Marc Faber Hates Cocktail Parties
As part of our expert advice series, we sat down with renowned Swiss investor Marc Faber and asked him what frustrating mistakes he sees investors make these days. The answer? They take stock tips from the tipsy far too seriously.
Marc Faber explained how casual conversation in social settings can contribute to investment suicide. Faber understands not only investments, but investors. The psychology of the individual investor is why most will be so vulnerable when the collapse actually comes:
“Most individual investors have the tendency to commit financial suicide. In other words, if they see the NASDAQ going up they may resist buying expensive stocks for a long time but in the end, they go to cocktail parties and all their neighbors say, “Today I made so much money buying this stock.” Of course at cocktail parties you have a group of people, they own different shares, all of them go down but one goes up. They’ll talk about the one that goes up. They never talk about the ones that go down. In the end, they also buy those NASDAQ stocks and the whole thing collapses.
“Then they go again to cocktail parties and then they see the neighbor’s house appreciating by 20% per annum. Finally, they can’t resist. They buy homes in 2005, 2006 but since they lost their money on NASDAQ they have to borrow 100% on the homes. Since the Feds tell them that home prices will never go down and don’t forget Ms. Janet Yellen, she was the president of the San Francisco Fed from 2005 to 2010. The San Francisco Fed is responsible for Arizona, Nevada and California, the three biggest housing bubbles in the whole country. Thank you very much Ms. Yellen. You’re now in charge of the whole US. You can create other bubbles.”
Obviously, it needn’t be a “cocktail party” per se, but his meaning is clear. Word of mouth stock advice can be the worst to follow because the information is so incomplete, yet coming from a trusted source like a friend or family member. His frustration was palpable over this phenomenon. It is obvious he has seen it happen over and over and over. He strongly encourages investors to invest with their eyes wide open, and with their heads on straight. Do not expose your family’s security and future to foolish knee-jerk emotional buys just because of an anecdote you heard somewhere. Resist this temptation the next time you find yourself at a cocktail party and conversation turns to investments. Ask yourself – What would Faber do?
Apparently, he’s really more of a beer guy, anyway:
“I drink Chang beer here in Thailand. It has an elephant on the can, and it belongs to essentially one of the richest Thais. He bought Fraser & Neave in Singapore which is Tiger beer. I think he makes very good beer.” – Marc Faber in The Australian Financial Review.
We also asked his outlook on the major precious metals, of course.
“In a bull market, silver will tend to outperform gold. In a bear market, gold tends to outperform silver. Gold, platinum, silver and palladium move in general in the same direction, and sometimes one will move faster than the others. The fundamentals of the platinum market are the most attractive at the present time.”
To get our extended report on our talk with Marc Faber, click here and you will find instructions for your free download. It is chock full of invaluable insight that you should know.