U.S. Stocks to Fall, Faber Says; Wood Doubts Recovery (Update1)

By Masaki Kondo and Mike Firn
Feb. 22 (Bloomberg) -- U.S. stocks will probably fall this year, according to investor Marc Faber, and the country’s economy won’t face a "normal" recovery as job cuts dent consumer spending, said CLSA Asia-Pacific Markets’ Christopher Wood.
Faber advised investors to buy U.S. stocks on March 9, 2009, when the Standard & Poor’s 500 Index reached its lowest level since 1996. The gauge rallied 64 percent since then to 1,109.17 and the Dow Jones Industrial Average gained 59 percent as more than $700 billion in government spending boosted the economy.
"I would look at the market to close probably a bit lower than it started the year in 2010," Faber said today in an interview before a speech at the CLSA Japan Forum in Tokyo.
"Equally, I don’t think we have a huge downside risk. If the Dow and the S&P dropped, say 15-20 percent, in other words the S&P towards 900, I think there would be more stimulus and more quantitative easing."
The U.S. unemployment rate dropped to 9.7 percent in January, the Labor Department said on Feb. 5, owing in part to the federal government hiring temporary workers to conduct the 2010 census. Wood, an equity strategist at Hong Kong-based CLSA, said an increase in lower-paid temporary workers will be "very damaging" to U.S. consumer confidence.
"I don’t believe in a normal U.S. recovery," Wood told reporters today at a briefing in Tokyo during the CLSA Japan Forum. He recommended investing in gold and in stocks related to emerging Asian markets.

‘Endgame, Crisis’

Spot gold prices have increased 13 percent in the past 12 months as the weaker dollar boosted bullion’s appeal as an alternative investment. The dollar has depreciated against all
16 of the major currencies tracked by Bloomberg in that period.
In Europe, mounting concern that Greece, Spain and Portugal will fail to curb their budget deficits has led the euro to decline against most major currencies.
While the Dow Jones Europe Stoxx 600 Index has advanced 36 percent in the 12 months to Feb. 19 and the S&P 500 has risen 42 percent, the MSCI Asia Pacific excluding-Japan Index has surged
75 percent.
"The endgame will be a systemic, public-sector debt crisis in the Western world, leading to debasement of Western paper currencies, leading to the end of the U.S. dollar-peg standard," Wood said. "Long-term investors only need to own Asian equities, Asian assets, gold and gold-miner stocks."

Less Prescient

Bullion for immediate delivery added 0.4 percent to
$1,123.11 as of 11:42 a.m. in London. Faber said in a Feb. 11 interview from Hong Kong that he wouldn’t rule out gold falling to $950 an ounce.
The investor, who publishes the Gloom, Boom and Doom report, correctly predicted in May 2005 that stocks would make little headway that year. The S&P 500 gained 3 percent. He was less prescient in March 2007, when he said the S&P 500 was more likely to fall than rise because the threats of faster inflation and slower growth persisted. The S&P 500 climbed 10 percent between then and its record of 1,565.15 seven months later.
"I would imagine it’s conceivable that the market makes another marginal new high into April, and that the second half of the year is not very rewarding," Faber said today.