Guru Grades

Marc Faber: Nabob of Negativism? (Last Updated 8/9/08)

We evaluate here the commentary of Dr. Marc Faber regarding the U.S. stock market via his archived articles at "AME Info - The ultimate Middle East business resource" since late 2000. Marc Faber is publisher of the Gloom, Boom and Doom Report, which "highlights unusual investment opportunities around the world." He is contrarian, holding that "many shall be restored that are now fallen and many shall fall that are now in honor." The table below extracts highlights from his commentary and shows the performance of the S&P 500 index over the 21, 63, 126 and 254 trading days after the publication date for each item. Red plus (minus) signs to the right of specific items indicate those that the market subsequently proves right (wrong). We conclude that:

• He has wide-ranging opinions on financial assets worldwide, international economics and geopolitics. He often bases his forecasts on similarity to historical situations, meaning that he infers patterns from very small samples.
• He has (rightly) been a strong proponent of the commodities and oil memes in recent years.
• Dr. Faber is generally pessimistic and even sarcastic regarding the economy of the U.S. "invincible empire" and its "doomed currency, which will over time lose all its value." He is apocalyptic in foreseeing "that the US Fed's monetary policies will lead to exponentially widening wealth inequity and impoverish the majority of US households, which will then lead to social strife, protectionism, war, and the breakdown of the capitalistic system." It's not a pretty picture. [The Anglosphere Challenge: Why the English-Speaking Nations Will Lead the Way in the Twenty-First Century presents a different view.] He offers also non-economic observations such as: "We also know by now that the conduct of the military - irrespective whether it is made up by a bunch of terrorists or West Point graduates - is anything but honorable."
• Based on subsequent stock market performance and our judgments about his forecasts for overall U.S. stock market direction, Marc Faber has been right about 54% of the time, which is somewhat above average. His forecast sample size is moderate, as is our confidence in this conclusion.
• Marc Faber's commentary for AME Info has been discontinued. We retain this record for historical reference as part of an overall analysis of guru accuracy.

In summary, Dr. Marc Faber’s track record on forecasting the performance of U.S. equities over the past few years is somewhat above average. Confidence in this conclusion is moderate. For the long term, he is unequivocally negative on prospects for the U.S. economy, stock market and society.

See Guru Grades for a snapshot of the accuracy of various experts in predicting the direction of the U.S. stock market, including links to evaluations of the commentaries of other individual market pundits and gurus.