Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Fed Too Late To Prevent US Real Estate Market Crash? - 22nd Aug 19
Retail Sector Isn’t Dead. It’s Growing and Pays 6%+ Dividends - 22nd Aug 19
FREE Access EWI's Financial Market Forecasting Service - 22nd Aug 19
Benefits of Acrobits Softphone - 22nd Aug 19
How to Protect Your Site from Bots & Spam? - 21st Aug 19
Fed Too Late To Prevent A US Housing Market Crash? - 21st Aug 19
Gold and the Cracks in the U.S., Japan and Germany’s Economic Data - 21st Aug 19
The Gold Rush of 2019 - 21st Aug 19
How to Play Interest Rates in US Real Estate - 21st Aug 19
Stocks Likely to Breakout Instead of Gold - 21st Aug 19
Top 6 Tips to Attract Followers On SoundCloud - 21st Aug 19
Holiday Nightmares - Your Caravan is Missing! - 21st Aug 19
UK House Building and House Prices Trend Forecast - 20th Aug 19
The Next Stock Market Breakdown And The Setup - 20th Aug 19
5 Ways to Save by Using a Mortgage Broker - 20th Aug 19
Is This Time Different? Predictive Power of the Yield Curve and Gold - 19th Aug 19
New Dawn for the iGaming Industry in the United States - 19th Aug 19
Gold Set to Correct but Internals Remain Bullish - 19th Aug 19
Stock Market Correction Continues - 19th Aug 19
The Number One Gold Stock Of 2019 - 19th Aug 19
The State of the Financial Union - 18th Aug 19
The Nuts and Bolts: Yield Inversion Says Recession is Coming But it May take 24 months - 18th Aug 19
Markets August 19 Turn Date is Tomorrow – Are You Ready? - 18th Aug 19
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19

Market Oracle FREE Newsletter

The No 1 Gold Stock for 2019

Marc Faber, Make Money on Stocks Volatility While Holding Physical Gold

Stock-Markets / Financial Markets 2010 May 28, 2010 - 06:38 AM GMT

By: Dian_L_Chu


Best Financial Markets Analysis ArticleDr. Marc Faber told investors to buy stocks on March 9, 2009 when S&P reached its low since 1996, and predicted a 20% decline if the index broke a new high. 

Now with the S&P down about 13% from that high, Faber talked to Bloomberg on May 24 about his latest call on the markets, economy and what he thinks are the best place to invest now.

S&P - Support at 1,045, Resistance at 1,200

Faber now thinks the stocks are oversold in the near term on extreme negative sentiment towards the euro and North Korea, but there's strong support around 1,045/1,050.

From a seasonal perspective, a summer rally in June/July could be expected, with a lot of resistance around 1,200/1,220, followed by a downturn and bottoming out in October/November. By then, another round of stimulus could come in and prop up equities as a stronger U.S. dollar and bond market would give the Fed ammunition to ease the monetary policy.

(Note: In a separate interview with Tom Keene on the same day, Faber says S&P could fall another 15%.)

Bearish About Everything, But Quite Happy to Hold Physical Gold

“It’s a race in the purchasing power of paper money to the bottom, and the only assets that will, for sure, keep their purchasing power are precious metals.”

Even though gold has been performing quite well in the last 18 months, it is "conceivable" that gold could go down somewhat more. Nevertheless, envisioning a forthcoming disaster in the next few years, Faber says he is quite happy to own physical gold after looking at all asset classes.

Asian Equity Still Reasonable

Faber said investors may still buy a basket of Singapore, Thai or Hong Kong shares with about 5% dividend, which would be good for a long term portfolio.

On The U.S. Economy

“Stocks could go up and the economy can deteriorate...Government official should stay out of the economy... Mr. Obama and his clowns around him don't understand... they're going to destroy the economy."
The fiscal deficits will go up instead of down and Faber is not sure a recovery ever happened. Economy will eventually settle at a lower level than pre-crisis--the New Normal--according to Faber. Meanwhile, huge fiscal and monetary stimulus, coupled with private sector credit contraction, will ensure high volatility in economic and financial activity.

Make Money on Volatility

In a typical Faber fashion, he ended the interview with the following remark:

"In the long term, as I always said, we are all doomed, but in the meantime, because of the volatility in the markets, you can make money. The key is to know when to stop, and when you stop, how and where to allocate assets."
My Take on Gold & Stocks

The rally in the past couple of days, instead of a bona fide "recovery", are primarily from shorts covering after China reiterated their commitment to keeping the euro in their estimated $2.4 trillion of reserves, and big fund managers in the U.S. held onto equities while cutting bond holdings.

Most of the technical indicators of SPX are not decisively bullish either. The StochRSI is at 0.666 (a bad omen, I might add). close to 0.80, which is the level that could signal a pullback. (See Chart)

Gold and equities have been trending mostly in tandem while inversely with the euro since late last year. The current market sentiment most likely will not react kindly to any bad news or rumor about Europe or anything investors perceive that may negatively impact global economic or political stability.

Although uncertainty typically buoys gold as investors seek store of value by selling stocks and buying into gold, a deep retreat of stocks could trigger enough margin calls prompting a selloff of other asset classes including gold.

Meanwhile, gold, now at around $1,212, close to its all time nominal high of around $1,230 an ounce reached earlier this month, could be subject to some near-term profit-taking and technical correction as well.

Dian L. Chu, M.B.A., C.P.M. and Chartered Economist, is a market analyst and financial writer regularly contributing to Seeking Alpha, Zero Hedge, and other major investment websites. Ms. Chu has been syndicated to Reuters, USA Today, NPR, and BusinessWeek. She blogs at Economic Forecasts & Opinions.

© 2010 Copyright Dian L. Chu - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


28 May 10, 09:55
Marc Faber

So on the SAME day to Bloomberg, Marc Faber says that stocks will rise and stocks will fall by another 15% ?

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules