Not everyone is sold on a rebound in Chinese stocks. According to Bloomberg this morning, Dr. Marc Faber, aka “Dr. Doom,” won’t be first in line to buy up these battered equities. Bloomberg’s Chua Kong Ho wrote:
Investors betting on a rebound in China’s tumbling stocks are setting themselves up for more losses, according to Marc Faber, who told investors to bail out of U.S. stocks before 1987’s so-called Black Monday crash and correctly predicted last August the U.S. would enter a bear market.
Faber’s forecast contrasts with local stock analysts, who are as bullish as ever even after a 51 percent plunge in the CSI 300 Index since its October record. “Buy” calls still make up two-thirds of all recommendations for Chinese stocks, virtually unchanged from the market’s peak, according to Bloomberg data.
I just wouldn’t buy. When a bubble bursts, you only hit bottom when people totally give up and vow they’ll never buy stocks again. People are still more worried they’ll miss the next rally.
The last time Chinese stocks fell by half — from a June 2001 high — the Shanghai Composite Index took four years to reach its low.
Even so, the Swiss-born investor admitted there could be a short-term bounce after such a huge decline:
We could have rebounds of 20 to 30 percent, but I wouldn’t bet on it. I would rather use rebounds as a selling opportunity.
Marc Faber Predicts Fall In Demand For Oil, Industrial Commodities
Yesterday afternoon, Bloomberg reported that commodities finished their best first half in 35 years, as the Reuters/Jefferies CRB Index of 19 raw materials rose 29% through June 30. However, well-known contrarian investor Marc Faber told the financial news outlet that demand for industrial commodities, including oil, will fall, along with prices. Bloomberg’s Monica Bertran and Millie Munshi wrote:
“The industrial-commodity complex is vulnerable because demand will slow down,” said Faber, publisher of investment newsletter the Gloom, Boom and Doom Report. “The economy is weakening, corporate profits will disappoint, valuations are not particularly attractive, and the financial sector that serves to channel savings into investment is in disarray.”
Demand for commodities will fall after raw materials including oil, corn, copper and gold touched record highs in the first half, Faber said in an interview on Bloomberg Television. The global economic slowdown will last a “very long time,” he said.
Discussing the $400 billion in write-downs at banks and securities firms worldwide, the Swiss-born investor said:
“The financial crisis has been the appetizer. We still need the main dish.”
Marc Faber: ‘Would Rather Buy Gold At This Stage Than Oil’
When it comes to commodities, Marc Faber, know as “Dr. Doom” by the financial press, prefers gold over oil. During a conference call hosted by U.S. Global Investors last Friday, Dr. Faber, who is famous for advising clients to get out of the U.S. stock market one week before the October 1987 crash, said:
I personally would rather buy gold at this stage than oil.
Although he said he wouldn’t rule out oil prices rising to $150 or $170 a barrel, Faber said the U.S. government’s recent discussions about how to limit speculative trading in oil futures could pull the plug quickly.
“I think we could have a serious correction — to $100 or below,” he said. “To curtail speculators in commodities in the U.S. could drive people like the pension funds… to go and buy gold.”
Faber also mentioned that gold is “very, very cheap” compared with oil now and that the oil-to-gold ratio is at its highest level ever.
Cheap?
Investors should go into gold as its price did not rise as fast as that of other commodities while the central bank keeps printing money, Faber said.
The Swiss-born investor told CNBC he believes gold may continue to shine while demand for other commodities declines as the result of a slowing global economy.
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