“Faber said gold was currently expensive relative to other commodities, and the bearish sentiment that’s driven investors from equities to the precious metal is likely to reverse soon. He had recommended investors buy gold since the start of an eight-year rally that this month saw the metal top $1,000 per ounce as skittish investors sought safe-haven assets.
‘Substantial’ Stock Rally
“I’m a little bit careful about the outlook for gold for the rest of the year,” he said. “A countertrend rally could occur soon where stocks would suddenly rise quite substantially.”
Faber today recommended investors short U.S. Treasuries, as a 27-year bull market likely ended in December, starting the beginning of a long bear market. Faber also recommends selling the Japanese yen, though the nation’s stocks may outperform global equities in the next one or two years because they have been depressed for so long, he said.
The yield on the 10-year U.S. government bond fell to a record low of 2.04 percent on Dec. 18, compared with a peak of 15.8 percent in September 1981. The yen has gained against every other currency in the world, except one, in the last 12 months even as the economy contracted at the fastest pace in 35 years. The Nikkei 225 Stock Average fell to the lowest in 26 years this week.
Head for the Farm
The best bet for investors may be to buy a farm and escape from the cities, as a prolonged recession could lead to war, as the Great Depression did, said the Swiss national, who now lives in Thailand.
“Buy a farm and let your girlfriend work on the farm,” he said, to the applause of investors. “If the global economy doesn’t recover, usually people go to war.”
Comment:
Faber lives in Thailand and is supposedly married to a Thai. So I daresay his recommendation to buy farm land in Asia (that’s where he usually recommends it) works fine for him. But as someone who lived there for two decades, I’d say a foreigner buying in any country in Asia, except Malaysia (where the language is English and the laws are British) should be on guard. Title law is not clear in most of them and disputes are common. In India, where British legal institutions prevail, the courts are often exploited by scammers who bribe lawyers and policemen to overlook forged documents. Title insurance isn’t usually available either. Caveat emptor.
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Even the more unconventional analysts like Suze Orman are still holding on to the idea that “the economy” (the old mass-production, push distribution, planned obsolescence economy) will eventually revive, and that the old dogma of holding onto your stocks for the long haul still holds good. Orman isn’t a stimulus shill–she urges people to minimize unnecessary consumption and credit and prioritize paying off debt–but she does continue to push 401k investment up to your employer’s matching contribution limit.
IMO this is delusional. If corporate capitalism hadn’t been rescued by the deus ex machina of WWII (postponing the crisis of overaccumulation by creating a permanent war economy and blowing up most of the industrial capital outside the U.S.), it likely would have (at best) staggered on forever with an unemployment rate of 15%. Stock prices most likely never would have recovered.
People like Orman refuse to recognize the possibility that some crises are terminal.
The best “investments” you can make are those that reduce your need for current income–either by paying down debt or acquiring tangible assets that increase your ability to subsist without outside income. And it’s probably better to clean out one’s paper investment portfolio and take whatever penalties are involved, and put it into something you can use to feed yourself when all the paper investments become totally worthless.
Well, I am in two minds with all this.
I think we will see a bottom in stocks sometime this year (not a prediction – a possibility) and a lot of knowledgeable people like Jeremy Grantham are looking to buy in a short while.
Gold is an investment that I hate recommending because gold mining is one of the most wasteful and disruptive activities. Newmont, Barrick, Goldcorp…all of them have pretty bad reputations with activists who follow these things.
If you buy land in Asia and don’t live there, then you are helping drive up prices for people who are already unable to buy at current prices and who – unlike Americans or Europeans – do not have the land or the kind of passport that lets you move somewhere else…
Pay off debt, for sure…but in some ways, it’s better to be in debt of some kind, just as it’s been better to be a borrower than a lender all these years. That’s the problem.
The government is introducing very perverse incentives by its policies and intervention…