This article was published by The McAlvany Intelligence Advisor on Wednesday, August 26, 2015:
Marc Faber, the bearish financial commentator from Thailand whom financial talking heads in the media love to hate, really doesn’t care what people think. He’s old enough to know his own mind (he’s 69), and he’s been right often enough that his opinions carry plenty of weight. He’s also a curmudgeon. In his June 2008 newsletter, following the arrival of $600 “stimulus” checks in everyone’s mailbox, Faber wrote this, belittling the idea that much if any of that free money would help stimulate the US’s moribund economy:
The federal government is sending each of us a $600 rebate. If we spend that money at Walmart, the money goes to China. If we spend it on gasoline it goes to the Arabs. If we buy a computer it will go to India. If we purchase fruit and vegetables it will go to Mexico, Honduras, and Guatemala. If we purchase a good car it will go to Germany. If we purchase useless crap it will go to Taiwan and none of it will help the American economy.
The only way to keep that money here at home is to spend it on prostitutes and beer, since these are the only products still produced in US.
I’ve been doing my part.
On July 14 Faber told Barbara Kollmeyer at MarketWatch that it “wouldn’t surprise me” to see stocks decline 30 percent “sooner or later.” Little did he know that it would be sooner.
But he knew why: the market was overvalued, having touched all-time highs while more and more stocks in the S&P 500 Index were well off their individual highs. He thought that Walmart and Coca-Cola were good proxies for what is really happening in the economy:
Walmart shares peaked out in February and since then the stock has been moving sideways. As an economic indicator, Walmart is a very good symptom of what is happening to the consumer, and if their sales are flat or down, or Coca-Cola’s, in the US, it tells you something about the consumer….
And it’s long past time for a stock market correction:
We’re in the fifth year of a bull market that began on March 6, 2009. This is a very mature economic recovery….
When asked what he would say to Fed Chairwoman Janet Yellen if he met her in the elevator, Faber said he would say nothing:
It’s pointless to talk to Fed members about economics because they are academics who believe in money printing. Some of them believe they didn’t print enough, and so with these kinds of people it is like running to the pope.
What do you want to tell them? It’s pointless to spend time with these people, trying to convince them that their monetary policies have been very destructive.
If the S&P 500 index is listening to Faber, based on its high of 2,135 it hit in May, the bottom could be 1,495. It’s already well on its way, trading at 1,900 as this is being written.
And it’s been quite a ride. On Monday, the Dow dropped 588 points, the 8th worst single day stock market crash in U.S. history, and, as Michael Snyder pointed out in his Economic Collapse blog, “the first time that the Dow has ever fallen by more than 500 points on two consecutive days.” Circuit breakers were almost touched.
On Tuesday the predicted dead cat bounce appeared imminent, with the Dow up 300 points nearly all day, until the last 30 minutes. Gary North described the action:
I have never done this before. I watched the Dow gyrate for 30 minutes. Normally I pay no attention. But this time, I was trapped. It was like watching an arm wrestling match.
At about 3pm I checked the DJIA. It was up by 250 points, down 150 points from the high of 400. I watched for at least 30 minutes. It went under 100.
In the final 10 minutes it went negative. It hit -135 or so. Then it climbed back. It kept going above and below -100.
With five minutes to go, it got back to -26. Then the bottom dropped out. Down, down, down. It closed at -205.
I have never seen anything like this before … an internal dynamic was operating.
Is there any hiding place from the coming storm? Faber thinks so. In his July newsletter Faber highlighted gold and silver-mining stocks as among the very few sectors that were “extremely depressed and offer an opportunity for potentially very high capital gains.”
At the moment most other indicators are pointing south.
Sources:
CNBC.com: Marc Faber: Why US stocks could drop up to 40%
MarketWatch.com: Marc Faber, aka Dr. Doom, sticks to stock-swoon call
Newsmax.com: Marc Faber: US Stocks Can ‘Easily Drop 20 to 40 Percent’
EconomicCollapseBlog: BLACK MONDAY: The First Time EVER The Dow Has Dropped By More Than 500 Points On Two Consecutive Days
$600 government “stimulus” checks
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