Friday, July 12, 2013

Faber says India stocks not bottomed yet

We are probably at the beginning of a more significant asset class deflation. If you look back, we had huge increases in asset prices, whether it is real estate, equities, bonds, gold or commodities.

When you print money, prices do not go up evenly and they do not fall all at the same time. So, the money flowed between 1996 and March 2000 into high-tech NASDAQ stocks and also in India. Then this was deflated and post 2000, we had in the US the colossal credit bubble where the money flowed mostly into housing which was deflated after 2007. After that, we had a huge flow of funds into emerging markets and emerging market bonds. I think that will also be deflated as in some cases we have already gone down quite a bit.

In case of India, the Indian ETF is now down 32% from the November 2010 high. It has performed miserably, relatively to the US. So the market will bottom out, but it is too early to buy anything at the present time.