Marc Faber says S&P-500 Index looking too expensive

Published: Friday, 24 Jul 2009 http://arabianmoney .net/2009/ 07/22/marc- faber-says- sp-looking- too-expensive/

Legendary Swiss investment advisor Dr Marc Faber told Arabianmoney. net that the S&P was looking overvalued and was vulnerable to a correction, speaking on the margins of the Agora Financial Decade of Reckoning™ conference in Vancouver, Canada today.

In a powerful presentation Dr Faber blamed low interest rates at the US Federal reserve for the bubbles recently created in all major asset global classes, except in Zimbabwe. But now the reversal had brought asset price destruction across the world.

Light at the end of the tunnel

His presentation entitled Yes, there is light at the end of the tunnel™ came with two important caveats: first, he did not know how long the tunnel would be; and secondly, the light depended on investment in the right asset class to beat hyperinflation.

Dr Faber gave a strong evocation of his hyperinflation thesis which essentially turns of Fed chairman Ben Bernankes often repeated and never denied reputation as a money printer who would drop dollars from a helicopter if that would help the US economy.

There could well be a second or third stimulus package, and as much quantitative easing as necessary, in the view of this famous contrarian. He thinks the alternative scenario of allowing a debt deflationary spiral to develop is simply not on the policy agenda.

The investment implications are profound. Dr Faber is telling his newsletter subscribers to make their dollar escape plans and buy gold and silver. He regards last autums precious metal correction as somewhat similar to what happened in 1975-6 before gold prices advanced eight-fold by 1980, although a correction to $850-an-ounce is still possible.

Confident predictionsPinning the Swiss super-analyst down after his speech Arabianmoney. net found him very confident in his predictions which have tended to face in both directions since the crisis began.

What is less sure is whether stock prices will move sideways and then enjoy an inflationary advance, or suffer a correction on the scale of last year before heading back upwards. In any event Dr Faber thinks precious metals are the better investment in a highly volatile period.

For the Middle East he advised Arabianmoney. net that a revival in oil prices would be forthcoming and that actually set the region up for a much better recovery than appeared evident from current data on real estate and auto imports