Monday, September 8, 2008

Marc Faber-"Dr Doom: More gloom, the Kondratieff wave and what comes next"

From FT Alphaville:

Investment guru Marc Faber is living up to his “Dr Doom” moniker with a client newsletter this week that seems to be as cheery as the English weather.

“The global economy is decelerating rapidly, corporate profits are declining and the weakness in financial stocks is now spreading through all asset markets,” he notes. Oh happy days.

There’s a small spot of relief though - if Faber is correct in his prognosis that stocks and commodities are near-term oversold while the US dollar is short-term overbought. A temporary reversal is possible but then, he warns, as the credit crisis spreads into the real economy, be prepared for a slump in all asset classes.

Ultimately, just like in the 1970s, we are currently in “a stock and asset picker’s market”. Volatility will stay relatively high and there will be large moves in individual stocks, sectors and asset classes (up and down). But when it comes to specific stock recommendations, while certain stocks have performed well in dollar-terms, the picture is very different in euro terms, warns Faber.

The major equity indices are unlikely to make much headway in real (inflation adjusted) terms and rather, it is far more likely that equities will continue to decline in real terms for quite some time.

Ron Griess, who runs the excellent website thechartstore (highly recommended for a historical perspective of asset markets), notes there have been three major inflation adjusted bear markets over the last 100 years (1906-21, 1929–49 and 1966-82). The average length of an inflation-adjusted bear market was 191 months (almost 16 years)....MUCH MORE