Marc Faber railed against central bank intervention around the globe and said he likes cash now because it “gives you flexibility to buy assets” when bubbles pop.
Mr. Faber, publisher of the “Gloom, Doom and Boom” newsletter, made his comments Thursday at the CFA Analyst Seminar in Chicago in a presentation titled, “Inflating Asset Markets and Deflating Real Economic Activity? Strategies for Global Investors.”
As he noted at the same event last year, Mr. Faber said all asset markets are overvalued, with few exceptions. “Different asset classes will be touched at different times,” he said, and ample amounts of cash on hand are necessary to take advantage when opportunities occur.
Falling interest rates driven by central bank intervention have not improved economic conditions, he said. Instead, median household income in the U.S. has fallen, income inequality has exploded and the working and middle classes are struggling in terms of real wages, he added.
Low rates have benefited earnings as U.S. corporations have been able to refinance at historically low levels. And the U.S. market advance, which has been driven largely by stock buybacks, has made U.S. equities expensive, he said.
In terms of investment ideas, he thinks real estate and emerging markets equities will outperform U.S. equities over the next five to 10 years. And in particular, he said Indochina — including Vietnam, Cambodia, Thailand and Laos — is the most promising region for investment over the next 30 years.
“In the absence of war, the area will be very attractive,” he noted.
Mr. Faber said he thinks the lifting of the Iranian embargo will strengthen the Iraqi Shiite population in the southern region of the country near the oil fields. He said while Iran has a stock market, it is not easy to access and suggested the more-accessible Iraqi stock market will serve well as a proxy for the lifting of the sanctions.
Bonds, he said, are the most-hated asset class now. But he would rather own U.S. Treasuries that currently have higher yields than some European sovereign debt. U.S. Treasuries will serve as a portfolio diversifier should the global economy enter a recession and equity values fall, he said.
And of course, given his bearish stance, Mr. Faber recommended holding gold in a portfolio — his recommended allocation is 25%.
“Gold is insurance if the banking system fails,” he said. “As an investor I’d like to own something outside the banking system, and that includes real estate, art and gold.”