(ABC.net.au) - World-renowned contrarian investor Marc Faber is known for making big calls.
Just before the largely unexpected global market crash in October 1987 known as Black Monday, which saw the Dow Jones lose 23 per cent in a single day, he advised his clients to get out of the stock market.
Black Tuesday, as it was in Australia thanks to our time difference with the US, saw 25 per cent wiped off the ASX in one day.
But Mr Faber doesn't always get it right.
In January 2015, he predicted gold prices would rise by 30 per cent that year. They in fact fell 14 per cent by the end of December.
Despite this, when Mr Faber talks, many people do listen.
His latest forecast is for a looming "implosion in asset prices".
Central banks are too late
Central banks around the world are walking a precarious tightrope as they hike interest rates to stave off heightened inflation, while not moving too far, too fast, so as to avoid triggering a recession.
The Reserve Bank of Australia hiked Australia's official interest rate for the first time in 11 years on Tuesday, by 25 basis points to 0.35 per cent.
The US Federal Reserve is widely expected to lift its benchmark interest rate by another 50 basis points this week.
However, Mr Faber is critical of central banks for not acting sooner.
"Never in history before, in the 5,000 years of recorded history, were interest rates this low, as they were in 2020 and 2021," he told The Business.
"So, we have now a situation where the central banks are in a very difficult position because if they don't increase interest rates, inflation will likely accelerate."
A necessary recessionary hit
Mr Faber is worried many people around the world will suffer as inflation takes hold.
"Ordinary people with low salaries and high taxes, they suffer the most, and the rich people, they can hedge."
But he argued the low interest rate stimulus band-aid must be ripped off.
"Well, whether they can clean that up entirely, that I doubt."
The uncertainty about how central banks will manage the economic situation the globe is now facing has investors nervous as they try to figure out where to put their money.
'Losing the least'
Investing is a bumpy ride — the title of Mr Faber's regular report, Gloom, Boom and Doom, is enough to tell you that is his outlook.
"It's better to be realistic than to be a dreamer and think that everything will always go up because history doesn't show that everything goes up," he said.
But that view has not stopped him investing.
His portfolio is a classic case of investing 101 – diversify.
"I have essentially four sectors in my portfolio: one is real estate; then I have cash and short-term bonds, for the yield; I have equities; and I have precious metals."
Amid this time of uncertainty for investors, here are some of his thoughts.
On mining, Mr Faber told The Business: "Australia is a resource-rich country, and I would expect commodities to decline less than, say, financial assets."
On technology stocks: "I think we have to understand with new technologies, like in the mining industry, you have 100 mining companies, you have 100 tech companies, one will do well, two will do well, maybe, but 95 per cent will be out of business because it's a very competitive field."
On digital currencies: "You know, people say, 'I diversify, I buy Bitcoin', well, Bitcoin correlates very closely with the NASDAQ 100. The NASDAQ 100 peaked on November 22, 2021, and Bitcoin on November 26. Since then, the NASDAQ is down more than 20 per cent and Bitcoin is down almost 40 per cent."
Mr Faber argues for investing in something because you believe in it on its own, not because of how it compares to its peers.
"For the last 20 years or so, the idea was always to maximise your profits, to outperform someone," he said.
"But how have they performed lately? Very badly.
"I think as an investor, in the current situation, you should say to yourself, 'whatever I have, I want to invest in such a way, that if Marc is right, and we have this implosion in asset prices, from real estate to stocks to bonds to everything, if Marc is right, I want to be among those who loses the least'.
"This is the strategy that I follow."
By Rachel Pupazzoni
Presenter Kathryn Robinson
