Faber: In his own words

Following our meeting with Marc Faber, publisher of 'The Gloom, Boom & Doom Report’ in February, Citywire Global caught up with the renowned author and investor on Monday about his first foray into European equities. Covering  China's slowdown, the US economy and asset bubbles, here we publish the transcript of our conversation.

FABER ON ASSET ALLOCATION

EB: In February, you said your allocation was 25% in physical gold, 25% in real estate, 25% in equities (mostly Asian) and 25% in corporate bonds – how has your allocation since then changed?

MF: What we have is a rapidly slowing global economy. What we essentially have in the advanced economies are zero interest rates. I guess that the downside risk to real estate and equities is for now limited. I obviously still own real estate and since we talked I added to some real estate in Thailand - not that I particularly am optimistic about real estate in Thailand because prices have moved up a lot already.

I just want to have some money in hard assets because I think eventually we will have a financial crisis where financial assets will be under stress.

The only thing that I have changed meaningfully since our discussion in February is the following. For the first time in my life, I have been buying some European stocks because I can see the markets of Portugal, Spain, Italy, Greece and France near the March 6 2009 lows.

The equivalent at that time was the S&P at 666. We are now at 1350 so basically these markets relative to the rest of the world are very cheap and some stocks in the markets are perfectly fine companies but because these markets were weak and because there is a threat of a euro break-up, everything has come down to very low valuations.

EB: Are these European stocks still with as attractive valuations even in the scenario of a euro break-up?

MF: I think that if the euro breaks or doesn’t break, or whether these countries exit the eurozone or stay in, these companies are very cheap. If these countries were to exit, obviously their currencies would devalue meaningfully but then the share prices would adjust right away to the upside in my view. I started to buy four weeks and maybe I will buy some more.

Mostly these are telecommunications companies and mostly high dividend paying stocks and low price to book and utilities.