Marc Faber's January 2011 Outlook - Correction Imminent By lewrockwell.com | January 3, 2011
Investor
extraordinaire Marc Faber is out with his latest Gloom, Boom,
and Doom report, which discusses his outlook for 2011. Here
are a few highlights:
1. Equity Markets – Faber believes
a correction is imminent for the stock market as bullish
sentiment (AAII sentiment) nears record levels and mutual
fund cash positions remain very low. Furthermore, the latest
upward move in stocks has occurred on declining volume,
which is usually bearish from a technical point of view.
The correction should occur in January. That being said,
you should be buying into the correction as it represents
a good buying opportunity. Faber prefers energy companies
and speculative stocks such as home builders and even AIG.
He goes on to say that the third year of a Presidential
cycle is very good for speculative stocks versus traditional
blue chip value plays.
2. Gold and Silver – Reiterates
his favorable opinion on gold and silver. Doubts they are
currently in a bubble as some analysts postulate. Faber
notes that investor exposure is very low when you compare
it to the world's financial wealth, meaning that gold and
silver are still under-owned and have room to run.
3. Emerging Markets – While he is
very bullish long-term on emerging markets, investors should
avoid (or at least lighten up on) emerging market stocks
right now. They should only be bought on corrections which
would represent favorable entry levels. Overall, Faber thinks
the SP 500 will outperform emerging markets in 2011. The
only emerging market that looks attractive right now is
Vietnam (VNM).
4. Commodities – On a correction,
Faber likes energy companies since the long-term trend in
oil is up, as supply fails to keep up with surging demand
from emerging markets. Notes that emerging markets have
surpassed the developed world in oil consumption and that
this trend should keep demand strong for the foreseeable
future. Faber likes the majors like Exxon, Hess, and even
Chesapeake as natural gas is too cheap on an inflation-adjusted
basis. Continuing the energy theme, coal and uranium stocks
should be gradually accumulated on weakness as the world
looks for alternative sources of reliable energy. Peabody
on the coal side and Cameco for uranium should outperform
over the next few years.
5. Bond Market – Reiterates his
bearish long-term view on US Treasuries, but notes that
they are currently oversold and could be a good trade at
this point (TLT). But this would only be a short-term bounce
as rates have likely bottomed and higher inflation will
erode future returns.
6. Japan Equities – While everyone
is still bearish on Japan, Faber likes Japanese equities
and thinks they have the potential for more upside. In particular,
he likes Japanese financials such as Nomura and Mizuho Financial.
Overall, Faber is pretty bullish on equities despite his
prediction of a short-term pullback in January.