said.

Specifically, the problem in Faber’s view is the loss of purchasing power as inflation whittles away the value of money.

“We’re in a paradoxical situation where under a traditional monetary system the safest places are cash, Treasury deposits, government bonds,” Faber said. Nowadays, he noted, “they have been made by monetization into the most unsafe assets from a longer term perspective.

“Weak economies usually have higher inflation rates than stronger economies,” Faber added. “In weak economies you have loose fiscal policies and money printing. And the U.S. is the world champion in loose monetary policies. I don’t believe a single word of what the Bureau of Labor Statistics is printing about inflation figures.

“Paper money has lost its value,” Faber said. “Hyperinflation is the pattern to come.”

3. Stocks offer some safety

“I am not completely bearish about stocks,” Faber said. “If I have cash, government bonds and stocks, for the long term, I’d take stocks.”

 

Just not necessarily U.S. stocks.

While Faber said the U.S. market is “oversold” and the Standard & Poor’s 500-stock index /quotes/zigman/3870025 SPX -1.50%  could rebound to the 1250 to 1270 range, he expects U.S. equity values to decline — though not in a full-blown capitulation.

“My assumption is that March 2009 was a major low, and that we will not go back below that low,” Faber said. “Can we go to 900 on the S&P? Yes.”

But as the S&P 500 slides closer to 1000, the Federal Reserve could step in with a third round of stimulus for investors to cheer, Faber said.

Fed action, he noted, “may not lift stock prices to new highs, but it may stabilize them. If you print money, stocks will not collapse.”

4. Emerging markets will expand

In contrast to his dim view of U.S. and other developed markets, Faber is downright sunny about investing in emerging nations.

“I do not think that investors fully appreciate the enormous shift that has and is occurring in the balance of economic power from the Western world to emerging economies,” he told subscribers In a market commentary published in early August.

This week, Faber reiterated his opinion that emerging markets will reward buyers over the long-term.

“I happen to feel that somewhere in the world we can make 7% on equities for the next 10 years,” he said. “I can buy you a portfolio of high-dividend stocks in Asia that would have a yield of 5% to 7%.” Dividend predictability is one reason that Faber also recommends holding corporate bonds.

Faber’s own stock portfolio is centered on dividend-paying Asian shares, particularly in Malaysia, Singapore, Thailand and Hong Kong. These include a variety of real estate investment trusts and utilities.

Lately he’s also turned positive on Japanese banks, brokerages and insurance companies. “They have a better loan portfolio than the European banks,” Faber said of Japanese banks. “The banks in Asia are in a very solid position. All these are a play on the recovery in the stock market in Japan.”

5. Gold is worth its weight

Gold blew through $1,800 an ounce on Tuesday, continuing its forward march as investors seek higher ground. Given his world view, Faber is convinced that the price of gold will continue rising and that any pullback is a buying opportunity.

To understand why, you have to see gold like Faber does — as a currency, an alternative to the U.S. dollar, that will be increasingly in demand as the U.S. and other governments print more and more money.

“The function of paper money is to facilitate the exchange of goods and services, to be a store of value and a unit of account — the U.S. dollar fails on all three,” Faber said. “Intelligent people, instead of holding cash in U.S. dollars with zero interest rates, why not hold money in gold and silver?”

And as a currency, Faber said gold should be held in its physical form and not in shares of gold miners or even exchange-traded funds. That would rule out popular vehicles such as SPDR Gold Trust /quotes/zigman/41663/quotes/nls/gld GLD +1.25%  or iShares Gold Trust /quotes/zigman/32787/quotes/nls/iau IAU +1.24%  

Be sure to store your gold in banks in Switzerland, London, Singapore, Hong Kong, Australia — just not in the U.S., Faber said.

“Physical gold in a safe deposit box is the safest,” Faber added. “Forget about huge capital gains. I would look at capital preservation. I want to preserve my capital.” 

末日博士的投資5招 麥嘉華:別想賺大錢 能保本就好

鉅亨網編譯許家華 綜合外電  2011-08-19  22:19

 

末日博士將要拋售市場了。

末日博士麥嘉華受訪時表示:「今日的金融狀況比2008年危機發生前的狀況還糟糕,財政赤字劇增,(歐美)政治系統也完全不正常。」

當然,今年8月全球股市前所未有的大震盪(也包括周四美股的重挫)讓投資者和交易員都想找一盞明燈以指引方向。

脆弱的經濟、通膨的政府政策、高失業率、社會和收入差距、中東與亞洲間的地緣政治緊張局勢和軍事行動,加上這些後你就可看到麥嘉華所見的投資地圖。

在這樣嚴苛的環境下,麥嘉華並不是要採取與大眾投資人相反的立場,而是要更固定的保持警戒──先求保本而非增值,那樣才能留得青山在,不怕沒柴燒。

麥嘉華:「我極度看空一切有關地緣政治的東西,處於一個印鈔票的環境下,我們該捫心自問,怎樣才能保有自身財富?我們該從哪裡拿錢出來?」

簡單說,麥嘉華認為Fed是在煽動投機而非鼓勵儲蓄,美元遭貶值、惡性通膨則是確實存在的可能性,自2009年以來股市的復甦只讓富豪和權力者受惠,現金變成了垃圾,只有黃金和土地才是避險天堂。

麥嘉華直率的說:「Fed是邪惡的組織,某種意義上來說,Fed對那些救了他們全部的人作出懲罰,就是那些不懂股市和投資的人,突然間他們也被迫得去投機。」

投機是投資的反面,現在企業投資很少,更別說政府和股市散戶,企業寧可囤積大量現金,因為他們擔心全球經濟成長趨緩可能會削減獲利。這樣吝嗇的態度,可能會變成自私自利的預言。

麥嘉華指出,除了傳統防禦性產業如健保、消費者主食和公用事業以外,股東恐不滿企業獲利,包括商品股。

此外,企業現在花錢的方法之一,是花在收購和合併的交易上,而不是招聘人手和添購設備,這最終就是走向通貨膨脹。

麥嘉華:「企業在資本投資和新投資上花的錢不夠多,這是他們之所有可以擁有那麼多現金的原因,未來幾年會有更多併購交易和產業整合,這將摧毀就業機會,但這就是未來會發生的事情,隨著產業整合,他們對定價的掌握力就越高,因此生活成本就會不斷上升。」

這種交易雖然普羅大眾恐不樂見,但卻是支撐華爾街的方法。對於投資,他提出了以下5招:

1. 避開美國公債

麥嘉華:「持有10年期或30年期的美國公債,那是自殺式的投資。」

但在經濟疲弱、股市震盪之後,投資者尋覓避險天堂,因此美國公債上漲,這又怎麼說?

麥嘉華:「疲弱的經濟意味著什麼?意味著稅收崩潰,赤字上飆,你不得不發行公債。」他補充,大量新債券將稀釋信用品質,只會進一步打擊投資者對美國公債的信心。

麥嘉華:「美國公債是垃圾債券,只要他們還能印,他們就能付出利息,但要用不斷貶值的貨幣支付利息和本金,這是通往違約的一條路。」

「所以,我只主張廣泛的一籃子多元化美元資產。美元可能會上漲一點,但比起黃金白銀這種紮實的錢,長期來說美元和其他紙鈔,例如沒好到哪去的歐元,都會下跌。」

2. 現金是垃圾

既然他看跌美元,那麼顯然他也不會建議長期抱持現金。除了貶值問題,通膨也會讓現金逐漸失去購買力。

麥嘉華:「我們處於相當矛盾的情形,在傳統貨幣系統下,現金、財政存款和政府債券應該是最安全的,但因為貨幣化讓他們從長遠角度來看,變成最不安全的資產。」

「疲弱的經濟體中,通常通膨率會高於強壯的經濟體。在疲弱的經濟體中,會施行寬鬆的貨幣政策和不斷印鈔票,而美國寬鬆貨幣政策又是全球冠軍,所以勞工統計局說的話,我一個字也不信。」


「紙鈔已經失去價值,惡性通膨的模式來臨了。」

3. 股市還安全一點

「我並非完全看空股市,如果我有現金、公債和股市,長期來說,我寧願選股市。」

只是不一定要美股。

雖然麥嘉華表示,美股已經「賣超」,且S&P 500指數可望回彈至1250至1270的範圍,但他仍預期美股下跌─只是不會跌個五體投地。

麥嘉華:「我推測,2009年的3月是大低點,我們不可能回到那麼低了,但S&P 500指數會不會到900?會。」但當S&P 500跌到接近1000的時候,Fed就會以第三輪刺激方案介入,讓投資人高興一下。

他表示,Fed的行動「可能不會讓股價升到新高點,但可望穩定股價」。「只要你還印鈔票,股市就不會崩潰。」

4. 新興市場將擴大

有別於對美國和其他已開發市場的態度,麥嘉華相當看好新興市場的投資。

「未來10年,世界上某些地方的股市可以有7%收益,我就可以在亞洲買一組有5%至7%收益的高股息股票投資組合。」股息的可預測性是麥嘉華推薦持有公司債的原因之一。

麥嘉華自己的股票組合也集中在支付股息的亞洲股票上,尤其是在馬來西亞、新加坡、泰國和香港,其中一大部分投資在房地產信託和公用事業。

最近他對日本銀行、券商和保險公司的看法轉正面。麥嘉華認為日本銀行的貸款組合比歐洲銀行還好。「亞洲的銀行相當處於非常穩固的位置,這些都是日本股市復甦的元素。」

5. 沉甸甸的黃金,價值就跟重量一樣有份量

金價周二漲逾每盎司 1800美元,投資者還會繼續拱上去,麥嘉華建議,現在每回下跌都是進場時機。

為什麼?因為麥嘉華把黃金當貨幣,一種可取代美元的貨幣,因此隨著美國和其他國家瘋狂印鈔,產量有限的黃金就變得更有價值了,市場需求也會不斷提升。

麥嘉華:「紙鈔的功能就是促進貨物和服務間的交換、儲存價值和一個帳戶單位,但美元這三種功能都搞砸了,聰明人怎麼可能不存黃金白銀這種錢,而拿著0利率的美元現金?」

因此要作為貨幣,麥嘉華認為要持有實體黃金,而不是黃金礦業公司的一張股票或者ETF的基金。他也強調,要把黃金存在瑞士、倫敦、新加坡、香港和澳洲的銀行,反正就是不要存在美國的銀行。

麥嘉華:「把黃金鎖在保險箱就是最安全的。別想說賺大錢了,我寧願保本。」

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