Japan Stocks Will Outperform All Others in 2012 — Marc Faber
Marc Faber, publisher of the Gloom, Boom and Doom Report, spoke to Bloomberg Televisions Betty Liu this morning and said that the Japanese market may outperform all the other markets against all expectations in 2012.
Faber said that investors should be very careful at this stage because he believes that earnings may begin to disappoint and corporate profit margins could deteriorate. Also that the economy has bottomed out, but is far from robust. Excerpts from the interview can be found below, courtesy of Bloomberg Television.
Faber on whether hes finding more shorts in the equity market:
In a money-printing environment Im reluctant to short. But say whereas I recommended investors to increase their positions last October, November, December, now I think that if people are overweight in equities they should reduce positions somewhat maybe cash. The U.S. dollar is desirable at the present time. And we have to say one thing. The market consists of thousands of stocks and the market consists of many different stock markets globally. The S&P has done exceptionally well relative to, say, emerging economy stock markets, most of which are still lower than they were in 2011. So, if you look at the advance-decline line of all the share markets in the world, then it is definitely being deteriorating. And I happen to believe that money printing will continue and I would probably buy financial shares and I believe that the Japanese market may outperform all the other markets against all expectations in 2012.
On saying that earnings will deteriorate and profit margins will shrink:
First, I think there are some cost pressures creeping in terms of rising raw material costs, especially energy, and the problem with, say, a QE3 would be that you are doing it in an environment of very elevated oil prices. So, maybe the energy prices would go up more and squeeze the margins of some corporations. And certainly squeeze the consumer. And my sense is that the economy has bottomed out but is far from robust because the typical household is being squeezed by higher cost of living increases. There are various measurements. You can measure the CPI. It is rising by less than 3%. Everywhere I look I see households essentially paying between 5% to 10% more for goods and services than a year ago.
On whether Q2 will be as strong as Q1 for investors:
I think that if you look back at a year ago we made a peak of 1370 on S&P on May 4 and then dropped sharply to 1074 on October 4. Then we recaptured the lows in November and December. Since then, the first quarter has been very powerful and has surprised investors because of its strong performance. And I think now the expectations are very high. The market is no longer oversold the way it was in December. And everybody thinks that the race is on, go along with equities, the hedge funds have positioned themselves on the long side and optimism is high. I would be very careful at this stage.