SOS Marc Faber Says on March 15, 2011

On CNBC 15 March 2011

1. world stock markets and commodities is due for meaningful correction after double in the last 2 years


2. if meltdown occurs in Japan, the devastation is mind boggling for the human lifes and financial condition for Japan


3. S&P 500 may drop from peak of 1344 for 10-15% (to 1140) and then QE3 and QE4 will be introduced


4. Crude oil from the reward risk perspective, demand will goes up, if Middle East blows up, there will be short of supply


5. Marc Faber think it will be WWIII (worst case) due to Middle East problems

DJIA in terms of GOLD has todate dropped drastically since 2008.

DJIA say in peak of 2007 is 13000, gold is 1000 per oz = 13 times gold per oz

Today, 2011 March 18, DJIA is 11,900, gold is 1420 per oz = 8.3 times gold per oz

MyView

Perhaps it is good to measure DJIA in term of CRB Index, meaning each DJIA point to buy each CRB Index point. However, although this measurement will indicate the which Asset Class is better, don't forget, both DJIA and CRB Index does not reflect the fundamental of the demand and supply, but merely the buying and selling of financial papers by GROUP of investors/speculators. This measurement however do indicates the relative purchasing power of DJIA in term of CRB points. Worth a while to calculate this ratio over a long period of time.

Allocations of cash into which asset class is very important. Hence, an indepth study on which asset to allocate is a worthwhile effort. Say if I were lucky enough to invest in gold at USD250 per oz in 2000, now it is USD1400, i.e. almost 6 times or 600% gain in 10 yrs. I suppose, one have to be quite a contrarian to do that and very very patient about it.

Say now, if an investor shorted stocks in 2010, although he/she is entirely wrong in 2010 (for a year), what will he or she get in 2015 or 2020? Just like gold, if you buy gold in 2001, it really didn't move between 2001 to 2005, that means, you can be wrong for 1-5 years in a row because gold is moving between USD300 to 400 per oz. Of course you will still be leaking your wounds if you have bought gold in 1980 at about USD800 per oz. Meaning, at today USD1400 per oz, an increase of ONLY 75% over 30 years, BAD BAD BAD investment indeed. So, TIMING is another crucial element here.

At the current printing of money by both USA, Europe, China and the rest of the world, it is hard not to believe in the long run i.e. 5-10 years, gold will continue to move up. So the main ingredient is the same, patient and right allocation. Near term, correction may happen. So a regular investment in gold is not a bad idea, every quarters, perhaps?

Before one gets there, one must be very very patient. Just like you know USA, Europe and Japan is having too high gearing, be it private or public, sooner or later they will burst, in a few ways, either stocks will collapse like Japan, or the currency will depreciate drastically against commodities, in short, or property prices collapse, I believe, which ever asset class that is too high in gearing will eventually dropped, Japan properties and stocks is a very good example.