Tuesday, February 19, 2013

Marc Faber interview Part 2

Marc Faber interview with MoneyControl.com

Q: Do you think this correction might be equal for markets across the world? The criticism of the Indian market right now is that it was one of the biggest outperformer last year, which is why it perhaps looks more vulnerable this year?

A: In general, I would be careful of markets that have performed superbly last year such as Turkey and Thailand. They are in my opinion, becoming slowly overheated. I am not so sure to what extend India is overheated because currency adjusted, we are still way below the peak in 2007.

But, in general I would argue you should buy equities when everything looks horrible and when investors cannot see why the markets would go down. That is the time to be careful because there is always something that will happen to send stock prices down.

Q: You have described two scenarios. One is a correction now and then maybe a grind of a year and the other one was a rally into summer and then a bigger correction. Which one would you assign a higher probability to?

A: If we had a very strong rally into the summer, as was the case in 1987, I would not then look for a correction. But, I would look for a very significant market decline to follow. However, the more likely scenario is in my view a strong rally into the summer. First, there will be a correction, then this rally and then a more significant top in 2013 which will not be exceeded for a while.