Marc Faber, editor of the Gloom Boom Doom Report commented on the Japanese earthquake disaster scenario in an interview with CNBC. Faber appears to be sitting on the sidelines waiting to see if there is a nuclear meltdown in Japan.
“This huge selloff is an investment opportunity in Japanese equities, but if a meltdown occurs then all bets are off.”
Faber later added, “Until you know whether there will be a nuclear meltdown or not, it could take 1-2 months, it can last a long time, you don’t know if there is a second earthquake that can have a larger impact, you don’t know.”
In the longer term Faber sees the following scenario:
a) destruction in Japan will necessitate reconstruction expenditures which should be somewhat inflationary and thus JGB’s will weaken
b) the Yen will weaken as “this is a turning point for the Yen”
c) Japanese equities should rise
In October 2010, Faber recommended purchasing Japanese equities as he expected a currency devaluation in the Japanese yen. He advised readers to buy Nomura Holdings [NMR], NTT DoCoMo [DCM], Mizuho Financial [MFG] and Mitsubishi UFJ Financial [MTU]. Faber also recommended European insurance companies such as Zurich Financial [ZURN.Switzerland], Swiss Life [SLHN.Switzerland] and Swiss Re [RUKN.Switzerland] which have been battered by the projected re-insurance losses. Faber’s Japanese equity stock picks are down over 20% in the last two days.
However, Faber has been expecting a correction in stock markets that have doubled in the last two years.
However, Faber thinks that the Japanese nuclear disaster means that more money printing is on the way.
“We may drop 10 to 15 percent. Then QE 2 will come, (then) QE 4, QE 5, QE 6, QE 7—whatever you want. The money printer will continue to print, that I’m sure.”
He expects that the Fed will temporarily stop QE to “test to see how the market responds.”
However, eventually Faber expects further rounds of QE which should be bullish for gold prices.
The Japanese earthquake should also be positive for oil and coal and obviously negative for uranium.
Faber thinks that oil should do well if global economies strengthen and also in the event of a dire political situation in the Middle East.
“Or you take an ultra-bearish scenario like I do where you think that everything will collapse and there will be World War III and collapsing countries in the Middle East and the supply will be curtailed and prices will go up.”