Sunday, May 17, 2009

economic recovery would not be that great for stocks because interest rates will go up and inflationary pressures will come back

TO BE NOTED: From Marc Faber:

"
May 17, 2009

Commodities Will Outperform Stocks

What happened over the last 6 months is this: the market went down and bottomed out for the time at 741 in the S&P on November 21th 2008. Then we rallied 27% into January 6th and then collapsed into March 6th when the S&P dropped to 666. Since then we went from 666 to 929, in other words, up 39%.

The emerging markets interestingly enough bottomed out between October and November last year. Oil and Copper bottomed out in December 2008 and since then have been going up very substancially. Copper up more than 70% and Oil up 90%. A lot of emerging market stocks have more than doubled, even in the US you have lots of stocks that doubled between November and May , like Freeport McMoran, Newmont Mining and more recently Citigroup. There have been very pronnounced rebounds.

I think this as little to do with the economy. Investors must realise the worst the economy is and the longer it does not recover , the larger the fiscal deficits will be and more money will be printed. You can have a situation where actually where an economic recovery would not be that great for stocks because interest rates will go up and inflationary pressures will come back. In that environment commodities will outperform stocks. "

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