Marc Faber @July 2012: We are still in a High Risk Environment

Q: Would you say the rally is probably short-lived and saw the best part of it play out by last week itself?

Marc Faber : This is too early to tell. Basically, we made a low in early June and at 1261 on the S&P and then we rallied and we came down again, but we didn’t test a new low. We may rebounce to around 1400 on the S&P. Don’t forget July is a month of seasonal strength and that we are coming into the election, there maybe some more money printing and fiddling with statistic sense of ours. So the market may actually rally a bit more. But it doesn’t change the global picture, which is essentially for a global economic slowdown, for an increasing number of companies that are reporting disappointing sales for forecast, for earnings. 

When there is a minor disappointment that’s what the case on Friday in the case of Nike, the stock then drops very significantly and erases essentially all the gains of the last three or six months. So we are still in a high risk environment. Eventually, I think that in the next 12 months, you will be able to buy most markets at a lower level than today. The only stocks I bought in the last 10 days are from the fresh issues in Portugal, Spain, Italy and France. - in CNBC TV 18 

Marc Faber : We are most deeply asleep at the Switch when we believe to control all Switches

Over the years, my experience has been that most investors (including myself) who lose money fail because of ‘overconfidence.’ When they buy, they are convinced that an investment will be highly profitable and seldom consider that they could be wrong. Likewise, when investors sell an asset they are sure that it no longer has a significant upside potential. Investors’ overconfidence leads to a complete lack of diversification and heavy concentration of money in a single asset class.

Investors should consider carefully that win/win transactions are far less common than win/lose transactions. Usually either the buyer or the seller makes a big mistake. Successful investing is about making sure that it is not you that makes the big mistake.

I am enclosing a report by Michael Gayed entitled “Money Illusion and Why the ‘Bond Bubble’ Must Burst.”

I wish my readers a nice, sunny, and peaceful summer.

Kind regards

Yours sincerely 

Marc Faber

Comments :-

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Marc Faber Recommends Diversification, bullish on Gold

Marc Faber :

You are asking a very good question because I have been thinking about this a lot. High quality government bonds of Germany, Switzerland, Japan and the US are at a very low level of interest rate and are no longer safe. So whereas I am not optimistic about asset prices, I think that if you take a 10-year view, then just as an example if you I have to to buy over the next 10 years and the holding period is 10 years, a US treasury note at the yield of 1.6% or I give you the opportunity to put your money in Johnson & Johnson that yields 3.5%. I happen to think that Johnson & Johnson over the next 10 years will outperform treasury norms or treasury bonds of 30 years maturity. But you live with volatility, may be the next 10 minutes or next three months or next six months treasuries may still outperform, but I believe the notion that US treasuries are safe is misplaced.

Marc Faber : Outlook for the US Dollar in 2012

Marc Faber : I think it is very difficult to be bullish about the US dollar or anything in the US economy. But, compared to other currencies, the dollar is now a relatively safe currency. Global liquidity is tightening and so the dollar probably will continue to appreciate, most likely also against Euro. But it is not that the US dollar is particularly good. It is just less bad for the time being. I have to specify for the time being compared to other currencies. 

-in ET Now