Marc Faber's forecast hasn't changed over the course of the year. The
editor and publisher of the Gloom, Boom & Doom Report is still
calling for a steep correction in the stock market.
Commenting on the stock rally in March, Faber told CNBC, "I believe it
will end badly this year," predicting the market would see a 20 percent
correction, or worse.
As we approach the end of the third quarter, Faber affirmed his conviction, telling CNBC that the trouble has already begun.
Editor’s Note: 5 Reasons Stocks Will Collapse . . .
Pointing to Indonesia, India and other markets, he explained, in dollar
terms, some have already dropped over 30 percent in two months.
"So we have some big setbacks globally. Not yet in the U.S.," he admitted.
"But in the U.S, you look at housing stocks. The homebuilders, they're
down 30 percent from their highs. Tells you something about this
wonderful housing recovery."
At this point, Faber sees U.S. equities as a "better sell than a buy."
"In my view, we'll go back to the lows in November 2012 — around 1,343," in the S&P 500, he predicted.
Instead of stocks, Faber recommended considering Treasurys.
"I think the sentiment is incredibly bearish about Treasury bonds and
Treasury notes," he said. If the market drops, "people will again fear
deflation, and they will move into 10-year Treasury notes."
And one reason he foresees trouble now is due to his expectation that investors will feel similarly about U.S. stocks.
"When emerging markets go down and the S&P goes up, the asset
allocators say, 'Do I want to buy the S&P near a high, or do I
venture back into emerging economies that are down 50 percent from their
highs, like India or Brazil and so forth?" Faber asked.
"So you understand that the pool of money can flow back into emerging markets," he said.
In addition, the United States is making the mistake of pushing for military action in Syria, he noted.
Syrian President Bashar al-Assad has warned that Western intervention could result in a complete loss of control.
"Chaos and extremism would ensue. There is a risk of regional war," Assad told the Le Figaro newspaper, Bloomberg reported.
"The Middle East is a powder keg, and it will go up in flames because
the Western imperialistic powers, they still meddle into the local
affairs," Faber told CNBC.
"It's going to be a disaster. And it's going to strike from Syria and
Egypt into Saudi Arabia, into the Emirates eventually, and so forth and
so on, and you're going to have a huge mess," he said.
Faber also points to the fact that interest rates on 10-year Treasuries
have doubled since July 2012 "despite Mr. Bernanke's maddening asset
purchases."
Interest rates have become "a headwind," he noted.
"We're up almost 70 percent in two years and the economic expansion is four years old already," he added.
With weakness in emerging markets, looming rise from a crisis in the
Middle East and rising Treasury yields, "where are the earnings going to
come from?" he questioned.
Editor’s Note: 5 Reasons Stocks Will Collapse . . .
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