Ultra-bear Marc Faber continues to warn about an imminent downturn in equities markets, saying...


Ultra-bear Marc Faber continues to warn about an imminent downturn in equities markets, saying that investors should brace for a major market drop ahead that will present a buying opportunity. "Within the next six to nine months we can buy just about anything 20 percent lower than it is now," Faber says. Jim Rogers shares that sentiment, with the exception of China, where he says the collapse has already occurred.

Comments (51)
  • Whitehawk
    , contributor
    Comments (3121) | Send Message
     
    About as enlightening as the revelation that he makes appearances at cheap discos in Bangkok. (eeck)
    4 Oct 2012, 07:51 PM Reply Like
  • piggysun
    , contributor
    Comments (244) | Send Message
     
    We are going to have new highs before bad things happen (around election day, maybe). VIX has been low for a long time. Bears are struggling.
    4 Oct 2012, 07:56 PM Reply Like
  • Tack
    , contributor
    Comments (16274) | Send Message
     
    I note a change:

     

    Aside from the usual continuum of scare pieces, apparently, Faber has now found it necessary to add an "opportunity" teaser -- if you only sell everything now, of course -- since nobody's paid much attention to his previous alarms.
    4 Oct 2012, 08:02 PM Reply Like
  • Ted Bear
    , contributor
    Comments (700) | Send Message
     
    And the Fed and the Treasury, after having spent how many trillions to ensure that the equity market bubble does not burst again, are going to step aside and let the equity market fall 20%?

     

    Just think about how absurd that is, in a world of absurdities that even just five years ago seemed unimaginable.
    4 Oct 2012, 08:17 PM Reply Like
  • Teutonic Knight
    , contributor
    Comments (3425) | Send Message
     
    No way, now that the Plunge Prevention Team (PVT) had been on full alert since Mr. Obama came into power since 2009.
    4 Oct 2012, 08:26 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (33819) | Send Message
     
    20% stock market drops have been deemed a national security issue and will not be allowed under any circumstance.
    4 Oct 2012, 08:45 PM Reply Like
  • J 457
    , contributor
    Comments (1000) | Send Message
     
    The drop will happen when least expected. Could be tomorrow, could be next month, but we'll see a healthy pullback soon enough. And strangely enough, so many stocks are at multi-year lows even while the major indices are propped up with a few high-flyers like AAPL or PCLN. Not sure if this means there's room to run with the multi-year low stocks, or if all it will take is bad news at AAPL and 20% is shaved off the QQQs' in a week.
    4 Oct 2012, 08:57 PM Reply Like
  • Tack
    , contributor
    Comments (16274) | Send Message
     
    APPL and PCLN are meaningless and won't cause anything.

     

    The bears keep waiting with bated breath and sweaty palms for some major collapse and bear-like (20% or more) pullback, all the while ignoring completely the huge disposition of capital away from, not towards, equities already. Money is huddled in Treasuries, other bonds, cash, gold, etc., but, we're supposed to see some panicky unloading of the remaining less-nervous holders? I guess that they, too just can't wait to collect those 1.5% yields.

     

    We're not going to see any pullback larger than 4-8% unless some major unexpected world event causes a large-scale economic disruption. So, those counting on a big drop better start hoping for a major war in Iran, or some such, because absent that, the risks of a major downside are already mitigated by lots of available capital to buy dips.

     

    And, I might add that there are some early Treasury holders with large gains that are gradually converting to equities and an increasing number of potential buyers who have gradually realized they missed the boat and are looking for entry points, so the buying interest will materialize long before any 20% drop in any normal course of events.
    4 Oct 2012, 09:17 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (33819) | Send Message
     
    You would see a 20% drop if the Fed quit printing, simply because the sustainable economy without 10% budget deficits is much lower than it seems - and profits would be much lower as well.
    4 Oct 2012, 09:22 PM Reply Like
  • anonymous#12
    , contributor
    Comments (545) | Send Message
     
    Tack, they also are ignoring the postponable purchase ratio(credit to brrodero), increasing auto sales and huge productivity gains.

     

    They also ignore that the employed are the ones who drive a economy, not the unemployed.
    4 Oct 2012, 09:26 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (33819) | Send Message
     
    anonymous, still the sustainable economy without printing and huge deficits is not what it looks like today. It's much like Spain or Portugal, the true level is much lower and the market would reflect that without printing.

     

    As it is, it will go higher. But at some point there will be consequences to the printing (which might mean it going higher still, mind you).
    4 Oct 2012, 09:33 PM Reply Like
  • anonymous#12
    , contributor
    Comments (545) | Send Message
     
    Paulo, true...deficits are scary. But I need to allocate money where I think the risk-return is more favorable. Equities are the place as of today. That could change with the fiscal cliff.
    4 Oct 2012, 09:39 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (4004) | Send Message
     
    "The bears keep waiting with bated breath and sweaty palms for some major collapse and bear-like (20% or more) pullback, all the while ignoring completely the huge disposition of capital away from, not towards, equities already. "

     

    Some people never let history get in the way of greed-driven cheerleading for high stock prices. Here's a historical fact: The ratio of the USA's total stock market value to the Gross Domestic Product currently exceeds 100%.

     

    From 1970 to 1997, this never occurred. NEVER. To act as if stocks are unpopular is plain ignorant.
    5 Oct 2012, 01:05 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (33819) | Send Message
     
    WSD, both can be correct.

     

    This is so because you're comparing to GDP, and he's comparing to capital - whcih could be seen as the other side of the ledger of that incredible mountain of debt which has greatly outpaced GDP, remember? So stocks are now a smaller part of that mountain because of it.

     

    Of course debt would collapse without the money printing, and that angle would turn out wrong, if the Fed let it happen. But it won't. So the mountain grows larger and stocks grow larger with it.
    5 Oct 2012, 07:06 AM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (4004) | Send Message
     
    The notion that people have fled stocks for other assets is propaganda spun by equity money managers/salesmen (and their gullible, insecure, or greedy followers).

     

    The only periods when stocks made up a significantly larger percentage of household assets was when stocks were overvalued (the Nifty Fifty era, internet bubble era, credit bubble era). Currently stocks make up roughly 36% of household assets, 8% higher than the average for the last 60 years.

     

    In fact, in every period when stocks made up 36% or more of household assets, longer-term market returns were mediocre at best, terrible at worst.

     

    http://bit.ly/R5Phh2
    6 Oct 2012, 12:20 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (4004) | Send Message
     
    Bonds currently make up a larger percent of household assets than at other points in the last 60 years, but the percentage is still far lower than stocks. In short, stocks are very popular, and bonds are more popular than in the last 60 years.

     

    You can thank the real estate crash and the government suppression of bank and money market interest rates for the popularity of both stocks and bonds.
    6 Oct 2012, 12:51 PM Reply Like
  • Tack
    , contributor
    Comments (16274) | Send Message
     
    WSD:

     

    Why not stop with the childish editorial comments. Apparently, the insecure one would seem to be the commentator, who can't express an opinion without some unnecessary attempt at self elevation by deriding those not holding his own opinion.

     

    You think that equities might have a higher percentage of "household assets" when the average homeowner recently lost 50% of his housing equity? And, do you actually believe that under the current market, monetary and economic conditions that the market is driven by retail investors, based on their percentages of net worth allocated to equities?

     

    If that's your assessment of how capital is presently allocated to bond and stock markets on an overall basis, and that it will be determinative in the behavior of those markets, then, it's looking through a soda straw in its breadth, to say the least.
    6 Oct 2012, 01:07 PM Reply Like
  • Tack
    , contributor
    Comments (16274) | Send Message
     
    WSD:

     

    No, you can thank the decrease in net worth, due to realty declines, the denominator.
    6 Oct 2012, 01:08 PM Reply Like
  • Tack
    , contributor
    Comments (16274) | Send Message
     
    Addendum:

     

    I should modify the foregoing by saying that average homeowners lost 50% of their home value, which in many cases was 100%, or more, of their actual equity (i.e., "household assets"). The magnitude of the recent disruption in home equity creates a huge discontinuity in any historical graphs of equity allocations, completely distorting the picture.
    6 Oct 2012, 01:41 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (4004) | Send Message
     
    Tack, apparently you don't see the sneering derision in nearly every comment you make. Real estate is currently above historical inflation-adjusted normal valuation, yet equities are still an elevated percentage of household assets. If there was a huge flight from stocks, you would see the percentage decline to 12-20% of household assets invested in stocks like in the 1970s. Note that in the 1970s residential real estate was significantly less expensive than currently (after adjusting for inflation). Obviously many households have negative home equity which dampens their real estate asset value. Still, 30% of homes have no mortgage.

     

    Even with mutual fund stock outflows over the last several years, stocks are currently more popular than the overwhelming majority of the last 100 years. The mutual fund industry did a great job of upselling stocks to the public in the last 20 years--right along with the biggest bubble in history. Stocks are still hugely popular, which provides a good reason to believe that the bear market that started in 2000 is not finished.
    6 Oct 2012, 01:59 PM Reply Like
  • Tack
    , contributor
    Comments (16274) | Send Message
     
    WSD:

     

    You will likely find yourself among only a small number of folks here in SA, who would all fit in a nice size van, that believes equities are presently popular. And, I don't believe the chart to which you refer is instructive at all because homeowners have suffered massive losses of equity, usually any household's single largest source of personal equity. Therefore, all other remaining assets have been bootstrapped higher, not because of larger holdings or popularity, but because overall household equity has dramatically decreased.

     

    And, it's worth noting that we have had over three years, without a single monthly exception, of nonstop outflows from equity funds. This, too, would hardly be a harbinger of the popularity of equities.

     

    Coupled with the fact that bonds of all types are selling at all-time record-high prices (i.e., low yields), the outlook for relative performance of equities, versus bonds, remains extremely attractive. It's hard to imagine what investment sector will outperform equities, relatively, over the next 10-20 years, save, perhaps, real estate, which is another derided and generally overlooked opportunity.
    6 Oct 2012, 02:20 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (4004) | Send Message
     
    Tack, you are wrong about the following statement. (There actually have been monthly inflows):

     

    "And, it's worth noting that we have had over three years, without a single monthly exception, of nonstop outflows from equity funds."

     

    The rest of your comment is just speculation. US Stocks quite possibly will outperform many other US assets in 10-20 years, but the likely mediocre returns might be hard to justify if the path is strewn with regular painful bear markets--like in the 1970s and 1930s. And if you don't care about volatility and steep declines, emerging markets will likely provide superior returns in the long run.

     

    In the aftermath of the greatest US stock market overvaluation in history (1999-2000), it's unlikely that US stocks will outperform the aftermath of the prior two overvaluation eras (1920s/1960s). Besides the overvaluation issue, the US does not have as many economic advantages over other countries as in those eras.

     

    It took 17 years to work off the overvaluation of the 1960s. It'll likely take at least 17 years to work off the overvaluation of the 1990s.
    7 Oct 2012, 09:55 PM Reply Like
  • Tack
    , contributor
    Comments (16274) | Send Message
     
    WSD:

     

    I won't debate whether there have been any net positive months during the last three years, but overall funds have been consistently moving away from euities and toward bonds.

     

    Regarding your analysis, based on 2000, I don't think it stands up to scrutiny. In 2000, the SPX EPS were $56. This year, they'll be near double that, yet the SPX is lower than 2000. Doesn't look like any overvaluation to be worked off, at least to me.
    7 Oct 2012, 10:19 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (33819) | Send Message
     
    The fundamentals are somewhat illusive, they're based on continuing $1.5 trillion budget deficits.
    7 Oct 2012, 11:18 PM Reply Like
  • Placebo Investment Advice
    , contributor
    Comments (4004) | Send Message
     
    Tack: If recessions never occurred, looking at single year market P/Es would likely have some predictive value. This is not the case, even with Bernanke's magic money-making machine.

     

    By the way, there was a flaw in your comment that the decline in real estate values was why stock assets are currently elevated as a percentage of household assets.

     

    At the peak of the real estate bubble in 2006, stocks made up a higher percentage of household assets than currently. As I said before, it is mythology (or propaganda) that stocks are unpopular, even with 3 years of outflows from investor funds. The decline in household ownership of stocks in the 1970s was huge compared to the last few years.

     

    Precious metals were genuinely unpopular in the 1990s, not stocks in the last couple of years.
    8 Oct 2012, 12:42 AM Reply Like
  • anonymous#12
    , contributor
    Comments (545) | Send Message
     
    You said October was going to be a total meltdown. What happened??

     

    I love seeing shorts getting obliterated, I make money they lose.
    4 Oct 2012, 09:07 PM Reply Like
  • J 457
    , contributor
    Comments (1000) | Send Message
     
    Eager beaver, it's only Oct 4. Geez, give it some time....
    4 Oct 2012, 09:16 PM Reply Like
  • ATG1977
    , contributor
    Comments (159) | Send Message
     
    OH wow I'm going to sell everything now and wait

     

    please
    4 Oct 2012, 09:14 PM Reply Like
  • minecanary
    , contributor
    Comments (1238) | Send Message
     
    Keep laughing banksters. One domino like Greece will be all it takes to stop the hypothecation madness. Then all you penthouse clowns who can't produce your own food will star in the re-make of Soylent Green. Your hero Benny will be served as sushi by the Washington Monument.
    4 Oct 2012, 09:47 PM Reply Like
  • june1234
    , contributor
    Comments (4353) | Send Message
     
    Apple a company that makes smart phones and tablets is 20% of the NASDAQ and 5% of the S&P 500.

     

    Despite all these trillions and trillions of $$$ to the few who qualify the global economies continue to contract. Looks like its working. In the summer of 2011 the ISM number in this country came in at 60, this last one came at a little over 50 following 3 months of contraction. That morning the market was up 157 pts on that "not as bad as expected" news. You cant keep selling that line forever; its still a bad story no matter how much lipstick you put on it

     

    It will happen when the same people who have been propping this money printing rally decide to bail they wont get caught with their pants down like they did in 08. Ben Bernake said the stock market crash of 29 did not cause the great depression the failure of the banking system did., an over-leveraged banking system just like we have today no matter how much creative accounting you let the banks do as they allow them to do nowadays .

     

    Google yourselves some videos: Ascent of Money. These debt systems have been collapsing throughout history.You cant solve a debt problem with more debt. And you cant keep selling "not as bad as expected" forever.
    4 Oct 2012, 09:58 PM Reply Like
  • Sam Liu
    , contributor
    Comments (3711) | Send Message
     
    "Jim Rogers shares that sentiment, with the exception of China, where he says the collapse has already occurred."

     

    does Jim mean it is occurring, or is bouncing back.
    4 Oct 2012, 10:03 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (1360) | Send Message
     
    Faber was saying the EXACT same thing last June. If you had listened to him then, you'd have missed a 15% run up in equities. The issue with these "doomer" guys is always the same - they just need to be right once to say "I told you so". Meanwhile, if you had listened to them every time CNBC trots these guys out on TV, you would have missed out on some terrific money making stock runs. Heck, I know people who have been waiting to buy stocks since the low of March 2009, because they are afraid to pull the trigger and are still waiting for the "big pullback".

     

    Eventually, stocks will pull back. Maybe 10%. However, that doesn't necessarily mean the end of the world is coming. Frankly, I would view that as a nice buying opportunity and have been booking some profits to raise cash in anticipation. However, this is a stock pickers market and if you chose wisely, you can make a nice return and tell the doomers "I told you so". The difference is you can be right multiple times and laugh all the way to the bank.
    4 Oct 2012, 10:23 PM Reply Like
  • Petrarch
    , contributor
    Comments (1126) | Send Message
     
    Faber and Rogers...oh brother...

     

    you do realize that these two are as mad as hatters?
    you get that...right?

     

    P
    4 Oct 2012, 10:29 PM Reply Like
  • june1234
    , contributor
    Comments (4353) | Send Message
     
    Jim Rogers is a big picture guy.In his own words he is a terrible market timer but very accurate over the longer term. China's economy is an export driven economy dependent on western consumption. They make all the I phones ,Nikes etc we consume. Western consumers are not consuming the way they were in 2005. You can't cut off credit to so many consumers in a credit economy like ours as they have done while miss-allocating trillions of $$ to prop up banks for their massively over-leveraged(like 300 to 1) bad bets . No matter how much "creative" accounting you let the banks do that debt is still junk .

     

    What is the fed going to do next they haven't done already? 400,000 people continue to, as they have for over 4 1/2 years to leave the work force each and every week in this country and that number never includes the self employed. But "its never as bad as expected". Tell that to those people who keep losing their jobs.

     

    Is the fed going to do print more money and continue giving it to the few? They have been doing that for years. Try selling a house in America today, it ain't pretty.The latest new and improved QE3 is nothing new, The fed has been buying billions in bad mortgages for years. QE5, 6, 368 ? I think they should start using a different letter like X or Z
    4 Oct 2012, 10:30 PM Reply Like
  • Sam Liu
    , contributor
    Comments (3711) | Send Message
     
    " Tell that to those people who keep losing their jobs. "

     

    So how many new jobs were actually created in the last 3.5 years.
    5 Oct 2012, 02:32 PM Reply Like
  • HarryWanger
    , contributor
    Comments (189) | Send Message
     
    Zzzzzzzzzzzzzz.....
    5 Oct 2012, 02:39 AM Reply Like
  • Interesting Times
    , contributor
    Comments (15014) | Send Message
     
    Does anyone really expect a 20% correction prior to the Election. I have been following these posts for a while and decided to join in.

     

    My belief is that a ton of action will occur after the Election..
    5 Oct 2012, 04:21 AM Reply Like
  • John_Miller
    , contributor
    Comments (55) | Send Message
     
    I like Faber, but I think people over analyze, and often misunderstand his comments.

     

    He's been bullish, NOT bearish on stocks for a very long time.

     

    He's just saying that he thinks they'll eventually be a significant pullback in the next year or so, and that will be a good time to buy again. Money printing doesn't mean stocks go up all the time; in fact, it often creates a lot of volatility.
    5 Oct 2012, 11:42 AM Reply Like
  • Paulo Santos
    , contributor
    Comments (33819) | Send Message
     
    Given enough printing they can actually go up all the time. Literally, every day.

     

    (We don't have enough printing for that. Yet)
    5 Oct 2012, 11:43 AM Reply Like
  • John_Miller
    , contributor
    Comments (55) | Send Message
     
    Stocks going up literally all the time would be an EXTREME case of money printing, and like you said we're not there yet.

     

    Look at how much money has been created over the last 12 years or so, and look at how much volatility there's been in stocks over that same period. Despite all that money, stocks have gone no where (nominally) since 2000. So this idea that there can 't be a 20% correction in a money printing environmental is absurd IMO.
    5 Oct 2012, 12:31 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (33819) | Send Message
     
    If you look at QE1.5, QE2, and LTRO1/2, you'll notice that during those times stocks were not far from going up all the time.
    5 Oct 2012, 12:33 PM Reply Like
  • marketquant
    , contributor
    Comments (1269) | Send Message
     
    I read Marc Faber's letter, but I don't get much out of it. Two-thirds of it is usually almost philosophical in nature.

     

    To be fair to Jim Rogers, he said that he is short stocks and long commodities, and he thinks the *spread* will make money.
    5 Oct 2012, 11:55 AM Reply Like
  • John_Miller
    , contributor
    Comments (55) | Send Message
     
    The philosophical stuff is my favorite part about it. I love his newsletter.
    5 Oct 2012, 12:32 PM Reply Like
  • marketquant
    , contributor
    Comments (1269) | Send Message
     
    > love his newsletter

     

    I am generally suspicious when advisers and subscribers are philosophically (or politically or socially or dead-economist-ly) aligned. I would strongly suggest reading Dan Kahneman's "Thinking, Fast and Slow". Loving the newsletter is a warning sign.
    5 Oct 2012, 02:13 PM Reply Like
  • John_Miller
    , contributor
    Comments (55) | Send Message
     
    A warning sign of what?

     

    I enjoy his commentary and perspective. I like hearing other people's ideas and opinions; I don't make investment decisions based on them.
    5 Oct 2012, 02:38 PM Reply Like
  • marketquant
    , contributor
    Comments (1269) | Send Message
     
    > I like hearing other people's ideas and opinions...

     

    Well, me and you should form a club then. I never find anyone who consistently reads "other" ideas. Basically every investor that I interact with has a distinct bias to the left or right, and every piece of investment info must align with their socio- econo- politico- filter. Good for you.

     

    I actually dread wading through Faber's preaching and self-righteous blather to extract the actual investment recommendations. There will 8 pages of unrelated yackety-yack followed by recommendations to buy Malaysian banks or whatever.

     

    I find it tiring that almost every guru or hedge-successful becomes a psuedo-philosopher.
    5 Oct 2012, 02:54 PM Reply Like
  • Jin teee
    , contributor
    Comments (354) | Send Message
     
    People keep saying investors are missing out on gains, but we need to look at more than just gains. You can't just say "haha, I made 20%, that means I'm smart! I win, you lose.." The key to winning in the long-run is how much risk you are taking for reward. The discrepancy is key. Secondly, you need to have the strength or balls to execute it. This is why you need principles. Warren Buffett did not get rich from buying this and selling that. His philosophies followed to a T, made him rich.

     

    The market is brutal, you say " your missing out, your missing out, your missing out..." Then in one faithful day, who's missing out?
    Just giving caution. Hope everybody here is wealthier in the future, good luck.
    6 Oct 2012, 07:45 PM Reply Like
  • Paulo Santos
    , contributor
    Comments (33819) | Send Message
     
    The risk has been distorted by the fact that there's someone who can and does print to buy assets every time the market gets weaker, and now even when the market is close to printing higher.
    7 Oct 2012, 06:51 AM Reply Like
  • eagle1003
    , contributor
    Comments (1886) | Send Message
     
    Mr. Faber is no fool and I respect his opinions. I have sold most of my holdings over the past few weeks and will wait for much lower entry points.
    Anyone that thinks that a significant drop in equities cannot occur because of an upcoming election or because of QE3 and money printing, does not understand that logic and rational thinking, based on current statistics and news, are impediments to being a successful trader.
    It wasn't very long ago that that there was no shortage of commentators insisting that treasury yields could not rise so long as the FED was printing money. Oh, really? What about oil? Despite the dollar falling and QE3, oil has been a free fall. The same sort of flawed logic is being embraced by those that think gold "must" go up and the dollar "must" crash. This kind of common knowledge rarely works out as expected.
    7 Oct 2012, 05:58 PM Reply Like
  • Tack
    , contributor
    Comments (16274) | Send Message
     
    But, the large disposition of capital away from equities already will prevent a major selloff, as new buyers will materialize on dips.
    7 Oct 2012, 07:00 PM Reply Like
  • minecanary
    , contributor
    Comments (1238) | Send Message
     
    At some point, you have to just stand far enough back from the BS....and say the US has hmmm $130 TRILL in unfunded liabilities..and EUR is probably higher because of of how and what they count...and China just flat out lies. Hmmmm..buy bullion bitchez. The horsepuckey is coming to a brutal end one way or another.
    7 Oct 2012, 07:46 PM Reply Like
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