Another day and another gloom and doom stock market prediction from “Dr. Doom.”
Marc Faber is a well-known Swiss investor that writes the Gloom Boom and Doom Report.
And investors listen to him because he’s credited with predicted the October 1987 stock market crash.
Although his recent doom predictions haven’t turned out well.
In 2012, Faber claimed that there was a “100% chance” of a global economic recession later that year or in early 2013. Subsequently, the average world product grew steadily by 3.4% in each of 2012, 2013 and 2014, and 3.5% in 2015.
In 2012, Faber predicted that the S&P 500 index would fall at least 20% within 6–9 months following the re-election of Barack Obama. Subsequently, the S&P 500 index rose from a low of 1359.88 on November 16, 2012 to 1480.40 as of January 1, 2013, 1570.70 on April 1, 2013 (up 15% from the November low, 6 months after Faber’s prediction), 1668.68 on July 1, 2013 (up 22% from the November 2012 low) and 1783.54 on November 1, 2013 (up 31%).
What is Dr. Doom predicting now?
In short, he thinks there are bubbles everywhere.
“There is a bubble in everything. Nothing in asset price is very low,” said Faber during an interview on CNBC Wednesday.
“One day this bubble will end,” said Faber. When that happens, people will lose 50% of their assets.
So why does Marc Faber think that?
He thinks consumption is relatively weak for this stage of the economic recovery and predicted that as financial-asset prices rise, wages will deflate and the U.S. economy will further weaken.
Time to panic right?
Not quite yet according to Faber.
One of the first warnings signals that the market is shifting will be when volatility picks up.
So if Marc Faber doesn’t want to invest in the United States stock market, what does he like?
Faber, meanwhile, likes U.S. Treasurys, given they guarantee a “certain yield” and particularly given the near-zero interest rates in Japan and much of Europe.
He prefers European assets and gold and 90% of his investment in stocks and bonds are emerging markets.
There you go.
He likes U.S. Treasurys, European Stocks and Gold.
Here’s where you and I have to cut through his crap.
I am willing to bet he says he likes those 3 asset classes because he owns them and wants to get out.
If he says he likes those assets on a larger platform like MarketWatch, it will help him unload those assets at a better price.
So don’t listen to advice like this.
So what should you invest in?
You should base your asset selection on your risk tolerance level.
If you can tolerate more swings in your portfolio value, then you can buy more stock index funds.
If you can’t tolerate swings, then buy more bonds.
The allocation should be determined by you and your financial advisor.
This is a good example of “news” you shouldn’t take seriously.
Will the stock market bubble burst?
Maybe or maybe not.
I don’t know. But I do know if you make decisions based on articles like this, you will be so confused.
Because tomorrow an article will come out saying the bull market will never end.
So read this article to become educated but don’t act on it.
Have you read any other articles like this recently?
If so, let me know in the comments below.
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