The common belief that commodities have outperformed stocks recently is wrong, says Marc Faber, economist and publisher of the Gloom Boom & Doom Report.
"Agricultural commodities have done well recently, but say industrial commodities have underperformed equities over the last two years," Faber tells The Economic Times.
Faber notes that he is not particularly optimistic there will be a large rally in commodities in general, since industrial commodities will remain under pressure because of the fact that the Chinese economy is slowing down further.
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“But if someone came to me and said look, the agricultural commodities will continue to go up, that may be the case,” says Faber. “I just do not play agricultural commodities because I want to sleep at night and they are extremely volatile and to buy [exchanged-traded funds] is very undesirable because of the high rollover cost.”
Faber sees an opportunity to buy European shares at the current devalued levels.
Markets in Europe have imploded during the past two years, but markets in Italy, Spain, Portugal and France have recently bounced off their lows in June and July between 18 percent and 30 percent, notes Faber.
“The correction is now coming, but I do not think we will see new lows because whereas two years ago the sentiment was very optimistic about the Euro and about Europe, now it is at an extremely negative reading,” he says.
“There is nobody who has anything favorable to say about Europe, but stocks are at discounting mechanism and they have pretty much discounted all bad news.”
Moody's Investors Service Monday downgraded the credit outlook on the European Union's Aaa rating to “negative” from “stable,” reflecting the negative outlooks on the European Union's triple-A rated budget contributors.
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