“Anything to do with artificial intelligence and semiconductors is ‘in the sky,’” Marc Faber says, “and earnings estimates are extremely high and, in my view, unrealistic.” Faber, editor and publisher of The Gloom, Boom & Doom Report, made the remark in a telephone interview with Puneet Wadhwa of Business Standard, published on June 23. His advice to investors was blunt: stay in cash and bonds for now.
The West Asia war has kept global markets on edge for the past few months, and Faber was asked whether stocks have priced in a possible end to it. He sidestepped the question. Global stock markets, he said, are many markets in different countries and industries, and some stocks, especially in the United States, are extremely highly valued.
The bubble pattern
His case rests on history. In bubbles, he said, earnings are grossly overestimated, and sooner or later they disappoint and stocks fall sharply. He listed 1929, 1973, oil stocks in 1980, technology stocks in 2000, home builders and subprime lenders in 2007, and Japan in 1989. Each time, he said, the most popular stocks fell by at least 70 per cent once their sector peaked.
Picking the top is another matter. “If you buy Nvidia or Micron today, maybe the stocks go up another 20 per cent. That is possible,” he said. “But afterwards they will go down a lot, and that is a risk I don’t want to take.” People who plan to sell before the collapse usually lose a lot of money, he added, because they forget to sell or the selloff catches them off guard.
What the indexes hide
Asia looks fine on the surface to Faber, though some markets are speculative and high, such as South Korea and Taiwan. Both lean on a handful of stocks. Two or three names, SK Hynix and Samsung Electronics, make up more than half of Korea’s market capitalisation. Taiwan Semiconductor is by far the largest company in Taiwan. An index there, he said, “doesn’t tell you what the typical stock is doing.”
Central banks, in his view, have limited power. The US started cutting short-term rates in October 2024, and long-term rates went up anyway. Cuts and easing might lift stocks for a while, but in inflation-adjusted terms he expects them to fall.
India and the bargains
On India, Faber said the market has started a bear market and will go lower, though not because of the economy, which he said is doing well. Indian stocks are cheaper than in 2024 but not cheap enough for him to buy. “I think that the Indian markets can go down another 20 per cent from here.” Earnings disappointments and slowing global liquidity growth are the triggers he named. Barclays, BusinessToday noted, called India the most unloved market in investor portfolios last week, despite its status as the world’s fastest-growing major economy.
Bargains are scarce. He pointed to Indonesian stocks, down 30 per cent this year, as reasonably priced, though he does not expect a big jump soon. He remains positive on precious metals longer term, expects oil to rise rather than fall, and has no interest in a SpaceX listing at the valuations he sees.
Sources
- Marc Faber sees 20% fall in Indian markets, prefers to stay in cash
- Stock market selloff ahead? Marc Faber sees 20% downside; here's why – BusinessToday
- Marc Faber: 'Indian Markets Can Go Down 20 Per Cent'
