Marc Faber says there are three reasons a big market correction is coming


Uber-bear Marc Faber is at it again, reiterating his thesis that a big market correction is coming. He outlines three reasons:

The U.S. markets are destined to follow emerging markets down at some point. U.S. equities have run up over 70% in just the last two years, Faber says. "Where exactly," are further earnings gains going to come from? And with the iShares MSCI Emerging Markets ETF already losing nearly 20% of its value and bouncing, its likely that asset allocation will flow out of the top-heavy U.S. equities and back into emerging markets.

Second, the Middle East will become a "disaster." Faber thinks the region "will go up in flames because the Western imperialistic powers, they still meddle into the local affairs."

Lastly, interest rates have become a headwind rather than a tailwind. The interest rate has doubled on the 10-year Treasury note since the July 2012 low, and and that's in spite of Mr. Bernanke's maddening asset purchases since September 2012.

It's all academic however, because once the market comes around to his line of thinking, Faber thinks we'll have already lost over 20%.

Comments (8)
  • Herr Hansa
    , contributor
    Comments (3130) | Send Message
     
    Yes, though not expected to happen quickly. This can happen over a couple years. Probably no major catalyst until a new head of the Federal Reserve is in place.

     

    Current Fed asset purchases are no longer having an affect on markets, other than causing some distortions. Big money has already moved away from single family dwellings and into multi-family dwellings. Other flows have headed towards Europe. Emerging markets will have a couple years to turn around, though I think some of the best opportunities will be found there.
    4 Sep 2013, 06:58 PM Reply Like
  • Ted Bear
    , contributor
    Comments (676) | Send Message
     
    We've become pretty adept at creating bubbles in America. Technology, stocks, real estate, and now stocks once again. With free money gushing from a broken pipe, who knows how high the equity markets can be inflated.

     

    BUT, you have to respect when the revenue lines at McDonalds, Coke, Cisco, and now the mighty Wal-Mart, start to slow. There are only so many workers that can be laid off, so many services curtailed, and so many processes mechanized before the slowing revenue growth leads to slowing earnings growth.

     

    While Faber is a blow hard about the demise of equities, this time around there could be plenty of reasons why equity prices could decline to a level more reflective of earnings....but then, there is always that $85 Billion a month which can buy a LOT of crap, regardless of the valuation.

     

    Doug Kass....where are you?

     

    P.S. Did you see the car sales numbers today? How did THAT happen? Turns out it was all done with creative financing....zero interest rates, large rebates and discounts, and seven years to pay for a car. Another bubble?
    4 Sep 2013, 07:09 PM Reply Like
  • Philip Marlowe
    , contributor
    Comments (1466) | Send Message
     
    For the first time ever I almost agree with Faber on his middle east point. It is true, the middle east can easily turn into a disaster. This is the main danger facing our economy, and it is entirely created by our politicians. It can also be avoided by our politicians.

     

    Otherwise, he is full of it as usual. His main point is that things have changed a lot since we experienced the biggest crisis since the great depression. All I have to say to that is: duh.
    4 Sep 2013, 07:16 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2849) | Send Message
     
    Look at a 50 year chart of the 10 - year treasury rate and tell me how the 10 - year under 3% is a headwind to economic growth.
    4 Sep 2013, 07:16 PM Reply Like
  • redarrow5150
    , contributor
    Comments (1218) | Send Message
     
    If Marc Faber took a dump in the woods would anyone hear it? Yes of course the BEARS WOOD.
    4 Sep 2013, 08:22 PM Reply Like
  • pman6
    , contributor
    Comments (270) | Send Message
     
    Of course nothing keeps rising. What else is new?
    Anyone could have said there will be a correction "some time in the indefinite future".
    5 Sep 2013, 02:34 AM Reply Like
  • OSCARMON
    , contributor
    Comments (7) | Send Message
     
    I find it very amusing to hear the cnbc talking heads justify the fed taper, whose possibility they have dismissed for so long, on economic acceleration. The economy is far from healthy and can not justify current equity valuations; the Fed will taper because it has no other choice. It is fast realizing that balance sheet risk far outweighs the benefits of further QE. So the ugly bird better learn to fly soon, because it sure as heck being pushed out of the nest.
    5 Sep 2013, 03:28 PM Reply Like
  • OSCARMON
    , contributor
    Comments (7) | Send Message
     
    I find it very amusing to hear tv talking heads justify the fed taper, whose possibility they have dismissed for so long, on economic acceleration. The economy is far from healthy and can not justify current equity valuations; the Fed will taper because it has no other choice. It is fast realizing that balance sheet risk far outweighs the benefits of further QE. So the ugly bird better learn to fly soon, because it sure as heck being pushed out of the nest.
    5 Sep 2013, 03:28 PM Reply Like
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