(Bloomberg) – U.S. stocks fell too far and may rally without setting records, investor Marc Faber said.
“We’re extremely oversold at the present time,” Faber said in an interview with Bloomberg Television. “The market is in a position to rebound.”
The Standard & Poor’s 500 Index dropped 38 percent from its record 1,565.15 reached Oct. 9, 2007, as investors speculated more than $660 billion in bank losses will spur a recession. The ratio of stocks advancing versus those declining on the New York Stock Exchange fell to a 17-month low on Oct. 15.
Faber said he is holding gold, cash and short-term bonds because inflation will increase as the U.S. government lowers interest rates to stave off an economic slowdown. Gold climbed 5.8 percent from Sept. 11 through yesterday and yields on three-month Treasury bills fell 51 percent over the period.
“The governments in this world have no other option but to print money. That will lead down the road to inflation,” Faber said. “You don’t need to be an economist graduated from Harvard to know we’re already in a recession. They will just put white paint on a crumbling building.”
Faber, the Gloom, Boom & Doom report publisher, said stocks make up 7 or 8 percent of his holdings, with cash, bonds and gold, his biggest position, accounting for the rest.
U.S. Recession
The U.S. economy slipped into recession a year ago, Faber said, and it won’t recover until consumers and the government reduce spending and borrowing. Economists project U.S. gross domestic product fell 0.1 percent in the third quarter, according to data compiled by Bloomberg.
“To rebuild economic health in the United States, you need a serious recession that will last several years,” he said. “The patient that got drunk on credit growth needs to go into rehabilitation. To give him more alcohol, the way the Fed and the Treasury propose to do, is the wrong medicine.”
U.S. Treasury Secretary Henry Paulson plans to spend $250 billion of a $700 billion bailout package to buy non-voting preferred equity stakes in banks. Congress earlier this year approved tax rebates for consumers as part of a $168 billion economic-stimulus package. Federal Reserve Chairman Ben S. Bernanke endorsed additional fiscal stimulus today, saying the credit crunch is “hitting home” as Americans find it harder to get loans, threatening a prolonged economic slump.
Fed Funds
The Fed will lower its 1.5 percent target lending rate by at least a quarter-percentage point when the central bank announces its next policy decision Oct. 29, interest-rate futures indicate. The rate has already been cut by 3.75 percentage points over 13 months.
Faber recommended buying stocks in Singapore because they are inexpensive relative to company assets. He said this is true particularly for the nation’s real-estate investment trusts and banks.
Singapore’s Straits Times Index has fallen 49 percent from a record one year ago.
“You should just buy the whole of Singapore,” Faber said. He also recommended stocks in Turkey.
Faber’s Hong Kong-based Marc Faber Ltd. manages $300 million. Faber told investors to bail out of U.S. stocks a week before 1987’s so-called Black Monday crash, according to his Web site.
Faber correctly predicted in May 2005 that stocks would make little headway that year. The S&P 500 gained 3 percent. He also told investors to buy gold in 2001, before it more than doubled.
On March 29, 2007, Faber said the emergence of home loan concerns meant the U.S. stock market was unlikely to benefit from the conditions that supported its rally since June 2006. The S&P 500 climbed 10 percent between then and July 19, when it rose to a record, and again reached highs on Oct. 5 and Oct. 9.
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Faber Says Stocks May Rally, Won’t Reach Records
By Eric Martin and Rhonda Schaffler
20 October 2008
(Bloomberg) – U.S. stocks fell too far and may rally without setting records, investor Marc Faber said.
“We’re extremely oversold at the present time,” Faber said in an interview with Bloomberg Television. “The market is in a position to rebound.”
The Standard & Poor’s 500 Index dropped 38 percent from its record 1,565.15 reached Oct. 9, 2007, as investors speculated more than $660 billion in bank losses will spur a recession. The ratio of stocks advancing versus those declining on the New York Stock Exchange fell to a 17-month low on Oct. 15.
Faber said he is holding gold, cash and short-term bonds because inflation will increase as the U.S. government lowers interest rates to stave off an economic slowdown. Gold climbed 5.8 percent from Sept. 11 through yesterday and yields on three-month Treasury bills fell 51 percent over the period.
“The governments in this world have no other option but to print money. That will lead down the road to inflation,” Faber said. “You don’t need to be an economist graduated from Harvard to know we’re already in a recession. They will just put white paint on a crumbling building.”
Faber, the Gloom, Boom & Doom report publisher, said stocks make up 7 or 8 percent of his holdings, with cash, bonds and gold, his biggest position, accounting for the rest.
U.S. Recession
The U.S. economy slipped into recession a year ago, Faber said, and it won’t recover until consumers and the government reduce spending and borrowing. Economists project U.S. gross domestic product fell 0.1 percent in the third quarter, according to data compiled by Bloomberg.
“To rebuild economic health in the United States, you need a serious recession that will last several years,” he said. “The patient that got drunk on credit growth needs to go into rehabilitation. To give him more alcohol, the way the Fed and the Treasury propose to do, is the wrong medicine.”
U.S. Treasury Secretary Henry Paulson plans to spend $250 billion of a $700 billion bailout package to buy non-voting preferred equity stakes in banks. Congress earlier this year approved tax rebates for consumers as part of a $168 billion economic-stimulus package. Federal Reserve Chairman Ben S. Bernanke endorsed additional fiscal stimulus today, saying the credit crunch is “hitting home” as Americans find it harder to get loans, threatening a prolonged economic slump.
Fed Funds
The Fed will lower its 1.5 percent target lending rate by at least a quarter-percentage point when the central bank announces its next policy decision Oct. 29, interest-rate futures indicate. The rate has already been cut by 3.75 percentage points over 13 months.
Faber recommended buying stocks in Singapore because they are inexpensive relative to company assets. He said this is true particularly for the nation’s real-estate investment trusts and banks.
Singapore’s Straits Times Index has fallen 49 percent from a record one year ago.
“You should just buy the whole of Singapore,” Faber said. He also recommended stocks in Turkey.
Faber’s Hong Kong-based Marc Faber Ltd. manages $300 million. Faber told investors to bail out of U.S. stocks a week before 1987’s so-called Black Monday crash, according to his Web site.
Faber correctly predicted in May 2005 that stocks would make little headway that year. The S&P 500 gained 3 percent. He also told investors to buy gold in 2001, before it more than doubled.
On March 29, 2007, Faber said the emergence of home loan concerns meant the U.S. stock market was unlikely to benefit from the conditions that supported its rally since June 2006. The S&P 500 climbed 10 percent between then and July 19, when it rose to a record, and again reached highs on Oct. 5 and Oct. 9.
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