Tags: Stephanie Pomboy | Barron | Gold | Stocks

Pomboy to Barron's: Buy Gold, Oil as Stocks Overvalued

Pomboy to Barron's: Buy Gold, Oil as Stocks Overvalued

By    |   Thursday, 21 January 2016 09:33 AM

Economic forecaster Stephanie Pomboy contends that the U.S. stock market remains overvalued despite the recent selloff and will continue to plunge even lower.

She maintains her long-held view that gold is one of the safest places to be, and that now is the time to invest in the tumbling oil market.

But just how much more will stocks fall?

“Well that’s a tricky question because you don’t know what rabbit [the Federal Reserve] is going to try and pull out of its hat,” Pomboy, the founder and president of MacroMavens, recently told Barron’s.

Global equities’ worst-ever start to a year deepened as oil continued its collapse and a slowdown in China weighs on sentiment. About $2.2 trillion has been wiped off the value of U.S. stocks this year through Wednesday, with the S&P 500 down 8 percent, Bloomberg reported.

“But I do think the stock market has further to fall. If you look at the [total market value] of the stock market to GDP, as well as other measures, we’re still at ridiculous extremes. Stocks have much further to go to be anywhere near normal, much less cheap," she said.

The S&P 500 closed Wednesday at its lowest since October 2014 after touching its weakest level in almost two years, Reuters reported.

However, some financial experts expect the index to fall even further before the downward trend can reverse. The S&P 500 ended just below 1,860, down 9 percent for the year and 12.7 percent from its record high. To confirm that it is a bona-fide bear market, it would have to fall 8.3 percent further to near 1,704.

Pomboy has been very bearish on the U.S. economy and markets since at least 2010. "I maintained throughout that quantitative easing, which was all that was left after the fiscal stimulus was exhausted, would fail to benefit the economy," said Pomboy, 47, whose institutional-investor clients include BlackRock, Fidelity Investments, and hedge fund Passport Capital.

"But as little love as I had for stocks way back in 2010, I got much more bearish when profit growth started to crumble at the same time the Fed began the Taper in 2014. With the era of the [Federal Reserve keeping rates at zero and buying bonds] now over, there’s absolutely no support left for stocks," she said.

She does like gold and U.S. Treasury bonds, however.

"I view gold as becoming a currency rather than a commodity. And the dollar is being debased," she said.  "The dollar is wildly over-owned. I think there is zero chance that the Fed continues to raise rates this year and as those expectations come out of the market, that will work to the detriment of the dollar and to the benefit of gold," she said.

She is bullish on Japan and owns shares of the WisdomTree Japan Hedged Equity fund (DXJ). She also has been bullish on Russia and owns shares of Market Vectors Russia exchange-traded fund (RSX).

Her only U.S. equity position is through gold mining stocks and gold. She touts SPDR Gold Shares (GLD) and Market Vectors Gold Miners ETF (GDX) among her gold investments. She also owns shares of Bond ETF (TLT).

As for how the current market volatility will influence this year’s presidential election, Sen. John McCain said that the ongoing plunge in U.S. stock markets would hurt the Democrats’ chances of winning the White House in November, just as a market crash did his 2008 bid for the presidency, The Wall Street Journal reported.

“In our daily tracking, we went from three points up to five points down in 24 hours,” the Arizona Republican said of his standing in the polls when markets went into a free-fall in 2008. In September 2008, McCain suspended his campaign against then-Sen. Barack Obama, saying he needed to get back to Washington to work on a bailout package.

"McCain said that he bore the brunt of public outrage because voters blamed Republicans, since a Republican, George W. Bush, then occupied the Oval Office, But he said that now it is Democrats who are likely to suffer, since Mr. Obama now occupies the White House and is a Democrat," WSJ reported.

“We have a Democrat president,” McCain told WSJ. “People hold presidents responsible.”

(Newsmax wire services contributed to this report).

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Economic forecaster Stephanie Pomboy contends that the U.S. stock market remains overvalued despite the recent selloff and will continue to plunge even lower.
Stephanie Pomboy, Barron, Gold, Stocks
Thursday, 21 January 2016 09:33 AM
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