Speaking at a conference in Singapore on Wednesday, Marc Faber, the man commonly referred to as Dr. Doom by the investment community, said that the real crisis has yet to come for the global economy. (His longer term perspective) "I think eventually there will be a big bust and then the whole credit expansion will come to an end. But before that happens, they will print money, and they will grow into very high inflation rate, and the economy will not respond."
His current view on equity, "I would be careful buying equities now, we are in a correction period."
On US dollars, "As of today, I will be long in dollars". "It can easily rebound by 10% during the next quarter". "This rally won't last because the US will be forced to print more money to pay its debts". The dollar will remain in a "Structural long term bear market" in terms of purchasing power.
On Gold, for short term gold trader, proceed with caution. "If gold drops below $1,000.00, it may go to $800.00" For longer term, "I have consistently repeated that I hold gold and that I recommend the accumulation of Gold".
On Federal Reserve Chairman, "He is a money printer, he is nothing else".
This Dow/Gold ratio is obtained by dividing Dow by the price of 1 ounce of Gold. In 1932, after Dow has dropped 89%, one could buy one Dow with two ounces of gold and in 1980's equity market bottom, one could buy one Dow with one ounce of gold. It is interesting to note that since 2000 peak of 43.7 Dow to one ounce of gold, gold has appreciated much faster than Dow. Dow might have reached another peak in 2007 but Dow/Gold ratio was in a consistent down trend since 2000's peak. The 60% rebound in Dow since March this year has no impact at all to the ratio due to higher rate of appreciation of gold. Marc Faber expects the trend to continue for the next few years until the ratio to reach one from the current level of 10, if Fed continues with its money printing policy.
US Dollars Index is an index of the value of US$ to a basket of foreign currencies. Is is a weighted geometric mean of the dollar's value compared only withEuro 57.6% weight
Japanese Yen 13.6% weight
Pound Sterling 11.9% weight
Canadian Dollars 9.1% weight
Swedish Krona 4.2% weight
Swiss Franc 3.6% weight
The index started in March 1973, after the dismantling of the Bretton Woods System. The index was 100 at its start. its historical height is higher than 160. Its low in 2008 was 70, the lowest since its inception in 1973.
Marc Faber long term view on US dollar,"It will go to a value of zero eventually, but not right now." "I think it will take 10 years until people realise that the fiscal situation of the US is a complete disaster."
No comments:
Post a Comment