Author of Gloom, Boom & Doom report Marc Faber, said the rally in US markets is likely to continue till April-end, but was quick to add that a total collapse is seen by year-end. "The S&P 500 is unlikely to hit lows below 666."
Asian equities, Faber said, are likely to get cheaper versus the US. "So, it is a good time to buy into these markets."
He feels China may not grow at 8 per cent this year as the economy is in recession.
According to Faber, gold could test $ 700 per ounce. He added that it is relatively expensive versus industrial commodities.
Here is a verbatim transcript of the exclusive interview with Marc Faber on CNBC-TV18. Also see the accompanying video.
Q: First a word on what we have been seeing on the US market indices and whether you expect to see a bigger bounce on the indexes like the S&P?
A: I think what we had is a very strong bounce of 27 per cent between November 21, 2008 and January 6, and then we made new lows. We didn't make new lows in all indices and every stock. It may have been a false break out on the downside. Now since March 6, we have gone on the S&P from 666 to an intra day high of 776. We are up more than 100 points. At this level, we have strong resistance on the upside, so we may trade for a few days at this level or may even go down again. But I don't think that right now we will make new lows before 666 levels. We may have a rally until the end of April and a total collapse at the end of the year, when it becomes clear that the economy is a total disaster.
Q: At present, is it time to buy again in the US or in any emerging market?
A: I would like to say one thing. In the US, all analyst and strategists tell you how inexpensive US stocks are because they are at 1997 levels. But in Japan, stocks are no higher than in 1981, almost 30 years earlier. In South Korea or Thailand, stocks are at the same level as 1987. So, if we are talking abut inexpensive equities, I would say in Asia, if you are prepared to wait, I would start accumulating equities. They may get cheaper because as in the US dividends will be cut, but compared to 18 months, now is a good time to buy equities. Everyone is so bearish. Eighteen months ago, you couldn't find anyone who was negative.
Q: Would that include China as that has been the best performer from an equity perspective? Would you still buy China? Do you believe that they will grow after all at 8 per cent this year?
A: I think it is out of the question that China will grow by 8 per cent this year. In fact, I don't think it will grow at all. I think the Chinese economy is in recession. Industrial production is down, rail car-loading is down, exports are down, FDI is down, and I don't see a light at the end of the tunnel in the near future. I think the whole global economy has little chance of recovering to the peak of economic activity we had in 2006-07. We fell off a cliff in the last four months and we may bottom somewhere here, but don't expect the kind of prosperity to return that we had two years ago.
Q: The even better performer has been gold for the best part of this year, how do you see that moving as an asset class because it has been getting a little soft these past few days?
A: My stance towards gold is this. You should buy every month a little bit and become your own central bank because you can't trust central banks anymore to act responsibly and maintain the function of paper money as a store for value. So, you want your own reserve. Can gold go down and revisit $ 700 per ounce? Possible. We went down following March 2008 peak form over $ 1,000 per ounce to less than $ 700 per ounce, and now we bounce back and will have a lot of volatility. Gold is relatively expensive compared to industrial commodities.
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