Investors in the failed debt-money system run by the world’s financial powers want to cling to the recent “gains” that have been handed to them by the record stock market. But it’s just as great an illusion now to think that all is hunky-dory as it was in 2007 and early 2008, before the great global financial crash that trashed most portfolios — unless you were clients of Real Money USA, who didn’t lose a penny.
It’s really whistling through the graveyard for investors to believe that their paper-money assets could be on any sort of long-term upward arc, especially after the recent stratospheric run-up. Problems abound — from spotty growth in economies around the globe, to geopolitical dangers in the Middle East — that they should be factoring into their expectations.
One of the biggest factors is that the global debt bomb just keeps on ticking, without any sign that political leaders really care to address the fundamental weakness that it causes. Meanwhile, the central banks have finally stopped stimulating western economies with their “quantitative easing” policies, meaning that they’ve removed the training wheels.
So it’s no surprise that one of the world’s best known investment bulls, Swiss investor Marc Faber, editor and publisher of “The Gloom, Boom & Doom Report,” has chosen now to sound a new alarm about the bull market. And while Real Money USA doesn’t see eye-to-eye completely with Faber, we do share his alarm about another coming crash and some of his analysis of what will bring it about.
Here are excerpts from his recent interview with USA Today in which, among other things, he recommends that 25 percent of portfolios be in gold:
Q: You have been emphasizing that tech stocks are overvalued. Could you be more specific?
A: I think that Social media stocks are in a bubble phase. I also think that a lot of biotech stocks are in a bubble phase. Aside from the fact that the entire market is in a bubble phase, these are two sectors that I would regard as highly priced. In the tech space, anything to do with cloud computing is overvalued. There is a lot of competition that will come in and depress prices for these services. I wouldn’t buy these stocks.
Q: In terms of asset allocation, what would you recommend to individual investors?
A: I would have a diversified portfolio holding roughly 25% of my assets in equities, 25% in real estate, 25% in cash and bonds, and 25% in gold.
Q: With second-quarter earnings season underway, how do you believe the S&P 500 will perform given the speculative, precarious market that you believe we’re in?
A: We could be entering a similar environment like in ’87, where we have a blow-off and a more serious bounce in the second half of the year. Since 1929, we’ve had 15 bear markets. We have a bear market approximately every six years. Do you know how much each bear market has given back in terms of price gains? On average, it’s given back 21 quarters of price gains, or five years. Let’s consider that all the bulls are right and the market goes up for the rest of the year, and then you give back five years! Then we are in 2015 at essentially the 2010 level.
For the best information on how to combine Faber’s insights with the rest of the big picture that you need, talk with our advisors at Real Money USA — who believe that your portfolio should be essentially 100 percent in precious metals including gold, not just 25 percent. Ask us why at firstname.lastname@example.org or 866-966-0177.