From The Economic Times (India):
Expect Indian markets to move up & currency to go down in next 5-10 years: Marc Faber
In an interview with ET Now, Marc Faber,
Editor & Publisher of the Gloom, Boom & Doom Report, talks
about the global and Indian markets as well as commodities. Excerpts:
ET Now: What was your summary of the Jackson Hole event and key takeaway of what has been given out, it has really been a reiteration that things are going to be looking bad in the near term?
Marc Faber: Well, basically the Jackson Hole meeting did not produce anything that we investors did not know before. What was basically articulated by the Fed Chairman, Mr. Bernanke, was that if conditions warranted, there will be more QE3 and the conditions will eventually warrant more QEs and there will be QE3. The question is when will it happen and to what extent have equity markets and also property markets in the US already discounted QE3.
ET Now: Do you think that has reflected in the way the Dow Jones, the S&P 500 have performed the year to date so far and as you have pointed out the property market, so even if a QE3 does come by we would perhaps not see the kind of rally that we have seen in the past QE announcements?
Marc Faber: Well, we have to distinguish several factors. First of all, on QE1 the market in March 2009 was unbelievably oversold and so the market was ready for a rebound and as you know that if you print money, it goes somewhere and in the US it went principally into equity prices and into corporate profits. We have record corporate profits which is unusual because revenue growth is actually very disappointing, very little revenue growth. But there are record profits and I do not think these profits are sustainable.
Moreover, the markets are no longer oversold. We are above 1400 on the S&P and compared to other markets in the world, say if you compare the performance of the US stock markets to foreign markets, over the last 18 months in early 2011 the US market had outperformed just about anything else and therefore actually by international comparison the US market is quite high and my view would be every central bank will print money, including the ECB, directly or indirectly, whatever they may call it, but they will do it. The European markets, some of them like France, Italy, Spain, Greece and Portugal, two months ago were either below the 2009 low or close to the 2009 low on the S&P that would be the equivalent of 666. So relative to other markets, some European stocks are now very inexpensive.
ET Now: Would inexpensive valuations in certain pockets which have been weak present an opportunity to get into investment mode out there because if we see various asset classes over the last couple of months, at least the last month, commodities have been the ones which have outperformed significantly. You think it is the turn of equities cheaper equities to now start outperformance?
Marc Faber: You talk about commodities having outperformed stocks? That is not quite correct. Agricultural commodities have done well recently, but say industrial commodities have underperformed equities over the last two years. I would say the opportunity in my opinion, and as I have written about this in my reports, is essentially to now pick up some European shares at very distressed valuations. Two years ago a book was published 'Invest in Europe Now'. Of course the timing was not particularly good and the markets since then in Europe have completely imploded. Now recently the markets have bounced off their lows in the case of Italy, Spain, Portugal and France by between 18% and 30% from the lows in June-July. The correction is now coming, but I do not think we will see new lows because whereas two years ago the sentiment was very optimistic about the Euro and about Europe, now it is at an extremely negative reading. There is nobody who has anything favourable to say about Europe, but stocks are at discounting mechanism and they have pretty....MORE
ET Now: What was your summary of the Jackson Hole event and key takeaway of what has been given out, it has really been a reiteration that things are going to be looking bad in the near term?
Marc Faber: Well, basically the Jackson Hole meeting did not produce anything that we investors did not know before. What was basically articulated by the Fed Chairman, Mr. Bernanke, was that if conditions warranted, there will be more QE3 and the conditions will eventually warrant more QEs and there will be QE3. The question is when will it happen and to what extent have equity markets and also property markets in the US already discounted QE3.
ET Now: Do you think that has reflected in the way the Dow Jones, the S&P 500 have performed the year to date so far and as you have pointed out the property market, so even if a QE3 does come by we would perhaps not see the kind of rally that we have seen in the past QE announcements?
Marc Faber: Well, we have to distinguish several factors. First of all, on QE1 the market in March 2009 was unbelievably oversold and so the market was ready for a rebound and as you know that if you print money, it goes somewhere and in the US it went principally into equity prices and into corporate profits. We have record corporate profits which is unusual because revenue growth is actually very disappointing, very little revenue growth. But there are record profits and I do not think these profits are sustainable.
Moreover, the markets are no longer oversold. We are above 1400 on the S&P and compared to other markets in the world, say if you compare the performance of the US stock markets to foreign markets, over the last 18 months in early 2011 the US market had outperformed just about anything else and therefore actually by international comparison the US market is quite high and my view would be every central bank will print money, including the ECB, directly or indirectly, whatever they may call it, but they will do it. The European markets, some of them like France, Italy, Spain, Greece and Portugal, two months ago were either below the 2009 low or close to the 2009 low on the S&P that would be the equivalent of 666. So relative to other markets, some European stocks are now very inexpensive.
ET Now: Would inexpensive valuations in certain pockets which have been weak present an opportunity to get into investment mode out there because if we see various asset classes over the last couple of months, at least the last month, commodities have been the ones which have outperformed significantly. You think it is the turn of equities cheaper equities to now start outperformance?
Marc Faber: You talk about commodities having outperformed stocks? That is not quite correct. Agricultural commodities have done well recently, but say industrial commodities have underperformed equities over the last two years. I would say the opportunity in my opinion, and as I have written about this in my reports, is essentially to now pick up some European shares at very distressed valuations. Two years ago a book was published 'Invest in Europe Now'. Of course the timing was not particularly good and the markets since then in Europe have completely imploded. Now recently the markets have bounced off their lows in the case of Italy, Spain, Portugal and France by between 18% and 30% from the lows in June-July. The correction is now coming, but I do not think we will see new lows because whereas two years ago the sentiment was very optimistic about the Euro and about Europe, now it is at an extremely negative reading. There is nobody who has anything favourable to say about Europe, but stocks are at discounting mechanism and they have pretty....MORE
