Faber: Hong Kong Real Estate Shares Attractive, Hold US Treasurys

August 19, 2014

ETF.com: Africa's been in the news recently. President Obama has been touting Africa's growth potential, and recently committed $33 billion in new investments last week. Are you interested in any investments on the African continent?
Faber:Africa is a resource-based economy. There are investments flowing into Africa, mostly into resources. There are, however, huge problems. South Africa is over-indebted. The African Bank just went bust, basically. That tells you something.

Ghana has huge problems as well, because they had this resource boom and it came to an end. In the meantime, imports surged and they have huge trade and current account deficit. It's simply not problem-free. It's been on the radar screen of many people, and some stocks have gone up a lot.

I would say it's not a region that interests me for now. I had investments in Africa in the early 1990s, but I don't have any at the present time. In fact, I'm a director of some mining companies, and they have assets in Africa, in the Democratic Republic of Congo and in South Africa.

ETF.com: You have a knack for looking at out-of-favor markets that aren't on the average investor's radar. Are there any now that jump out at you anywhere in the world?
Faber: Yes. The two asset classes that are truly depressed are gold mining shares and coal shares. Also, Russia is depressed. The gold shares, GDXJ, is up 40 percent this year. But it's still down something like 70 or 80 percent from the previous high. We're kind of building a base in gold mining shares and in gold. So if someone asks what is a cheap asset class, then I have to say that is now an asset class that is inexpensive.

ETF.com: You had mentioned GDXJ, a junior gold miner ETF. Do you prefer to own gold miners through the majors or the junior miners?
Faber: I prefer to play a rise in gold prices through physical gold, which I own. But I accept the fact that gold mining shares became extremely inexpensive. Now, the big groups—like Newmont and Barrick—have become a highly leveraged play on gold. If gold goes up, these stocks can go up a lot because they have very high levels of debt.

There isn't a huge difference anymore whether you own small gold miners, gold mining exploration companies, or whether you own Newmont and Barrick. If the price of gold drops below $1,000 and stays there, both the small exploration companies and the Newmonts and Barricks of this world will have big financial problems. If gold prices rise, the exploration companies, the juniors and the likes of Newmont and Barrick will appreciate in price.

ETF.com: Last quarter, you told me that your top contrarian play at the moment was cash. You advocated keeping up to 25 percent in cash. Does that still hold true, or do you have a new contrarian play?
Faber:I still like cash. Markets haven't done particularly well in the last three months. A lot of markets are down 10 percent in just two weeks; a lot of stocks are down. So I think it's a time to hold some cash, yes.

ETF.com: Thanks for your time.

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