Respected investment icon Marc Faber explains that small investors can still make money in a volatile and uncertain market, but not by buying stocks and bonds.
“If I compare their prices to stocks and real estate, I think the precious metals is where I still find value," he told India's Business Standard. "There are exceptions to the rule that asset prices are grossly inflated. But if we were to talk about asset price inflation in general, everything will go down in value - be it bonds, equities and collectables. But precious metals will fall less than equities,” said Faber, editor of the Gloom, Boom & Doom Report.
“It doesn't matter whether you invest now or later, I think the return expectations are low. One will not make a lot of money by buying stocks and bonds. We also don't know how the world will look like in five years from how - how crazy and insane the central bankers will become,” said the man widely known as "Dr. Doom" because of his frequent bearish - and apocalyptic - market prophecies.
“Worldwide, most asset prices are grossly inflated. An asset class that became inexpensive at the end of last year was precious metals - gold, silver and platinum. While they have rallied nearly 100% since then, I think they are still reasonably attractive,” he explained.
“I believe we are moving into a period where small investors have a huge opportunity to make money, as they have a window to capitalize and take advantage of market inefficiency. Index funds mostly buy large companies," said Faber, credited for advising his clients to get out of the stock market before the October 1987 crash.
"As a result, it leads to undervaluation of smaller companies, and that's where I see an opportunity for the individual investors.”
As for the United States, he doesn't think the Federal Reserve will hike interest rates in September with the November presidential election looming for already jittery investors.
“The U.S. Fed has grossly overestimated growth rates of the economy, and it appears that it the economic growth has slows down considerably. I think by December 2016, the economic statistics will be even worse. So no rate increases will happen then either,” he said.
As for the election itself, he thinks Wall Street prefers Democrat Hillary Clinton.
“I disagree, and think she will be a disaster. But, that is the way investors think. So if she is elected, it may be better for the stock market in the near-term as compared to Donald Trump's victory. In the long-run, however, the outcome will not make much difference.”
To be sure, Newsmax Finance Insider Hans Parisis contends that election fear is swaying some business decisions.
Parisis recently wrote that the Fed's "Beige Book" report included "several comments stating that the uncertainties of the November election may by weighing" on some business decisions.
"We all know that political uncertainty has an influence, and that is not especially unusual, but what is perhaps unusual this time around, is the extend of uncertainty given the nature of the current presidential race and the radical different alternatives that are being presented," he wrote for Newsmax Finance.
"For investors it could be worth keeping in mind that less reliable indicators like sentiment data may be disproportionately influenced by political risk."
(Newsmax wire services contributed to this report).
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