Marc Faber, publisher of the “Gloom, Doom and Boom” newsletter warned against lofty asset valuations, excessive debt and investor complacency as he discussed his views on the market at a CFA Institute financial analysts seminar in Chicago Thursday.
In light of central bank monetary easing around the world, Mr. Faber said, “we have a bubble in everything — from stocks to bonds, real estate, high-end real estate and even art.”
“I believe stocks are fully priced here,” he said, and “I’m of the view of Jeremy Grantham — that when you have low valuations, future returns are relatively high; when you have high valuations, future returns are relatively low.”
Despite his statement, he said he’d rather own equities now than sovereign debt.
Mr. Faber warned about excess leverage around the world, noting that globally, debt levels are currently 30% higher than they were before the financial crisis of 2007.
Debt invested in capital, such as infrastructure, has a long-term positive impact on economies, he said. However, consumer credit has been expanding at a rapid pace, providing short-term improvements to economies.
“Growth doesn’t come from eating and consuming — it comes from capital investment.”
He also spoke about the increasing hostilities in the South China Sea between China and the U.S. and its allies in the region. The Chinese military’s main objective, he said, is to ensure the flow of natural resources into the country and a growing U.S. presence in the region could lead to a potential geopolitical event.
Investors think that hypothetical events like this can be solved by the Federal Reserve printing more and more money, he said.
At some point, however, “geopolitical tensions in southern Asia between China, U.S., Vietnam, Philippines, etc. will have an effect on asset prices,” he said.
Asked what he is currently long and short, Mr. Faber said he hasn’t shorted anything since 2009: “It’s tough to short anything in a money-printing environment.”
He said the Iraqi stock market was “cheap.” In his view, the country is likely to be split into three parts — but he has seen it before where countries come and go, but somehow companies find ways to stick around.
