The bear market is on its way
back, economist and contrarian investor Marc Faber, the editor and publisher of
The Gloom Boom & Doom Report told CNBC Tuesday.
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Axel Griesch |
ASFM | Getty Images
Dr. Marc Faber
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The S&P 500
[.SPX 1370.26 
-17.31 (-1.25%)
]
has risen steadily since hitting its lowest point of the previous decade in
March 2009.
-17.31 (-1.25%)
]
has risen steadily since hitting its lowest point of the previous decade in
March 2009.
Markets have been more turbulent
in recent months as debt crises in both the US and the euro zone threatened to
damage growth there.
"The Treasury market is telling
you that the economy is in recession," said Faber. "So if the bond market is
telling you that the economies of the Western world are weakening, but at the
same time the stock market is still relatively high, I think the stock market is
vulnerable."
He added his voice to those
criticizing politicians in the US and elsewhere over the current problems.
"The politicians are all useless
individuals. Nobody is reducing the problems in the US or Europe, just putting
on a band aid and postponing the problems endlessly," he said.
"Some analysts think that there's
a chance economic data will surprise on the upside but I think, if anything, it
will be on the downside," Faber added.
He believes that some companies
will start to disappoint in the second half of this year.
China Bigger Risk
Second-quarter results so far have
been a mixed bag, with major European banks such as BNP
Paribas and Barclays announcing
disappointing results on Tuesday, while earlier in the week
Motorola and engineering giant
EADS performed better than expected.
The most recent plan for US debt,
which the Senate will vote on Tuesday afternoon, involves more than $1 trillion
of spending cuts and a hard-won raising of the debt ceiling.
Faber argues that China
disappointing "is a much bigger risk for the global economy than the US because
the US is no longer a major commodities buyer".
He believes that the impact of a
decline in Chinese growth on the oil price could be critical for major
commodities producers like Canada, Australia and the Middle East.
"If commodity prices are falling,
then commodity producers will buy fewer goods from China," he pointed out. "This
is something that the world central bankers can't deal with."
Food price inflation is more of a
problem in emerging markets than in the developed world as food is typically a
much bigger part of annual spend in poorer countries, Faber pointed out, arguing
that this could lead to worse than expected growth in China.
Faber, who describes himself as
"ultra-bearish", said that he thinks that precious metals are the best place to
be at the moment.
Despite worries about major euro
zone economies including Italy, he is relatively bullish on the survival of the
euro.
"What surprises me more is
actually the strength of the euro and that it has not collapsed yet," he said
He believes that peripheral
economies which drag down the euro will eventually be "chucked out" of the
single currency.
"I would have chucked out Greece
three years ago, straight away, and it would have been much cheaper," Faber
said.
Gold's
[XAU= 1651.64
-6.94 (-0.42%)
]
position as a safe haven will continue to keep prices close to their recent
historical highs, Faber believes. He said that he would buy gold if it falls
below $1500 per ounce again.
-6.94 (-0.42%)
]
position as a safe haven will continue to keep prices close to their recent
historical highs, Faber believes. He said that he would buy gold if it falls
below $1500 per ounce again. 
The Bear Market Is Starting by Marc Faber is a very interesting scoop. Thanks for the lead because none of the Canadian NEWS MEDIA MUPPETS broadcast and negative stories like this.
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