Gloom, Boom & Doom Report publisher Marc Faber gives us his long-term outlook and short-term strategy for navigating the financial markets. (Interview follows excerpts and comments)
Gold Explortation companies:
The exploration companies have no cash flow. What you need to look for are companies with some backers that have money to essentially develop the exploration results that they may achieve or may not achieve.
The ones that are partly owned by the majors, I would say Novagold, Gabriel Resources, Ivanhoe. These are companies that have essentially some backers where their exploration results, which are favorable, will be one day developed.
Gold miners will more than likely experience a Boom in the future, as gold and silver prices move up as a safehaven for investors. It is important to note that there are a ton of gold exploration mining companies out there, so doing your research will be critical to success. Marc Faber’s mention of Ivanhoe, Novagold and Gabriel Resources should be noted, but so to should his mention of junior mining companies with no backers. With credit lenders freezing operations globally, underfunded junior miners will be destroyed over the next several years as they will not be able to fund their often costly exploration budgets.
Dr. Faber estimates that global GDP ex-government operations is more than likely down 10% or more thus far, meaning that exports around the globe are sinking due to lack of demand. Money is tight, and no one is spending. This is subsequently forcing prices down on many consumer goods, services, commodities and real estate.
It’s true, right now, there are no inflationary pressures, although I’d like to point out that healthcare costs and educational costs are still rising. And,Â food costs – food prices, which rose sharply last year, they have eased a little bit but they didn’t go down back to the level of, say, 2005.
So there is, in the system, some inflation.
The massive money printing we have, and the massive deficits we have now, will make it difficult in the future when there are some price pressures….
The problem with gold is that gold has performed so well, in the sense that it went up slightly whereas all the other assets tumbled. So gold relative to, say, the CRB index which is composed of industrial commodities is now rather high. I’m now rather looking at industrial commodities.
Gold will be the safehaven play for the long-term, especially if you own portable forms of it. And while it is probably still wise to acquire gold, Dr. Faber is suggesting that looking at industrial commodities like Aluminum, Copper, Cotton, and Crude Oil may be a quality buy as the CRB Index is depressed.
Marc Faber On Long-Term Stock Market and Equities:
I think looking forward, I believe that over the next 10 years you will make money in stocks if you start buying here. It’s very difficult to see a scenario where you wouldn’t make any money.
Basically, this means that if you buy now, you’ll make money in 10 years, but don’t be surprised if you get hammered in the short-term.
Marc Faber’s Short-Term Outlook for Stocks:
The governments’ efforts will by-and-large fail to boost economic activity. But, they can boost, say, asset markets. They can boost stocks.
Stocks have adjusted very meaningfully. This is the second largest bear market in history after the 1929-1932 bear market. And it is possible that we drop to maybe 600 or 500, but equally we could, from the lows, also have very very powerful rebounds. Don’t underestimate the power of printing money.
What Marc Faber would do right now:
I would make the followng bet:
I think the dollar will begin to weaken. That will be the first signal that some liquidity is coming back into the marketplace. And I would bet that equities can rally between here and the end of April.
The sentiment right now is very very negative….The news is horrible. There’s no good news, everything is just horrible. And I think the news will stay bad, but maybe the [acceleration] of bad news will slow down.
Basically, investors are so jittery right now, that they continue to expect more and more bad news, which is keeping a lot of money out of the equities markets. If we have some good news, or even if we have a slow down in bad news, it could be very bullish for the markets for the next 6 – 8 weeks.