The equity markets have been hitting two month highs and even some of the gloomiest doommeisters have been saying (hedged) positive things about the short term outlook.
Today investment guru Marc Faber reiterated his generally apocalyptic view of where the world economy’s heading – “It’s not mildly contracting, but falling off a cliff” – but followed with a prediction of a two to three month rally from “oversold” levels that the market reached in late November. Faber, the editor of the Gloom, Boom and Doom Report, thinks the market will fall much further after this short term rally, but thinks the October/November slide went too far, too fast. His long term view is that the world economy and stock markets are in trouble for the next five years.
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But in the short term money can be made. Anyone who invested in the stock markets at around November 20 and kept their money there would be up about 20 percent, which is a pretty great return for such a short period of time. Of course, very few people did that with more than a tiny portion of their money. Still, the point remains that even in a bear market, even one that has much further to fall, there are lots of opportunities to make money in short term rallies.
Faber is an expert on commodities, was one of the earliest commodity bulls this decade, and sees opportunities in commodities right now, at least for the short term. This morning he said he didn’t see the big gains this year coming from gold, but from industrial metals. That’s because they’ve fallen so incredibly far from their peaks earlier this year that a substantial rebound is likely. He didn’t sound like he’d keep his money in things like platinum and copper for years, but he was quite confident about those “oversold” commodities rising in the near term.
“I would rather buy a basket of oversold industrial commodities than gold,” he said.
Long term he sees oil rising much higher because the world is still using the stuff, not a lot of new supply is coming on stream, and old supplies are running down. Plus, “I think World War Three has already begun” and geopolitical problems like lead to supply disruptions that tend to cause price spikes.
What of crops? Today he didn’t say. Faber doesn’t concentrate on agricultural commodities, which is frustrating given the big size of his brain. I interviewed him a couple of months ago about his outlook for farmers in coming years, and his main suggestion was that farmers eliminate completely their debts and not assume they’ll have high prices to pay for their operations. Sound advice but that doesn’t help farmers figure out whether they’ll get more megarallies like last summer’s in which to cash out and build up a reserve for bad times.
Still, his general view that commodities can recover in the short term because of the massive selloff since summer applies to ag commodities, and if it’s true, it means the next few months should provide farmers with some substantially better prices than they’ve been facing since October.
