When speaking about an imminent stock market correction, Marc Faber argues that since the market hasn't had more than a 10% correction since 2011, it is likely that we will see a 30-40% decline in the not too distant future.
Marc has witnessed many bull markets and crashes in his career. Marc says that bull markets frequently go on for longer than expected, but the current bull market is already very old, and has been going up steeply since 2009 – in other words, more than 5 years old. “The one thing I can say, is that we are in an aging bull market, and the recovery has lasted longer than the typical recovery phase over the past 100 years.”
We ask Marc if the Fed's current slowdown in tapering will be reversed in a stock market correction? Marc points out that whenever there is a problem with liquidity in the markets (1988, 2000, 2007), the Fed has stimulated the economy by injecting liquidity, so it's not unlikely that the Fed will again try to support asset markets. The problem is when this goes on long enough, numerous assets aren't affordable for the majority of people. The impact of this may be negative for the economy, because some asset prices may rise disproportionately in comparison to other prices.
In the multi year low in mining equities, Marc says that general assets are very high right now. And the only asset class that in Marc's view are beaten down now are the gold and silver mining shares. When looking at the Dow Jones Index in comparison to the GDXJ(junior gold mining stocks index), the underperformance from the GDXJ has been colossal. As a contrarian or as a value investor, Marc sees reasonable value in the gold mining stocks right now. Government bonds and other assets are essentially inflated, but the gold mining stocks are deflated.
Speaking on the influx on gold into Asia... Marc thinks it's an interesting situation, because in the west we have rumors of central bank's manipulation of the gold market to keep the price depressed. Marc believes that these rumors are insensible – the West should want to sell their gold at a high price, not at a low price point.
Finally, in the last 20 years, there has been a huge increase of wealth in Asia. The increase in gold purchases in Asia, comes from a growing population, and a population which is increasingly affluent. Marc says that in terms of the Asian stock markets, they are relatively depressed in comparison to the US stock markets, and there is better value there.
Dr Faber publishes a widely read monthly investment newsletter "The Gloom Boom & Doom Report" report, which highlights unusual investment opportunities, and is the author of several books, including “ TOMORROW'S GOLD – Asia's Age of Discovery” which was first published in 2002 and highlights future investment opportunities around the world. “ TOMORROW'S GOLD ” was for several weeks on Amazon's best seller list and is being translated into Japanese, Chinese, Korean, Thai and German. Dr. Faber is also a regular contributor to several leading financial publications around the world.
