It won't come as a surprise to market watchers that "Dr. Doom" Marc Faber isn't getting any more cheerful.
But the noted bear at least found a sense of humor on Wednesday into which he could channel his bleakness.
The publisher of the "Gloom, Boom & Doom Report" told attendees at the annual "Inside ETFs" conference that the medium-term economic outlook has become "so depressing" that he may as well fill a newly installed pool with beer instead of water.
Drinking up seems to be Dr. Doom's only answer for investors to get through this market.
Emerging market stocks will outperform U.S. equities when another bull market comes, noted bear Marc Faber contended Tuesday. But Faber sees one problem — he believes markets will not enjoy another bull run in his lifetime.
Still, the Gloom, Boom & Doom Report publisher sees a potential recovery for some emerging market economies, particularly Russia and Brazil, which have endured a recent slowdown.
"There are some that are extremely depressed that could have large rebound potential," Faber said during a Tuesday evening panel discussion at the ETF.com Inside ETFs conference in Hollywood, Florida.
Stock prices have broadly fallen worldwide this year, with lower commodities prices and fears of a global slowdown contributing to investor concerns. Economies dependent on natural resources have been hit particularly hard. Brazil and Russia, once stars of the emerging world, have been damaged by oil as well as political issues.
While Faber has made a name on pessimism, he contended that bright spots for potential growth still exist in emerging markets. He pointed to Cambodia and Vietnam, among other Asian economies.
The Federal Reserve’s recent rate hike may have breathed some life back into the economy, but “Dr. Doom,” a.k.a.Marc Faber, is warning Americans of a U.S. economic collapse in 2016.
Known for his doom and gloom commentary, investor-turned-analyst Marc Faber is predicting that the U.S. stock market will be heading for a fall in 2016. According to Faber, a recession is already upon us and the signs will, sooner or later, become more obvious.
Speaking with Bloomberg, Faber said that the median price-to-earning (P/E) ratio for U.S. stocks is relatively high, an indication that the market is inflated and the stock market bubble could burst at any time, sparking an economic collapse. (Happy New Year, huh?)
Now, Faber may have been wrong on some of his past predictions, but the current economic conditions largely agree with his forecast for the U.S. economy in 2016.
Take, for instance, this year’s global corporate default rate. More companies from the U.S. have defaulted on debt this year than companies from any other country.
Bloomberg reports that a whopping 60% of this year’s global defaulters have been U.S. companies, with the second biggest defaulters being the emerging markets at only 23% (Source: “U.S. Companies Led the World in 2015 Debt Defaults, S&P Says,” Bloomberg, December 28, 2015.)
Worse yet, the S&P is expecting the defaults to increase as we head into 2016, with the majority of the defaulters emerging from the energy sector. It’s currently facing its worst price slumps in years.
According to Faber, long-term Treasury bonds now look like better investments than U.S. stocks. Nonetheless, investing in the emerging markets makes better sense to him than investing in the U.S. He particularly mentions the Vietnamese stock market as a good alternative to the U.S. for equity investment.
Faber also finds the real estate markets in Portugal, Spain, Italy, and the Indo-China region as lucrative investment opportunities for the long haul. (Source: “Faber Seeing Recession Clashes With Yellen, Likes Treasuries,” Bloomberg, December 28, 2015.)
Faber’s preference for the emerging markets over the developed markets may have to do with the problem of the U.S. debt crisis and rising debt plaguing all big world economies, including China and the eurozone. From East to West, virtually every big economy is now heavily debt-laden.
Take a look at the U.S. federal debt as a percentage of the gross domestic product (GDP), which is hovering close to all-time highs. In fact, according to CNBC, last month, the U.S. debt distress ratio, a measure of risk in U.S. debt, hit its highest level since the Great Recession highs in 2008–2009. (Source: “Debt distress level at highest since recession,” CNBC, December 28, 2015.)
All these signs reiterate Marc Faber’s stance that the much-dreaded U.S. economic collapse may soon be upon us. I have only one piece of advice for my readers: invest wisely!
For the second Monday in 2016, stocks weakened considerably, with the three major indexes down between about 0.30% and 1% in afternoon trading. While many market watchers point the finger at China, one says that scapegoating is way off base.
“The analysts and the strategists and the economists who got it all wrong about the U.S. now blame China for the market decline, when in fact most stocks began to decline in November 2014,” said Marc Faber, editor of the Gloom, Boom & Doom Report, speaking to Yahoo Finance early Monday. “And [the S&P] peaked out in May 2015 at [about] 2,134.”
The so-called experts, Faber explains, “kept on being bullish about how great the U.S. economy was doing … even when housing stocks went down, auto stocks went down …They kept the bullish view that the U.S. was above everyone else. Now, they blame China.”
Rather than focus on positive economic signals, the portfolio specialist — who spoke to Yahoo Finance from Thailand — said, “I look at stock performance. Most homebuilders are down more than 20% [or] 30%. Why is GM down more than 20%? Why are most stocks on the New York Stock Exchange down more than 20%? They are down more than 20% because the earnings outlook is poor, and because the economic expansion in the U.S. has slowed down meaningfully.”
These figures should be driving portfolio expectations, he adds. “At the present time, I'd be surprised if there is any growth at all in the U.S.”
Also on Monday, Bank of America highlighted a bearish indicator: weakening demand for rail transit.
"We believe rail data may be signaling a warning for the broader economy," a Bank of America research team explained in a note. "Carloads have declined more than 5% in each of the past 11 weeks on a year-over-year basis.”
Though one-off volume declines appear from time to time, “The current period of substantial and sustained weakness, including last week’s 10.1% decline, has not occurred since 2009," the bank stated.
The highly anticipated economic growth data for China are out, and while markets are celebrating the prospect of more stimulus, analysts — including perma-bear Marc Faber — are again questioning the trustworthiness of the numbers.
Official figures released Tuesday showed China’s GDP growth dropped to 6.8% in the fourth quarter and to 6.9% in 2015 as a whole. Those readings marked theslowest annual pace of expansion in 25 years, and a larger-than-expected slowdown in the world’s second largest economy.
But in an interview with CNBC, Faber — publisher of The Gloom, Boom & Doom Report — said the Chinese economy isn’t at all growing as fast as the country’s government suggests. Instead, the investor known as “Dr. Doom” puts the growth figure at about 4%.“An economy is very complex, and you have some sectors of an economy expanding and some sectors contracting [...] My sense is that at very best, the economy is growing at around 4% per annum, but it could be lower,” Faber said in the interview.
The investor cited concerns about China’s “colossal debt bubble” and slowing exports as the basis of his more-downbeat assessment.
Other analysts agreed that China’s growth numbers could be inflated and underlined the outlook for continued slower growth. Here are some of the initial reactions:
“As is always the case with Chinese data, there are both positives and negatives to take away, while the question of reliability always hangs over the numbers [...] While the figures will undoubtedly be called into question and the slowdown in other key sectors have been a factor, we should take comfort from the fact that the economy is transitioning away from manufacturing and exports and towards consumption as planned and still performing well in this challenging global economic environment.” — Craig Erlam, senior market analyst at Oanda
“If China is slowing down, it raises the question of whether the authorities will be tempted to let the renminbi slide yet lower, giving a boost to Chinese manufacturers but potentially exporting deflation to the rest of the world. Second, any Chinese slowdown only points to the elephant which is still in the room, namely debt. This isn’t just a Chinese problem, it is a global one, but core Chinese debt (loans to the non-financial sector) has mushroomed from 187% of GDP to 244% of GDP since the end of the great financial crisis in 2009.” — Russ Mould, investment director at AJ Bell
“China is in a funk because of the huge debt built up in 2008 onwards as it fought off the effects of the global financial crisis, but markets are excited because China may instigate stimulus to counteract slowdown fears. That can only mean more rate cuts or reductions in the required reserve ratio for banks. There is also scope for the currency to take some of the strain, but not yet, given the recent developments and especially on the offshore yuan.” — Simon Smith, chief economist at FxPro
“The data was not a surprise. In the quarters ahead we would expect China’s growth to continue to slow as structural forces dictate a lower trend rate. The volatility of markets has raised questions about currency pegs — Hong Kong and Saudi Arabia both being mentioned. It is worth remembering that pegs are political not market decisions, and we do not expect the pegs to break.” — Paul Donovan, global economist at UBS
“With China GDP growth below the golden 7% yearly target, the visible economic slowdown may have further elevated investors’ fears towards the failure of a series of aggressive measures by Beijing to revive growth and as such may reinforce the bearish sentiment towards the Chinese economy.” — Lukman Otunuga, research analyst at FXTM
“While the economy is overall still in what could be called a soft landing, the state of manufacturing is close to what we would say is a hard landing. This is why what may be a soft landing for China is in many parts of the world being felt as a very hard landing. This is especially the case for commodity exporting countries like Brazil and Russia. Countries that export more to the service sector on the other hand will not feel the slowdown as hard.” — Allan von Mehren, chief analyst at Danske Bank
Marc Faber, editor of the “Gloom, Doom & Boom Report,” has advised investors that now is a good time to invest in gold because stocks will crash over 40% and the world is on the verge of a new liquidity and debt crisis.
Faber says investors would be prudent to diversify into safe haven in gold bullion which has risen 3% this year and is currently at $1,096 an ounce.
He recently told MarketWatch that the stock-market downturn could result in stocks hitting lows not seen in five years.
Faber warns that the S&P 500, which fell to 1,881 yesterday, could drop to its 2011 low below 1,200.
“According to FactSet data, that would be 1,099.23, set that October. Faber referred to that outcome, a more-than-40% plunge in the broad stock-market benchmark, as his ‘medium bearish’ scenario. His most bearish prognostication envisages the S&P 500 falling back to its 2009 nadir, which FactSet data put at 676.53,” MarketWatch reported.
“The main factor is diminishing global liquidity because of the decline in oil prices.” A rapid appreciation of the U.S. dollar may send Brent oil as low as $20 a barrel, according to Morgan Stanley and other analysts.
Crude oil (WTI) fell sharply to below $28 a barrel today on deepening concerns about oversupply, fragile demand from China and the slowing global economy.
Faber has correctly warned that the price of crude oil indicates a shrinking global economy. “When oil prices increase, it basically is a consequence of expanding [global] liquidity,” Faber said, so inversely, this unrelenting fall suggests contraction.
Faber cautioned that the situation could change because of global central bank tactics. “It is impossible to make predictions because we don’t know the extent of the madness of central bankers,” he said. He has been a harsh critic of the quantitative easing measures of the Federal Reserve and other global central banks.
He has warned that their zero percent interest policies have resulted in the world becoming vastly more indebted and therefore more vulnerable to a new and worse global debt crisis.
Faber favors allocated and segregated coin and bar storage in Singapore.
