By Dr. Steve Sjuggerud (Original Link)
Investment guru Marc Faber is actually buying European stocks…
But wait a minute…
Isn’t Greece about to explode? Isn’t Spain next? Isn’t the very existence of the euro in doubt?
Yes, yes, and yes.
But this is the type of situation that contrarian investors like Marc Faber look for.
As the longtime editor of the Gloom, Doom, and Boom Report, Marc Faber looks for moments like this. For the most part, Marc has been out of stocks in the world’s major countries for many years – since well before the dot-com crash in 2000.
But just recently on Bloomberg TV, Marc said European stocks are relatively attractive right now…
Most European markets peaked out a year ago in May 2011 and are down very substantially. They are approaching the lows or exceeding the lows of 2009.
So in Europe, what you have are many shares of good-quality companies that are yielding 5% to 7%.
If you look 10 years out… if you buy a 10-year U.S. Treasury at a yield of 1.6% [today], that is the maximum you will earn. Whereas companies that have dividend yields of 4% to 7% I think will provide you with higher returns.
We have record-low interest rates on cash. You’re not earning anything in some countries. So I’m saying [European stocks] are relatively attractive compared to cash and to bonds.
It might seem foolish to step up and buy European stocks when Europe is so hated right now. But the opposite is true – this is the right time to consider it. European stocks are incredibly cheap.
In my True Wealth newsletter, we own Germany through the iShares MSCI Germany Fund (EWG). Top holdings include Siemens, BASF, SAP, Bayer, Daimler (Mercedes), T-Mobile (Deutsche Telekom), and BMW.
These are major, worldwide businesses. They are not going away. Heck, if the euro weakens, it will benefit many of these companies: The majority of their costs are in euros, but a significant portion of their sales come in dollars.
Best of all, thanks to the European crisis, many of these companies are trading at record-cheap values.
You might see Europe in the news and think it’s foolish to put your money to work there. But legendary contrarian Marc Faber is interested. And so am I.
When you look at what you’re getting for your money (like the holdings in EWG), and the incredible values now that Europe has busted, it’s worth it.
The one thing is, German stocks are still in a downtrend. This makes me uncomfortable. I’d much rather wait and miss the first 10% of the “up” move than to buy today and try to catch a falling knife.
In general, European stocks are near-record-cheap – trading for less than 10 times earnings, at a discount to book value, and paying 4%-plus dividends. Today may not be the exact day to “back up the truck” and buy… but that day is close.
Don’t fear German stocks. Get ready to buy them very soon…
Good investing,
Steve
Further Reading:
Two months ago, Brett Eversole told DailyWealth readers about the deals being offered in European blue-chip stocks. But rather than buying back in April, he told readers, “I’d rather wait on an uptrend to appear before buying… to make sure I’m not trying to catch a falling knife.”
For readers who took Brett’s advice and waited to buy, the European blue chips he recommended are 8% cheaper today. Read more here: The World’s Best Companies Want to Pay You Big Investment Income.
Clever guy, Marc Faber. He choosed the right moment for informing the public ..not to buy. stocks or to sell them in order to buy/sell those stocks by himself in opposite timing.
However, he will lose his credibility next time.
I agree but soon. A little early because the stock markets have not discounted a global recession which should crash stock markets worldwide. QE might paper over things temporarily but 3 months after any QE the chickens will come home to roust. Safer to buy on any rebound.