Dr. Marc Faber, Editor and Publisher of the Gloom, Boom & Doom Report, thinks we're in a tech bubble and it's all the Fed's fault.
The market as a whole is up nicely this year. But tech stock returns have been outstanding. But, is it really just another tech bubble?
Dr. Marc Faber, Editor and Publisher of the Gloom, Boom & Doom Report, thinks so. Speaking Talking Numbers, Faber makes it clear he's not of fan of the tech sector, even as the tech-heavy NASDAQ Composite Index is up 27%. By comparison, the S&P 500 is up 21% and the Dow Jones Industrial Average is up 17%.
While the NASDAQ index is outperforming the rest of the market, it's the driver of the index that worries Faber.
"There are very few tech stocks that have made new highs," says Faber. "Microsoft, Cisco, Intel, [and] IBM are all way below their previous highs. The NASDAQ is being driven by the Netflix of this world, Amazon, Facebook, and so forth. These kind of stocks – mostly stocks that have actually no earnings. So, they can go to any price level."
Does that mean investors should short these highflyers? Not at all, says Faber, who warns that shorting the big movers in tech could end as badly as it did for those who shorted the NASDAQ too early in 1999.
"I don't want to short these kinds of shares because if you have no earnings, who knows what the peak is?" says Faber.
Prices are out of whack with value, believes Faber, and the reason is the Federal Reserve Bank's low-interest rate policy. "The Federal Reserve, by keeping interest rates artificially low, creates bubbles," says Faber. "How are you going to value a Warhol painting or a Picasso if interest rates are at zero? How are you going to value stocks when interest rates are at zero? You create a complete mispricing of everything in the system."
So, how should investors break best divide their portfolio? And what tech stocks does he think actually have value?
Watch the video above to hear Dr. Marc Faber's insights on the tech markets and what tech stocks may are better than the rest.
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