Wicked Inflation, Falling Stocks, Middle East Turmoil

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Marc Faber's March Outlook: Falling Stocks, Wicked Inflation, and Middle East Turmoil

by Nathaniel Crawford Wall Street Pit


Marc Faber is out with his latest issue of the Gloom, Boom and Doom Report, which is always a must read for serious investors. This month’s report covers his outlook for the stock market, gold, oil, and the future for the US and global economy. Here are some of the highlights:

1. Stock Market – Still bearish in the short-term. Faber cautions against being bearish longer-term as long as the world is printing money, which will continue to inflate nominal stock prices. That said, technical indicators suggest a market correction. In particular, Faber notes the declining number of new 52 week highs, overly optimistic sentiment, and breakdowns in major stocks like Hewlett-Packard and Wal-mart. Furthermore, corporate insiders are selling stocks at a furious pace (855-1), indicating that they believe now is time to take profits, not risks.

2. Emerging Markets – Faber is still bearish on emerging markets in the short-term, and he expects world markets to correct further. However, emerging markets should be bought on the decline, especially since many of them are already down from their November 2010 highs. He notes that many institutions have been rotating out of EM and into developed markets, despite EM having better fundamentals. Some EM stocks have fallen 20-30%, which makes them a good value compared to US stocks. EM markets with the lowest forward PE ratios are Russia, Hungary, Turkey, and Brazil, which are good places to invest. Other markets to consider are Malaysia, Thailand, and Singapore where you can get good dividend yields.

3. Gold – To Faber the risk concerning gold is not whether it goes up or down, but the risk lies in not owning any of it in your portfolio. Gold could face a correction, but this does not bother him. He advises people to continue to accumulate gold and silver by dollar cost averaging every month. Strong fundamentals favor gold long term – not just because of money printing by central banks, but also because demand from emerging markets like China are increasing at an extraordinary rate. In 2010 China and India accounted for 50% of total gold demand in 2010. This number will only increase, providing strong support to the gold price.

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Dr. Marc Faber [send him mail] lives in Chiangmai, Thailand and is the author of Tomorrow’s Gold.

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