In his June 2009 Gloom Boom Doom report, Dr. Marc Faber suggested we may see a correction into late June, and possibly even longer, as financial markets in the US give back some of the gains since the March 6 lows.
I would, therefore, use any setback in asset markets (commodities and stocks) as an opportunity to accumulate the equities and funds I mentioned in last month’s GBD report.
Recommendations in the December 2008 and May 2009 GBD report include, but are not limited to, the following:
BHP Billiton (BHP)
Rio Tinto (RTP)
Natural Gas via First Trust ISE Revere Natural Gas Index Fund (FCG)
Financial Bull 3x Shares (FAS)
Freeport McMoran (FCX)
MSCI Emerging Market ETF (EEM)
Take careful consideration before entering positions in these investments:
Marc Faber: I would only buy most of these recommendations on a correction, ideally on a significant correction. (May 2009 GBD, p. 10,11)
Source: Marc Faber’s Gloom Boom Doom Report (May, June 2009)
The FAS triple leveraged ETF has made me quite a bit of money. I sold it in May for 10.50 right after it topped off at 12.50. It is so volatile, but if your timing is good it returns huge profits. I lost some of those gains when i jumped into FAZ (the oppositie of FAS) thinking a correction was going to happen in late May. I got stopped out in about 4 days. Very volatile ETFs.
Awesome…Awesome posts Mac. By any chance, does he mention what a meaningful correction is, 10%?
Alex, you know, he did not specifically mention what he anticipates as a “significant correction.” I can only guess that he would be referring to the 775 – 825 level as “significant.” The reason i say this, is because he specifically mentioned this range in an interview he conducted in May (can’t find the specific link right now) and he also specifically mentions 800 as a hypothetical in this interview: https://www.shtfplan.com/marc-faber/marc-faber-expect-market-correction-for-next-2-weeks-to-2-months_06102009 from June 10.
There was one interview in which Marc Faber also mentioned S&P breaking under 750 as something he considers to be very bad. I ran some Fibonacci numbers a few weeks back and I think 750 (at the time i ran the numbers) puts you in the area of a 61.8% retracements from the March 6 low to the recent high, so I am assuming Faber is working off of similar math. We have since hit 945 on the S&P, so that retracement might be at 775 or so now.
My strategy going forward is to hold my Inverse/Shorts for the time being, hoping for a correction to at least 825 or so. If i see a break to the upside from where we are right now , i may unload my shorts.. say back over 950 and if the XLF ETF blows through it’s 200 DMA.. (This is something Harry Dent of HS Dent Investments is closely monitoring). If this happens, i may unload my shorts and wait for the next leg up, perhaps even jump into a double leveraged oil bull and FAS 3x ETF for the short-term, but buying into anything right now is extremely dangerous, and especially if the markets break in the up direction going forward.
If we do, in fact, see a correction (the bears are parying to the financial market gods), I’ll have to wait and see what technicals and news we’re looking at, but i am hoping we’ll see a drop to the 825 level so i can start unloading my short positions (not all at once) and moving back into all three major commodity classes. My personal view is that 825 would be considered a “significant correction” (10% – 15%).
I don’t like using stops too much (the ‘manipulators’ know where all of our stops are 🙂 ), but i will be watching closely and if markets keep collapsing, i might just move back into shorts under 775 – but i certainly won’t know for sure until this level is breached and we get a feel for the market.
Personally, i don’t think this is the final drop – even Faber himself suggests that a higher move will occur after the correction. This is echoed by cyclical forecaster Harry Dent in his June 2009 Economic commentary. So i am watching closely to see which way geo-economic and political news is leaning these days. I am honestly hoping for enough of a correction to pick up more gold mining stocks (gold=$850 or less) and more commodities, and maybe even FAS for the next (and final) wave up to DOW 9500 – 10,000.
One of the critical indicators I am looking for to signal a market (re)collapse is the yield gap between DowJones dividend yields and bond interest rates — I have not seen it break to levels that historically have signalled a “collapse.” I am only guessing here, but the “big one” might come soon after we have the Dow Jones above 9500 and long-bond (30 yr) rates at around 5% or so. We will be very close to a breaking point in this scenario. Faber doesn’t talk much about this, but he definitely sees a long-term bond collapse in the works. To learn more about the yield gap concept, check out this fantastic article from Howard Katz: http://www.kitco.com/ind/katz/jun012009.html .
i kind of ran on and on and on with this one, eh?
So, to answer your question: we don’t really know what he considers a “significant correction” to be, at least based on the GBD reports because he does not specifically mention a range! LOL.
Mac
never a long blog.. keep up the good work!
I’m holding RJA and DBA and they seem like they aren’t off the lows by that much so I guess I’ll be still holding them as they dont seem like they can go any lower. The rest have gone up alot so I expect them to dip a bit more than RJA and DBA. Let me know your thought. Also, what do you think oil can be at this 2nd crash?
Hi Tony, thanks for the compliment. we do what we can.
I think DBA is a fantastic ETF to hold. I totally dropped the ball on this one. I picked it up right after march lows, but unloaded it in April for a small profit. should of held it, it seems!
My personal opinion, which I base on a number of different ideas, is that we will see a commodity crash into later this year, or earlier 2010. This is based on the deflation theories of Harry Dent, who is a cyclical economist — worth reading his stuff if you ever get a chance.
I do see longer term inflation on the horizon, but in the near to intermediate term, say into mid 2010, I want to say that I am looking for global equities to get hammered. The reasons for this will be a weak economy here in the US, which will adversely affect demand globally for all sorts of sectors, including real estate, consumer good and commodities.
It is difficult for me to imagine oil at $100 if the Dow Jones is at 6500. But, i must also mention that I believe oil is a ‘special’ commodity. There is one scenario where oil can go through the roof, and that would be a geo-political event like an attack on Iran. That being said, I will probably hold oil in my portfolio for quite some time, taking profits here and there, but for the most part, holding high dividend oil companies (like Canadian Oil Trusts) may be the best play for this type of scenario. If oil drops to $40 a barrel, you’ll still be able to collect 5% – 10% dividends (in CAD) while waiting for a rebound. If you like oil and what high dividend paying stocks, do a search for Cliff Wachtel, who has some excellent anaylsis and recommendations for Canadian energu stocks.
Long-term, i can definitely see oil at $150 or higher again. This will depend on 1) Supply fundamentals (which could be affected as oil companies pull back on drilling and exploration) and 2) Inflation (which should be a strong factor in a year or two or three) 3) cap and trade taxes. In fact, with these considered oil could be even more than $150 a barrel in 5 years. Of course, a cup of coffee might be $10, as well.
In the near term, say from now to September/Oct 2009, I can honestly see it blowing back through the $100 mark and even higher. This is confirmed by analysis from Harry Dent, who suggests we might see an oil pull back short-term (now) and then a break back up to $100 or more. If you listen to Marc Faber, he seems to have a similar view — in that we will see a correction in general for most asset classes, and then another leg up for everything (equities, commodities, etc.).
Right now, the oil investments are working out quite well, especially for those who picked up oil in the $40 range earlier this year. I am not unloading any oil at this point, and would actually pick up more of it on a dip, to say, under $60, especially if i got a whiff of positive news coming our way.
But, if I see Oil hit $100 and I see the Dow at 9500, I am going to seriously think about moving out of my positions. At the very least, setting up trailing stops in the 10% range might be the safest thing to do at that level. In the event of a big pull back, you’ll at least be protected.
I try to leave every possibility on the table — so if a second crash happens — a “commodities collapse”, if you will — I would say oil could go as low as $35 a barrel or even lower. It is hard to believe given the potential for inflation, but we’re in the worst recession in 80 years — so anything can happen, so I am taking nothing off the table at this point.
All we can do is watch for the signs, lock in profits when possible, and get out of the way if we don’t understand what is happening. It’s better to be out of the market wishing you could get in, then being in the market wishing you can get out!
Feel free to throw any other possibilities on the table — nothing can be discounted at this point.
Mac
I’m reading up on all these experts and I can’t help but be more confused. I’m getting conflicting recommendations from everyone. In the end, one person is going to be right and many are going to be wrong. I’m really curious as to who has been the best forecaster short/mid term and who has been the best for long term? I know HS Dent and Faber would be good to look at for very short to mid term and JR and Schiff to be long term. However, they do conflict, by alot too.
1) Dent is calling feflation, while the rest is calling inflation to hyper inflation.
2) JR says to only invest in the things you know and only have a few investments in your life time but know alot about those investments and not be jumping around short term (but again he’s a horrible market timer). Dent seems to encourage alot of changing of positions due to cyclical events.
3) JR says commodities are the best investments whether stocks are going to be good or not because everyone is printing so much money, Dent says there will be a commodities crash eventually
4) Schiff and Faber says China is the best place to be even with the current run-up (and JR said this in Dec last year) while Dent says even China will have a major correction and possibly recession as well (due to it taking several years to de-couple).
The biggest “contrarian” of all contrarians would be Dent it seems. So I’m really confused as to who will be right. Everyone has excellent track records and some will be right, some will be wrong, so after this event, we will know who washes out in mediocre if they are wrong and who will be hailed savior for the ones who are right.
I’ve followed JR the most so I tend to be on JR’s side, but I will have to read up on Dent and his past record independently to see if he was even more correct than JR (JR missed the crash of his flagship pick, commodities, in Oct 2008, but seems to think it will come back better than ever. Dent I think called the commodities crash, but the verdict is still out as to what the ultimate outcome would be since I don’t know whether the commodities crash was due to forced liquidation back then.
Let me know what your experience has been with Dent and whether those weekly updates he had gave you good returns. It’s too bad JR doesn’t have a newsletter.
I subcribe to the Gloom Doom & Boom report – unfortunatley I do not find the exact comments you indicated from Marc Faber on p10,11 of the May 2009 commentary. Are you paraphrasing? He does recommend to buy equities, but only after a significant correction stated. Just want to confirm post.
Correction: Gloom Boom & Doom report.
Jose, in order to get my point across, i used the following sentence from May 09, Page 10:
“Therefore, I would only buy most of these recommendations on a correction” (p.10, 2nd paragraph)
and then, last sentence of this paragraph in paranthesis:
“but, as I said, ideally on a significant correction” (emphasis added by Faber)
I should have probably split the two statements up in my quote above. I hope, however, that I was able to get Faber’s point across without changing the meaning of his statements. It seemed to make more sense the way I did it, as opposed to typing up the entire paragraph.
Also – in regards to GBD, I fogot the “&” — typo on my end.
Thanks for visiting!
Mac
Thanks for the clarification. Nevertheless, I have combed page 10 of May 2009 GBD Report and cannot find the quotes…I know I read them somewhere (maybe just on your post). I spent another hour reading both the May 09 and Jun 09 GBD Report and still no success in finding these comments…this is driving me nuts!ÂÂ
Dr. Faber did mention this was a high risk entry point for equities on moneycontrol.com (posted on his blog on June 9, 2009).
Jose, that is wierd… I am looking at Page 10 right now. It is a single column, left side with text and two charts. Chart 1: Figure 8, Ishares Emerging Markets 2007-2009  Chart 2: Figure 9 30-year T-Bond Yield. On this page he also lists about 20 – 30 recommendations he has made over the last 6 months or so.
In regards to the Marc Faber blog you mentioned — I am not familiar with a personal Marc Faber blog, and I believe there is a particular web site that may make it look like the publisher is Faber but it is not. Do you have a specific link to the blog? perhaps we are thinking of two different web sites.
…dude this is really bothering me. I am looking at Dr. Faber’s “Market Commentary May 1, 2009″ and Figure 8 (which is on page 9) is titled “The inflationary problem begins” and shows a chart of the 30 Yr US Treasury Bond Price (chart by decisionpoint.com). Figure 9 (on the report I’m looking at) is on page 11 and is titled “Has the secular bull market in government bonds ended?” and shows the long-term US Treasury constant maturing (chart by thechartstore.com).
Furthermore, the emerging market equity recommendations start being listed on page 14.
We may not be looking at the same publication – although it would not make sense to have two different versions provided we are pulling the GBD Report durectly from DR. Faber’s website (http://www.gloomboomdoom.com) …by the way here is the link to the blog I mentioned previously (http://marcfaberblog.blogspot.com/). I’m aware of the other blog that states clearly it’s fan based (http://marcfaberchannel.blogspot.com/).
Am I missing something? I really need to figure this one out…
…by the way, I found the two charts you referenced. They were actually in the February 2009 Market Commentary. They appeared as Figure 8 on page 11 titled “Emerging Markets: At Least a 30% Rebound Potential” and shows the ishares MSCI Emrging Markets (EEM) (chart by decisionpoint.com). The other one is Figure 11 on page 14 titled “US Long Term Bond Yield” and shows the 30 Year T-bond Yield (chart by decisionpoint.com).
Although I found the charts, I still cannot pinpoint the quote from Dr. Faber.
I urge that you check your references once again.
…dude what happened to my prior post? The one preceeding the one posted on June 28th, 2009 @ 9:32pm.
Jose, the post has been approved. If a post includes outbound links it requires admin approval.
In regards to the GBD:
It sounds like you subscribe to the Market Commentary from GBD, which is a bit different than the GBD. The Commentary, as you mentioned, is in electronic version and downloadable from the GBD web site.
Our SHTF subscription is for the full Gloom Boom & Doom report which is delivered via snail mail each month. While the information is similar these are two different publications from Marc Faber. This would explain the discrepancy in page numbers and content.
In regards to http://marcfaberblog.blogspot.com/ . I do not think this is Dr. Faber’s blog. Notice the obscene amount of Google advertisements? If I were Dr. Faber, I would be promoting the GBD and Market Commentary and not spamming the page with Google Ads. Notice the links to the Peter Schiff, Jim Rogers and Gerald Celente blogs. these are all similar in nature insofar as design is concerned. This is not an official Marc Faber blog. There is also a Twitter account that purports to be Marc Faber, but be careful — because that is fake too (I think)!
Mac
Got it…thanks for the insight.