Marc Faber sees bubbles, says Yellen could make it worse
November 20, 2013, 4:49 AM
Bubbles? Uber bear Marc Faber sees them just about everywhere these days.
“I see a bubble in everything that relates to the financial sector,” the author of the Boom Gloom & Doom report told CNBC on Tuesday. He puts bonds, low-quality bonds and equities on the top of that list. “If you look at the financial sector as a percentage of the global economy, it’s very large. We have a huge debt bubble, and it’s only getting bigger. It’s not getting any smaller.”
- flickr/lvstealth
And that bubble is being pumped by central banks, which may worsen with the nomination of Janet Yellen as Fed chairwoman, he says. She adds to a “collection of dovish professors at the Fed”, who could push for more bond buying rather than a taper. Read the latest from Fed’s Bernanke on asset-buying and rates.
Faber also sees a “colossal bubble” in the high-end sector, like diamonds, art and luxury goods, where costs have been going up and competition has increased. “The outlook is relatively favorable but tastes may change,” Faber says. (HSBC strategists recently tapped luxury goods as a theme to watch for 2014, saying they see a wave of consolidation coming for the sector.)
As for what Faber likes, he’s holding onto 10-year Treasury bonds 10_YEAR +0.74% and adding to his gold GCZ3 -0.90% position. On that note he also likes mining stocks, notably in the precious metals space.
Faber sees no great value within equities, warning that rising markets don’t indicate good value. An exception here is Europe, a market he sees poised to outperform U.S. stocks and emerging markets. But even here he cautions against buying “indiscriminately” because everything has moved up so much and sentiment is so bullish. The Stoxx Europe 600 index XX:SXXP -0.38% is up over 15% year-to-date, though that still trails a 25% surge for the S&P 500 SPX -0.20%.
He likes European companies because much of their business is international, saying he owns stocks in telecoms, utilities and blue-chips in Switzerland.
– Barbara Kollmeyer
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