Marc Faber recently appeared on Bloomberg to discuss Facebook. He even has his own page, but someone maintains it for him – but he answers emails himself. He doesn’t want to meet any more people.
Although 18% of people may be signed up with Facebook, not everyone uses it, such as Marc Faber. Also, they are not growing nearly as quickly as Google did in the early days. There is a lot of hype around the Facebook IPO, and Marc Faber says that it is overvalued, so he isn’t interested in it.
There is no doubt that Facebook will continue to grow. However, it is a question of how much and how fast. It doesn’t meet Marc Faber’s criteria for a good investment. He usually looks for assets that are neglected.
Everything has collapsed in Arizona, so there are very well-priced homes there. That would be a much better place to invest.
There are also some good investments in Hong Kong and Thailand. There is a tidal wave of liquidity being injected by central banks around the world. Much of that money is going into equity prices. The trick will be to get out of equities at the right time. You must be able to move your money from one asset bubble to another.
This year is shaping up to be a lot like 1987. If this continues, we could see an overvaluation by March or June of this year, and then a major correction in the second half of the year.
Everyday in the market, you can see one company buying another. There are a lot of mergers and acquisitions right now. Since the recovery beginning in 2009, there has been little change in employment, but corporate profits are at record levels. So a lot of companies have a lot of cash in order to buy other companies.
People have rushed into cash and government bonds because they perceive these asset classes to be safe. But ten-year Treasury bills have such low yields. Over a ten year period, you would be much better off in equities. You could expect 3-4% in real terms – that is after inflation. Some companies will fail, but most will survive.
Look at Germany during their times of hyperinflation. If you held equities you would have experienced a lot of volitility and it mmight not have been the best investment, but at least you would have had something, as opposed to cash or government bonds, which both became worth nothing.
2012 could have a strong beginning, until April or so, but then it could begin to disappoint.
Greece is bankrupt and Portugal is not quite as bad, but they are also in trouble. The problems are not being addressed, which is why Marc Faber is so negative. The whole financial system will one day have to collapse.
