Faber Expects a Total Collapse 37 comments
July 21, 2009
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Dr. Doom showed up on CNBC to talk about the prospects for either a continuation of the recent rally or a complete collapse of the financial system (Faber starts at about 1:40).
Faber:
We had a crisis and nothing has been solved ... usually, a major crisis like we had should clean the system but nothing has been cleaned. It's gotten worse politically - this linkage between politicians in America and the Federal Reserve, Treasury Department, and Wall Street. The big crisis is yet to come. It will be huge. it will be a total collapse.
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On Jul 21 02:59 PM Roman_Fiddler wrote:
> Okay, so if there is a total collapse (and I tend to agree it is
> more 'when' rather than 'if'), what country is the best place to
> be?
>
> Of course self-sufficiency and a nice stash of gold, silver and ammo
> would help in such a situation, but where is least likely to feel
> the worst?
Heck, mortgage resets don't peak til 2012. I anticipate the 'collapse' continuing until then, as increasing insolvency can't be the prescription for growth.
The rally is old, but the bear is still a cub.
How about Australia?
On Jul 21 03:04 PM conceptwizard wrote:
> Canada
What is the cause for the bullishness of the market? More on that, what accounts for the positive in the indicators - economic leading indicator, 1st time claims (unemployment), improvement in tech sector earnings, etc. etc. etc.?
I also believe that there has been a huge amount of "talking" up the market by the gov't and the media. Cases in point in how CIT's bankruptcy warning today was treated in the media as a non-event, and how Buffet announced is stock purchase intentions.
But, can speak alone drive market indices and economic indicators to such heights that it breaks significant technical milestones? Are the market participants so 'dumb' as to not see through the spin?
With most of the funds that were pumped into the economy still on the sidelines, the real estate prices still falling, loan losses still increasing, pending commercial real estate loan blow-outs, increasing property foreclosure, subprime loans still on the books (though the magic of accounting rule changes), consumer spending dropping ... what is the cause behind the improvements in economic indicators?
Again, can the good feeling that comes from the media and positive speak cause such improvements?
As far as I'm concerned, I've not even seen a bottom completed yet (technically). How then can a new bull market start without an end to the Bear?
'What is the cause for the bullishness of the market?'
All the money being created by the Fed, for a start.
See Edward Harrison's excellent article on this today here.
All the money has to park itself somewhere, and it is going into asset price inflation.
Then you have market manipulation.
The Fed is quite blatant about this now, in the interests of 'market stabilisation'.
Goldman Sachs and other financials are hiding their losses with the demise of mark to market and pumped the market whilst they raised more capital from the marks, sorry, I mean investors.
Nothing much of anything is holding the market up, but the manipulation means that shorts have been burnt badly so it is difficult to take a position with the Government and all the insiders playing against you.
Executives have been unloading their shares like mad into the rally though, so they think it can't last much longer.
ragingdebate.com/econo...
As to where to go, I believe that a bigger consideration would be if history rythmes in terms of world wars proceeding global crashes. Even so, leadership will always be needed and I am staying. I cannot leave my family and friends in my town clueless and without hope. But if I had less responsibilities locally, I would choose Costa Rica.
On Jul 21 02:59 PM Roman_Fiddler wrote:
> Okay, so if there is a total collapse (and I tend to agree it is
> more 'when' rather than 'if'), what country is the best place to
> be?
>
> Of course self-sufficiency and a nice stash of gold, silver and ammo
> would help in such a situation, but where is least likely to feel
> the worst?
It would seem that most of the funds created by the Feds are being deposited at the feds by the banks. It's not being lent out. Unless the banks are putting some of these cheap fed funds into speculating in the market.
Is my understanding incorrect in that the primary reason why inflation isn't signficantly higher is because of the low velocity rate.
I'm still trying to find the reasons for the improvements in the economic indicators. Can market speak and strong desire to believe cause the improvements in the indicators?
I'm still a bear as I've not yet seen the reversal or the market bottoming process. I saw a sharp technical drop in March and a subsequent Bullish Engulfing candle in the monthly chart, but that's it! Not enough to support a new Bull. Since then, it's basically gone straight up. Seems like a sharp retracement after the initial sharp drop ... which incidentally broke the 2002'-03' low.
Do check out Harrison's comments on QE and asset price inflation here:
seekingalpha.com/artic...
Yeah, a lot of the money that has been created has gone into reserves, but the guarantees by the Fed and the announcement that some are too big to fail have decreased the costs of risky behaviour, so the likes of GS are speculating like mad as they have everything to gain by paying themselves huge bonuses on the back of profits, no matter how transient they may prove, and nothing to loose as the Government is there to pick up the tab.
With markets this thin it does not take much to move them anyway, and since they have their boys in virtually every position of influence and so have access to all the data ahead of time and the huge resources of the Fed, which refuses to say how it is spending it's money, there is in reality very little risk in the market for these insiders.
They knew the market was going up, because they were going to make it do so.
It was the little guy who got burnt, as he was predicting much less rise as the fundamentals are so poor.
Again, it is the little guy who will get burnt when the insiders decide it is time to short the market.
Vegas is straighter and less fixed.
On Jul 21 02:16 PM WAKEUP wrote:
> Faber is right. I gave up trying to convince my friends and associates
> that they should tighten up, and get ready for the worst. No one
> is listening; so, my job is done; I tried. I'M tightening up, and
> that's all I can do. It's going to be a BITCH, and it's going to
> last for a LOT of YEARS. The pathetic part of all this is that the
> same ones I tried to tell to get ready will be the first ones calling
> for a "little help." A word, from experience, to those few who just
> might listen: I have been through, personally, alone, what this country
> is just starting to go through. I'm TELLING you, when your situation
> starts to slide, you'll be in the toilet, financially, before your
> senses can get you ready for it. It's swift, and it's deadly. Save
> your money, buy only what you need; shop for bargains on EVERY purchase.
> It took me YEARS to finally recover from my financial HELL, and I
> will NEVER forget it. Neither will those who, because they refuse
> to believe what is coming, are about to enter that phase of THEIR
> lives.
You have to look at where most of the volume (low as it is) is coming from. Read some of Tyler Durnan's articles. He shows that as much as 50-70% of all US trading volume is coming from Goldman Sachs and about 2% of other traders such as program and high frequency traders. When you have a tiny fraction of traders controlling most of the market trading and low volume, then you can understand how they have kept pushing the rally up since the March lows. The question you have to ask yourself is what happens when this tiny group of trading control freeks decides to switch sides and go short or significantly reduces their trading? You won't want to be long equities when that happens.
On Jul 21 04:47 PM Trend Surfer wrote:
> I'm not in disagreement that this is not yet over. However, a genuine
> question for y'all!
>
> What is the cause for the bullishness of the market? More on that,
> what accounts for the positive in the indicators - economic leading
> indicator, 1st time claims (unemployment), improvement in tech sector
> earnings, etc. etc. etc.?
>
> I also believe that there has been a huge amount of "talking" up
> the market by the gov't and the media. Cases in point in how CIT's
> bankruptcy warning today was treated in the media as a non-event,
> and how Buffet announced is stock purchase intentions.
>
> But, can speak alone drive market indices and economic indicators
> to such heights that it breaks significant technical milestones?
> Are the market participants so 'dumb' as to not see through the spin?
Untrusting, I agree with the thesis that there is a huge amount of manipulation going on. But, to what end?
Would it be to engender a positive sentiment so as to ultimately influence business and consumer spending? If so, it would be based on a belief recessionary conditions occur and perpetuate due to sentiment.
Fundamentals has to support asset price inflation. Otherwise, it will ultimately collapse due to dry-up of market participants. GS of all people would know that manipulation without the follow-through of fundamentals is a losing game. Unless of course it is done with the gov't being the ultimate client.
For a start, they were the only ones to know that the market was going to go up, for the very simple reason that they ARE the market.
So everyone betting on the fundamentals lost money - to Goldman Sachs.
Pumping up the market has also allowed them to raise new capital and pay back TARP.
That frees them to pay themselves massive bonuses.
The execs at most companies have also been selling their shares like crazy into the bubble, so pulling their capital out.
At some stage pulling the rug out from under the market will cause prices to crash, so the monies they have drawn out can then buy assets dirt cheap.
Even if they wanted to you can't keep markets suspended forever on thin air.
But they have their next move planned, so they don't need to.
On Jul 21 02:59 PM Roman_Fiddler wrote:
> Okay, so if there is a total collapse (and I tend to agree it is
> more 'when' rather than 'if'), what country is the best place to
> be?
>
> Of course self-sufficiency and a nice stash of gold, silver and ammo
> would help in such a situation, but where is least likely to feel
> the worst?
On Jul 21 10:20 AM Barking wrote:
> so the $64K question is can a concerted effort by the Fed, Tres and
> Wall St stop a collapse? And what happens when there is world wide
> UNLIMITED money printing??
>
> Faber is right...its either going to be a ongoing rally.....OR a
> complete collapse....these are really amazing times....
>
> I think gold/silver do well in either environment....