I’ve come to envision Marc Faber, renowned publisher of the Gloom, Boom & Doom Report, as continually surrounded by an elite retinue of house guards, bouncers, marksmen and food tasters. After all, he needs no less if he’s going to earn his living bashing the financial world’s most sacred cow: the equities markets.
Now the curmudgeonly contrarian’s at it again; in a recent interview with MarketWatch he catches our attention with a bit of good news: the S&P 500 could easily catapult to 2,300 in the next several months. But he quickly follows up with the not-so-good news, “When it unravels, we’re going to go to 1,100 ….”
If you’re wondering how Marc Faber can muster the nerve to make such a claim, you have to look at his record of predictions. He famously foresaw the 1987 crash, and in his book Tomorrow’s Gold: Asia’s Age of Discovery, he predicted the rise of precious metals, oil, and other commodities. He also predicted the decline of the U.S. dollar since 2002, with a temporary rise mid-2008 before it showed a strong recovery.
But recently Faber’s predictions are less than optimistic. Like Bill Gross of Janus Capital, he’s openly critical of how the world’s central banks pump money into economies to keep them floating. In the grim reckoning he sees coming he feels markets could easily lose five years’ worth of capital gains.
Faber’s worst fears seem to be borne out by last week’s post-Brexit decision by the Bank of England to cut its interest rate to .25%, the lowest level in three centuries, while at the same time pumping £70 billion ($92 billion) of stimulus into Britain’s ill-fated economy. The Bank of England is on shaky ground at the same time the European Central Bank and the Bank of Japan are fighting to deal with their own lackluster growth. “We’re all on the Titanic,” Faber says.
He’s not happy about the value of stocks either, which he feels is largely illusory. In another recent interview on CNBC, he claimed the market has been more driven by acquisitions, buybacks, and takeovers than it has by actual buying. According to Faber, “It’s quite a narrow growth of stocks that have been very strong.”
Apparently, Faber’s such a downer that readers of MarketWatch have complained that the publication offers him an occasional platform—though you’d think they’d be glad of the alternate viewpoint, whether or not they agree. In an unusually frank defense of Marc Faber, an editor’s note offers this perspective, “For MarketWatch, the story isn’t really Faber’s bearish call, it’s the valid points that he makes about the state of the global market.” It goes on to discuss how difficult and exceptional this period of global growth has been.
Foes of Faber’s bearish outlook on stocks would be wise to note that in one arena at least he’s consistently been bullish: Precious metals. That’s not a Johnny-come-lately leap onto the 2016 gold bandwagon; Faber’s enthusiasm for precious metals is long-standing, although on Bloomberg he points out that gold is a particularly strong investment in the post-Brexit world.
Even if you don’t fully share Faber’s curmudgeonly stance, you have to concede that markets are famously cyclical. What’s up today is coming down sometime soon. We also face unprecedented pressures in this new global economy. The world of vacillating currency values, shrinking bond yields and dwindling stock dividends is the one you’ll be retiring into in short order. This makes physical gold one of the few liquid hard assets you can rely on to stabilize and protect your portfolio, plus your twenty-to-thirty year retirement.