Having liquidated a large portion of investment in Asian equities in the last few weeks, Faber has put the cash to work in Europe, while still holding 30% cash which he will allocate only when markets fall further, he said.
'For the first time in my life, I have been buying European stocks because I can see the markets of Portugal, Spain, Italy, Greece and France near the March 6th 2009 lows,’ Faber said speaking from his home in Thailand.
‘These markets, compared to the rest of the world are very cheap and some stocks are perfectly fine companies but because these markets were very weak and because there is a threat of a euro break-up, everything has come down to very low valuations.’
Faber said he would currently still rather hold European stocks than US stocks – despite a possibility that the latter will see a rise in the S&P index to highs as seen in April this year.
‘I think that it’s possible that the US stocks may rally as the whole world thinks that the US has natural gas and there is a re-industrialisation in America. But, if I look at all the options I now have, I can see that European stocks are now terribly depressed.’
‘I still keep a lot of cash because if the markets drop another 30% - which I hope they will do – I will then invest in equities.’
In a video interview with Citywire in February this year, Faber said he held 25% in real estate, 25% in (mostly Asian) equities, 25% in corporate bonds and 25% in physical gold.
Speaking today, Faber said he bought telecomms and utilities companies in Europe’s peripheral economies in the last four weeks having reduced his Asian equity exposure. He said he still recommends investors to invest in gold and real estate and holds no bank exposure.
‘It may be a mistake, but I don’t think it is time to invest in banks because they still need a lot of capital and they will have to increase the equity capital. But maybe they will have a rebound – who knows – it’s possible. I just don’t see enough transparency (to invest)’.
In his portfolio, besides a 30% holding in cash, Faber holds a large proportion in high yield bonds made up of mostly Asian, Russian and European names such as Gazprom and ICICI bank.
‘Most of my bonds are what rating agencies would consider low quality. I don’t consider them as lower quality because they are corporate bonds and I think that a lot of corporations will rather survive than the governments.’
An edited transcript of the interview with Marc Faber including a discussion of the slowdown of the Chinese economy and its effects on commodity markets as well as Faber's outlook on the US economy will be published exclusively here tomorrow.