For proof that the U.S. stock market is in trouble, look no further than the presidential candidates running for a place in the 2016 election, says Marc Faber, editor and publisher of the Gloom, Boom & Doom Report.
Faber, who has earned the nickname "Dr. Doom" from his longtime bearish stance on U.S. stocks, said most candidates are "relatively questionable" in integrity and quality.
"Going into the year end and the next year, I only have to look at the presidential candidates and then I know I have to be bearish," Faber said Tuesday on CNBC's "Trading Nation." "It's a pity that a country like the U.S., with so many highly intelligent and educated people, can only produce the kind of candidates we have."
A September national poll from Monmouth University shows Hillary Clinton as the front runner for the 2016 Democratic nomination by a wide stretch, followed by Joe Biden and Bernie Sanders. Leading the polls for the Republican nomination is Donald Trump, followed by Ben Carson and Jeb Bush.
While Faber admitted that he is not a close follower of American politics, he said Republican candidate Ted Cruz would be the best choice for U.S. markets to prosper.
"He's a relatively conservative person and that may be good for stocks," Faber said.
This is the latest in a series of somewhat unique reasons that Faber has provided for his long-held bearish stance on the U.S. stock market. For the past couple years, Faber has consistently predicted a stock market crash and U.S. recession, which have yet to materialize.
Presidential election aside, Faber said there are a lot more concerns facing the market, including an economic slowdown in China, falling currencies and trouble in the bond market as the Fed contemplates raising interest rates.
Markets have "reached some kind of a tipping point," warns Marc Faber in this brief Bloomberg TV interview. Simply put, he explains, "because of modern central banking and repeated interventions with monetary policy, in other words, with QE, all around the world by central banks - there is no safe asset anymore."
The purchasing power of money is going down, and Faber "would rather focus on precious metals because they do not depend on the industrial demand as much as base metals or industrial commodities," as it's now "obvious that the Chinese economy is growing at nowhere near what the Ministry of Truth is publishing."
Faber explains more... "I have to laugh when someone like you tries to lecture me what creates prosperity"
The U.S. could be on the verge of an economic collapse and investors should start moving their portfolios into hard assets like gold and silver. At least, that’s according to renowned investor Marc Faber.
In a presentation at the CFA Analyst Seminar in Chicago, the popular market commentator argued asset markets are broadly overvalued and investors should be accumulating cash. To survive the looming financial crisis and economic collapse, the author of the Gloom, Doom, and Boom Reportrecommended investors keep a quarter of their portfolio in gold. (Source:Faber likes cash, says real estate and emerging markets equities to outperform, last accessed: July 29, 2015.)
“Gold is insurance if the banking system fails,” he said to attendees. “As an investor I’d like to own something outside the banking system, and that includes real estate, art and gold.”
For just a tiny glimpse of the role that gold will play in the event of a market collapse, look no further than China. The yellow metal rallied somewhat on Monday and Tuesday, with investors rushing at a safe haven asset as China’s crisis continues. This rush would turn into a stampede if such a crisis hits U.S. stock markets, as Faber predicts could very well happen.
“If our banking system goes through any hiccups, you want to have real estate, art, and gold in your possession, not bonds or treasuries. Gold prices benefit in times of uncertainty, and we are on the cusp of a major global financial crisis,” says Faber.
The gloomy economist is a staunch supporter of buying assets when they are undervalued, and gold certainly fits the bill at the moment. Whether you buy now or wait for it to drop lower in price is your call, but don’t miss out on the upswing.
While investors are looking for sound growth, higher interest rates, and diminished inflation, China remains the bullish wildcard in the gold equation. Its stock market crisis could very well spread globally, shifting demand firmly in favor of gold.
Still not convinced? Faber points to the extreme dissonance between real and virtual demand for gold, and how this will play out if another crisis hits.
Gold prices on international markets are dangerously out of touch with the physical realities of its physical supply. Futures markets inflate the supply of gold through virtual transactions which keep the price artificially low, while demand for actual gold is high.
Translation: when markets stop reflecting fundamentals, you can bet we’re in for a correction at some point. Don’t be caught on the wrong side of the equation when it happens.
Marc Faber, publisher of The Gloom, Boom & Doom Report, says nearly all asset markets are overvalued so it’s best just to stash away your cash right now and you’ll be poised to buy when market bubbles finally pop.
But he does suggest allocating 25 percent of your investment portfolio to gold.
“Gold is insurance if the banking system fails,” he said at the CFA Analyst Seminar in Chicago in a presentation titled, “Inflating Asset Markets and Deflating Real Economic Activity? Strategies for Global Investors.”
He said real estate and emerging markets equities are better bets than U.S. stocks during the next five to 10 years.
He said Vietnam, Cambodia, Thailand and Laos are among the most promising regions for investment for the next 30 years. “In the absence of war, the area will be very attractive,” he noted.
He sees bonds as the most despised investment right now, but prefers U.S. Treasurys to European rivals.
Meanwhile, gold prices rallied from from five-year lows on Monday as investors returned to the precious metal after China’s stock market plunged. Gold futures rose $11.70, or 1.1%, to $1,097.20 a troy ounce on the Comex division of the New York Mercantile Exchange.