The time to turn bearish
by Peter Switzer
Regular readers know that I’m entrenched in the bulls' camp and have been since the governments of the world locked arms together to back their banking systems. They then threw money via budget deficits to prevent the world economy falling into a 21st century Great Depression.
What followed was a market comeback from March 2009, which was what the historical script would have predicted and it was what I was telling my readers and financial planning clients, some of which wanted to go to cash after Lehman Brothers failed. These were challenging times but we got it right. However, I’m not a one-trick pony — if I had to change horses in mid-stream, I would, but at the moment the time for changing has not come.
That’s why I look at any rational argument that’s different from mine. Dr. Marc Faber, nicknamed Dr Doom, the author of the Gloom, Boom & Doom Report was recently interviewed by CNBC and he’s a bear. He also runs a fund out of Hong Kong.
“I have always underestimated the madness of the investment community,” he admitted.
Dr. Faber thinks the financial system will implode and thinks the excessive money supply will lead to World War III and that’s a big call!
However, he currently holds stocks, real estate and commodities but doesn’t like bonds or cash.
Remember, most countries cash rates of interest are not as good as they are here.
He likes natural gas going forward and Japanese stocks. He likes real estate but not in China and Hong Kong and he also likes the US dollar.
But note this important thing about ‘great’ bears — they’re not great on timing.
His best call was the end of the tech bubble but he made it in 1998.
“That was the prediction that the tech bubble would burst,” he told CNBC. “But it came two years too early.”
The irony is that Dr. Faber shorted tech stocks and lost money because the Nasdaq more than doubled in that time!
Our main game is to watch this rally and be on the lookout for good reasons to become bearish but they’re not on the horizon just yet. But I will be looking with the best telescope I can find.
By the way, RBS Morgan’s chief economist Michael Knox, who I think has a great handle on the history of markets, thinks the S&P/ASX 200 will get to 5500 by year’s end and 5800 by mid-2012.
I think this guy is on the money with these calls and in fact they could be a tad conservative.
Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.
Published on: Tuesday, April 05, 2011
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