Faber says that the world is in a buying panic, which is the opposite of a selling panic. He says everybody is bullish about something, so they are buying bonds, or stocks, or real estate, or precious metals. Nobody wants paper money.

He believes that in a broad market price decline, gold would likely fall but do so much less than other assets because there is a limited supply of gold whereas there seems to be an endless supply of USD and NYSE stocks, etc. So Faber is a hard money guy.

He said that Asia currencies are likely to rise (priced in USD), and there would be a boost to high dividend paying Asia stocks, where yields of 5 to 6 pct are available.

The long U.S. bonds (10 year and 30 year) ought to be sold he says because reflation is the order of the day. As Bernanke is likely to crank up money supply and relax the Fed's tightening policy, Faber believes that the USD will continue to fall. The only scenario that could change that is if Bernanke decides to put the U.S. into a mild recession by raising interest rates to the point required to stabilize the USD, and prevent "hyper-inflation" " like in Latin America in the 1980s and 1990s " from coming to the USA.

I agree with all the above. Moreover, I have been saying this for several months after I saw that the Fed and the Administration decided in September to embark on a reflation policy shift. All that decision did, as I see it, is extend the U.S. equity and bond market bull phases. Now they are over-extended " like 1999-2000, and will have to fall further to get back into harmony with other assets and wealth-creating economies.

Faber left some hope. He thinks that the U.S. healthcare Big Pharma group is trading at a discount. What he means is that the discounted cash flow calculations, using a discount factor that is fair (i.e., low), due to today's relatively low interest rates, would mean that there is more upside and less downside prospects relative to other U.S. stocks.

I agree, but these drug stocks too will fall. The U.S. Congress is likely to put pressure on prices, which many see as contributing to higher cost of living. Besides, as interest rates go up, as they will if the U.S. stays the course with reflation, then DCF calculations will start to indicate that the stock prices are not undervalued.

Faber also likes Taiwan equities. His point is that in 1990, the Taiwan equity market index was 12,000 and it's now 6,000, so there are values. He didn't think the domestic economy would be so hot there but he did think exporters would do well, selling into China.

As to Japan, he (like me) thinks the equity market and bond market move has played itself out. In mid-2003, the interest rates started to rise, from 0.5 pct to 1.5 pct, which took the bond market down. The cash then went into equities, which have flourished.

As you recall, I too saw that trend and cycle move starting for Japanese equities soon after I started to blog in April 2004.

So what Faber is saying here is that there will now be a switch from Asia Pacific equities generally into China "A" shares and Taiwan shares for the next cycle. I agree that Marc Faber is on the mark. :-)