One Bear’s Prediction: Massive Market Selloff Coming

By:  Bob Adelmann
11/14/2012
       
One Bear’s Prediction: Massive Market Selloff Coming

Hard-money investment manager Marc Faber predicts that markets could decline by 20 percent, perhaps more, as the economy faces the continued recession and worries about the "fiscal cliff."

Hard-money adviser Marc Faber, best known as publisher of the Gloom, Boom & Doom Report and consequently often referred to as “Dr. Doom,” told CNBC on Tuesday that the stock market could decline by 20 percent. He doesn't think it will have anything to do with the “fiscal cliff” but instead will reflect poor earnings as bellwether companies struggle to be profitable in the continuing recession:

I don’t think markets are going down because of Greece, I don’t think markets are going down because of the “fiscal cliff” — because there won’t be a “fiscal cliff.”

The market is going down because corporate profits will begin to disappoint, the global economy will hardly grow next year (or even contract) …

That is the reason why stocks, from the highs of September of 1,470 on the S&P [Standard & Poor’s 500 Index], will drop at least 20 percent, in my view.

Faber noted that shares of Apple, Inc. are already down more than 20 percent since September, while shares of Amazon.com Inc., McDonald’s Corporation, and Google, Inc. have each lost more than eight percent of their market value during that period.

Taking a longer look, however, Dr. Doom is even more bearish. He thinks equities could lose half of their value in the coming years as the financial crisis continues no matter how the immediate “fiscal cliff” crisis is resolved:

I think the whole global financial system will have to be reset and it won’t be reset by central bankers but by imploding markets — either the currency markets, debt market or stock markets. It will happen — it will happen one day and then we’ll be lucky if we still have 50 percent of the asset values that we have today …

I think we lived beyond our means from 1980 to 2007, and now it’s payback time.

The day after Faber made his prediction the Commerce Department reported that U.S. retail sales fell in October, declining more than expected, even when taking Hurricane Sandy into account. Inside that report, building material sales fell nearly two percent, defying expectations that sales would rise as citizens made preparations for the storm.

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