Investment strategist Marc Faber, writer of the Gloom Boom & Doom Report, "would be the first in the crowd to tell you the emperor has no clothes", says Lauren R Rublin in Barron's. Indeed, he "has done so early, often and aptly in the case of numerous investment bubbles". Faber predicted the Asian crisis, told his clients to get out of stocks just before the October 1987 crash and was keen on commodities from the start of their long upswing in the early 2000s. So what's on his mind now?
Central banks' ongoing quantitative easing, or money printing, is an experiment likely to come to a sticky end, he reckons. It has scant impact on growth, but "creates dangerous excesses in asset classes". Prices have been "grossly inflated globally for stocks, bonds, and collectibles." The wealthy have seen the value of their portfolios rise, but the middle classes and the poor have not benefited.
So there is scope for a nasty slump in asset prices and economic turmoil: near-zero interest rates are bound to have led to widespread misallocation of capital in recent years. But because the wealthy have benefited disproportionately, social tension is also likely. "At some point, there will be a big reset. In the democracies of the Western world, large numbers of people will vote against the well-to-do." Punitive tax rates for the rich are on the cards. "Eventually there will be so much antagonism against well-to-do people that it won't be comfortable".
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Meanwhile, he remains keen on parts of Asia, notably Vietnam, where the equity market has fallen by 70% from its high. The banking system is grappling with bad loans after a lending spree, but its exports look solid and it has a hard-working labour force. "You can find companies with yields of over 5%. Laos, Cambodia and Myanmar are also opening up." Finally, he has stuck with gold, given the potential turbulence ahead. "I have about a 25% allocation to gold and buy some every month."
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