Faber: Likes US Real Estate – Stocks Overbought

Posted by Marc Faber via Beacon Equity

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Gloom Boom Doom Report publisher Marc Faber with his latest thoughts on Greece, China, stocks, U.S. real estate, and some creative ideas for male real estate investors during these troubled times.

“It’s a symptom of a wider problem that we have over-indebted governments in the Western world and Japan, and this is just a small plate, a small appetizer to much larger problems and a much larger crisis,” Faber said about strained Greece negotiations with the EU.  Sign-up for my 100% FREE Alerts

As for stocks, generally, the Swiss pony-tailed expat from Thailand believes the rally from the December lows has been too strong to jump on board, yet, especially during the seasonally weak month of February for equities.  He also has been watching the weakest sectors of the economy (home builders and banks) for clues to the overall market direction for the coming weeks.

“Basically, what has happened, the market peaked out last May in 2011, then it dropped to 1,074 on October 4th on the S&P.  Now we’re up 25 percent,” Faber explained.  “The market is very overbought right now, and any excuse for profit taking is now being taken.  And I think February is traditionally a weak seasonal month, so we’ll go down first for a while.

“I would just wait a little bit [before buying stocks] because, take for instance the home builders and the banks: the home builders, in some cases, are up 100 percent from the lows, last October [and] November; the banks are up 60 to 70 percent from the December lows.  I would just wait here a little bit because, we don’t know how bad the correction will look like—could be 100 points on the S&P, could be 200 points.”

Like Peter Schiff of Euro Pacific Capital, Faber likes high-yielding foreign stocks, especially in the area of the world that which Faber is most knowledgeable and comfortable—Asia.

“Well I bought some shares in November [and] December of last year, and I’m not going to sell them because they are high dividend shares in Asia, and I quite like the Asian markets.”

Faber especially likes “Singapore REITs and real estate related companies in Thailand, because they knocked off the industrial park companies following the flooding of the Thai … some Thai industrial states,” adding, “and some shares in Hong Kong.”

Following the lows in December, globally, stocks have move up in tandem as the so-called ‘risk-on’ trade drew investors off the sidelines back into stocks, as investors anticipated a loosening of monetary policy among the world’s dominate central banks.

Moreover, India, whose currency took a mini-crash last year of approximately 20 percent within a one-month period, has rallied back from its nearly 54 rupee level low against the U.S. dollar at the end of 2011, now trading at the 49 handle, as the risk-on trade flows back more strongly into emerging markets once again.

“Actually, what is interesting, in this rally, since early January, emerging markets have done best,” Faber pointed out.  “India is up 14 percent, and the currency has strengthened.  So you’re up almost 20 percent, in essentially, a month’s time.  So all these markets have become overbought—near term.”

Generally, Faber doesn’t like stocks in the U.S.; he likes the battered down residential real estate market, instead.

“I like real estate in the U.S…  Just buy a house,” he chuckled.

In typical Faber style, he went on to share an anecdote from his most recent destination.  This time, the vignette takes place in Phoenix, a city among the worst hit by the across-the-board U.S. residential real estate crash.

“I was in Phoenix the other day,” Faber began.  “Then, the taxi driver took me to the hotel, nice hotel, Fairmont.  And then he told me the person that I just drove before you—I drove him to a five-bedroom house.  He told me he just bought it for $120,000.  Where in the world can you buy a five-bedroom house for $120,000?  I would buy it, live in one bedroom and rent out four bedrooms to concubines.”

But he wouldn’t rent out spare rooms to any foursome of concubines, according to Faber; the concubines must pay rent to him so that the property would throw off cash.

“If you take a very bearish view of the world, then at least—if you own property, you still own it—you pay for cash and get the cash flow as I suggested [from the concubines].  And if you are very bullish about the world, it means the demand for real estate will go up.”

Faber continued, sharing his observation from his earlier stop in Miami.  There, Faber said he witnessed the ‘crane index’, firsthand.

“I was three days in Miami.  Three years ago, I counted 47 cranes, building highrises,” he said.  “This time around, I counted one crane, destroying a building.  So, the market has cleared, actually, in Miami.”

Faber noted the frustrations that foreigners across the globe face when seeking overseas bank accounts outside their native countries—which has been a growing trend since the Asian currency of 1997-8, and magnified by the current ruse by many nations disguising capital controls with ‘fighting terrorism’.

“A lot of money has come from Latin America, from Russia because, if you want to open a bank account somewhere, they ask so many questions.  But as a foreigner, you can go buy a condo,” Faber said.

Globally, Faber is less concerned with the drama playing out in Greece.  His concern focuses upon the only economy primarily responsible for driving global growth (mostly from resources purchases) since the collapse of Lehman Brothers in 2008.  That country, of course, is China.

“When we talk about Greece, the major issue for the world economy is China,” he explained.  “And China has been slowing down.  Industrial production is down; electricity consumption is down; exports were down; and cement production is down; steel production is down.  So, many indicators point to a meaningful slowdown in the [world] economy.”

According to Faber, the countries of Australia and Brazil are most vulnerable to a marked decline in Chinese consumption, especially of raw materials—which has recently given rise of talk among some analysts that the Aussie dollar and Brazilian real may be due for a decline due to a China slowdown.

At the end of the interview, the two Fox Business hosts thanked Faber for his appearance and for “the information about the concubines.”

Faber replied, “Yes, yes, yes [about the concubines].  It’s most important; it’s an urgent matter.”  Sign-up for my 100% FREE Alerts