Marc Faber, editor of the Gloom Boom Doom Report, and the man who said in early April he expects “massive wealth destruction” ahead for investors, also expects a 1987-style stock market crash if U.S. stocks continue to rally without further Fed stimulus.
“I think the market will have difficulties to move up strongly unless we have a massive QE3,” Faber told Bloomberg’s Betty Lui on Friday. “If it moves and makes a high above 1,422, the second half of the year could witness a crash, like in 1987.” Sign-up for my 100% FREE Alerts
Faber’s comments about the market’s dependency upon further Fed ‘quantitative easing’ come off the heels of TrimTabs CEO Charles Biderman statement of Apr. 30, when Bidrman said in a weekly update, “It’s the Federal Reserve that controls the market” and “we play with their money that they print or stop printing.”
The wealth effect of record U.S. housing prices, robust credit-driven consumer spending, an employed workforce, and an economy fueled by ever-increasing debt has disappeared for the most part, leaving investors with little money to buy stocks. And if there is money left over, the retail investor is buying bonds or parking extra cash in money market accounts in fear of the next show to drop in Europe, with fallout across the Atlantic anticipated to spill over to the U.S.
Collective market wisdom says that stocks have risen due to a natural rebound from oversold conditions in March 2009, relatively high dividend yields compared with Treasuries, and massive liquidity provided by the Fed. But Faber feels that earnings expectations are too high and could disappoint, and that many companies paying out dividends from earnings could level off, be cut, or eliminated by some companies all together.
read full article Marc Faber Fears Stock Market Crash | Survivalist Investor
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