• Sprott Money
    05/06/2016 - 06:03
    The US, in its own decline, is showing this same self-destructive tendency. The worse things get, the greater the inclination of the citizenry to say, “Carry on, everything’s fine.”

Marc Faber Sees A 1987-Like Crash Approaching

Tyler Durden's picture




 

When given the opportunity to expand on his thoughts, Marc Faber, of the Gloom, Boom, & Doom Report, provides dismally clarifying detail on the state of the world. In this excellent (must-watch on a day when nothing changed but European stocks dead-cat-bounced) Bloomberg TV interview, the admittedly ursine Faber reflects on the US (slowing of revenue growth and the real linkages to European stress) noting that unless we get a huge QE3, there will be "a crash, like in 1987" noting he believes we have seen the highs for the year; on the likelihood of QE3 (agreeing with us that the Fed won't act unless asset markets plunge first); on Greece's exit of the Euro and whether policy-makers can manage the exit properly "bureaucrats in Brussels and the media are brainwashing everybody that if Greece exited the euro, it would be a disaster. My view is the best would be to dissolve the whole euro zone"; on the difference between investment markets and economic reality (thanks to financial repression); and on the global race-to-debase "I do not have a high opinion of the U.S. government, but the bureaucrats in Brussels make the government in the U.S. look like an organization consisting of geniuses. The bureaucrats in Brussels are completely useless functionaries".

Faber on whether he still thinks that profit margins will shrink and record profits seen will be no more for U.S. corporations:

"Yes, if you look at the statements by corporations, it is very clear. Earlier on, you had a commentator who said the exports to Europe from the U.S. are irrelevant. I agree with that. What is relevant are the businesses of American corporations in Europe and the earnings they derive from these businesses. That is definitely slowing down. The revenue growth is slowing down and, in my view, you will have more and more corporations that report earnings that are actually good but they do not exceed expectations…The bottom line is I think the market will have difficulty moving up strongly on less we have a massive QE3 and if it moves here and makes the high above 1422, the second half of the year could witness a crash."

 

"A crash, like in 1987…because the market would become technically very weak. I would expect the market making a new high. If it happens, it would be a new high with very few stocks pushing up and the majority of stocks have already rolled over. The earnings outlook is not particularly good because most economies in the world are slowing down. People focus on Greece but Greece is completely irrelevant. What is relevant are two countries -- China and India -- 2.5 billion people combined. They are a huge market for goods and these economies are slowing down massively at the present time."

On whether more Fed stimulus will put a floor on the S&P 500 this year:

"Yes, I think we had a rally that began March 2009 at 666 on the S&P. We made an orthodox pop a year ago on May 2, 2011 at 1370. Then we made a new high on April 2 of this year. The new high was not confirmed by the majority of shares and many shares are already down 20% or so and every day, there are shares that are breaking down or they no longer go on good news which is a bad sign. I think maybe we have seen the high from the year unless you get a huge QE3. That may not be forthcoming."

On whether the Fed will issue QE3:

"I think that QE3 will come, but it depends on asset markets. If the S&P dropped  here another 100-150 points, I think that QE3 will occur.  But if the S&P bounces back and we are above 1400, I think the Fed will essentially be waiting to see how the economy develops. The economy in the U.S. consists of different economies, some of it is very strong. I was in southern California and there the economy is doing fine. In other places, it is not doing fine. It is not universally bad. Compared to other countries, it is actually doing relatively well."

On whether Greece will exit the euro:

"There is a very good chance they will exit the euro and it would have been desirable if the euro countries had kicked out Greece three years ago. It would have saved a lot of agony. As a result of the bailout, the problem has become bigger and bigger and bigger."

On whether policymakers can manage the exit properly:

"I think it would be much better for Greece and the entire euro area if Greece were kicked out. Spain kicked out. Italy out and even France should be out. At the end you just have Germany with the euro. The other countries can have their own currencies and still trade and use the euro as an international currency."

 

"The bureaucrats in Brussels and the media are brainwashing everybody that if Greece exited the euro, it would be a disaster. My view is the best would be to dissolve the whole euro zone and that the countries would go back to their own currencies and still use the euro as an international currency the way you travel through Latin America and with a dollar you can pay anywhere you with. In my view, that would be the best. These countries that have financial difficulties, you will have to write off their debts and make it difficult for them to access the capital market in the future. Just to keep bailing them out will increase the problem. It will not solve the problem."

On how economic catastrophe can be avoided if the euro is dissolved:

"Explain to me why there would be an economic catastrophe. Many countries have pegged currencies have given up the peg to another currency and it was not a catastrophe. The public has been brainwashed that the breakup of the euro would be a complete disaster when in fact, it may be the solution."

On whether there will be a race to the bottom among various countries to devalue their own currencies if the euro is dissolved:

"I do not have a high opinion of the U.S. government, but the bureaucrats in Brussels make the government in the U.S. look like an organization consisting of geniuses. The bureaucrats in Brussels are completely useless functionaries and they want to maintain their power. They always talk about austerity being bad but if you look at the government expenditures of the EU, in 2000, it was 44% of GDP. Since then, it has grown by 76% under the influence of the Keynesian clowns and now it is 49% of GDP. That is the problem of Europe -- too much government spending and lack of fiscal discipline."

On whether it's a mistake to short the euro:

"I want to make this very clear -- the investment markets may move in different directions than the economic reality because if you print money. That's why in the Bloomberg poll, Mr. Bernanke is viewed so favorably because fund managers and analysts and strategists, they are only interested in having stocks up so their earnings increase and their bonus pool increases. But in reality, the economy can go downhill and stocks can go up just because of money printing and in Europe, the ECB has proven now that they are very good money printers."

On where to invest in Europe:

"Actually, usually when socialists come in or there is a crisis such as we have in Greece, it occurs usually near market lows. If someone really wanted to take speculative positions, he should look at quality non- financial stocks in countries like Spain, Italy, France, and Greece. I think rebound is coming. The market on a short-term basis is oversold. But if you look at the market action -- first of all, we made a low on the S&P last October at 1074. We went to 1422. The market is down from 1422 to less than 1360. The whole world is screaming we're in a bear market. This is a minor correction. I think it may become a more serious correction as the technical picture of the market has deteriorated very badly and as the S&P made a new high this year on April 2nd, all the European markets are lower than they were a year ago."

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Thu, 05/10/2012 - 12:29 | 2413574 holdbuysell
holdbuysell's picture

Prediction for the day it happens:

The next trading day after Brian Sack steps down.

Thu, 05/10/2012 - 12:30 | 2413581 Clueless Economist
Clueless Economist's picture

My models show Faber has a 50/50 chance of being correct.

Thu, 05/10/2012 - 12:32 | 2413588 Clueless Economist
Clueless Economist's picture

...but my Models also calculate that 5 Trillion jobs have been created or saved by President Obama.

Thu, 05/10/2012 - 12:34 | 2413596 Popo
Popo's picture

Faber has been predicting infinite QE response as well.   Seems to me he's doing a little bit of betting on both sides of the coin now.

Thu, 05/10/2012 - 12:44 | 2413642 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Everyone is.  Even Tyler is.  Inflation, deflation, these terms are irrelevent now.  Stock prices are irelevent.  Fiat's value, although it only hs perceived value as it has no intrinsic worth, is all that matters.  The Central Bankers, these mizers of economics, now have the wind at their backs as their balance sheets are flush with cash.  They can ofer the opportunity of loans by the bushel, and usher in the greatest move in the "money" supply ever known, and only with a simple lending technique:  that of the fractional reserve.

Thu, 05/10/2012 - 12:55 | 2413689 SheepDog-One
SheepDog-One's picture

I simply dont see it, this wave of pent-up loan activity that will be next. How the hell do a bunch of bankrupt unemployed people spark a flurry of fractional reserve loan activity?

Thu, 05/10/2012 - 13:01 | 2413704 Dr. Richard Head
Dr. Richard Head's picture

Someone has to unload those lots stuffed full of Government Motors cars.  Cadillac CTS here we go. 

Thu, 05/10/2012 - 13:06 | 2413719 SheepDog-One
SheepDog-One's picture

Pieces of junk.

Thu, 05/10/2012 - 13:40 | 2413841 Gringo Viejo
Gringo Viejo's picture

You wanna talk about junk? I gotta warehouse full of "Invisible Pedestrian" Halloween Costumes I bought last August. They ain't movin' at all. If anyone's interested, I can give you a good price on the costumes and some Tony Perkins' shower curtains.

Thu, 05/10/2012 - 13:12 | 2413740 Oh regional Indian
Oh regional Indian's picture

It's even simpler than that Doc.

When they finally start lending, rates will be floating and people will be desperate.

Businesses will take what-ever money at some point. Then comes the squeeze, in-evitable rate-raising....bingo....real asset confiscation.

And of course businesses will build models to justify takign such loans because at a point, balls to wall, you take whatever.

that is how I see it playing out.

ori

mt-whitney-to-tanggula-pass-obliquely

Thu, 05/10/2012 - 13:26 | 2413788 Dr. Richard Head
Dr. Richard Head's picture

No shit. I neglected to figure in variable rates horseshit. 

I thank my stars that our company has no debt, the irrevocable trust does not allow board members to take on debt, and we have a strong cash flow. 

Thu, 05/10/2012 - 13:28 | 2413803 Oh regional Indian
Oh regional Indian's picture

Wow, a debtless company in this day and age? When I launch my next, I'll put in such a clause too. No Banking Santa Clauses for anyone!

ori

Thu, 05/10/2012 - 13:41 | 2413856 Dr. Richard Head
Dr. Richard Head's picture

The law firm that put together the trust tried, over my loud objections, to force in borrowing provisions against private compay shares FOUR seperate times.  The law firm would sneak it into different parts of the trust after each request was made for it to be removed.  Each conference call just made me boil. 

Before the final draft came, I sternly objected to the lending provisions to the Chairman of the Board citing the various ways our company could be destroyed under that premise.  He said I misunderstood what the firm was doing and asked me to have a conference call with him and the firm.  He point blank asked, "Can any board members put their shares up as collateral for a loan?"  His answer was "Yes."

After a wide-eyed discussion the Chairman understood what I was getting at and the fifth request for removing the debt verbiage was honored.  I wonder if the firms insistance that it be there had anything to do with the firm being the last in line of the trust after depedents of board members are dead.  Would be a cash cow of leverage in this company.  Bunch of fuck tards.

Thu, 05/10/2012 - 13:49 | 2413890 Oh regional Indian
Oh regional Indian's picture

Lawccountants, the worst of the worst. If all you can see is fees, fees and more fees...

That is an interesting anecdote, thanks for sharing.

ori

Thu, 05/10/2012 - 13:40 | 2413830 iDealMeat
iDealMeat's picture

Not so for Small biz.  I see them using this economy to get rid of shitty employees and cutting to the point to where the core just says fuck the fiat and get by making what they like to do.

On the other hand if the core of the co. are shitty people the company is going to crash regardless of how much fiat they have.

The real producers and people with normal and practical morals are waking up in droves. They're sick of the bullshit..

The massive economic reset is coming.

Prepare, and enjoy the show.

 

Thu, 05/10/2012 - 13:00 | 2413706 FlyoverCountryS...
FlyoverCountrySchmuck's picture

A 'Loan' is just free money, if you never intend to pay it back.

Thu, 05/10/2012 - 13:04 | 2413711 The Big Ching-aso
The Big Ching-aso's picture

 

 

Whenever Faber shows up on ZH I'm fairly certain it ain't gonna be about positive economic developments during a global depression.

Thu, 05/10/2012 - 13:20 | 2413772 redpill
redpill's picture

What positive economic developments?

Thu, 05/10/2012 - 13:50 | 2413898 DaveyJones
DaveyJones's picture

does a 1987 style crash include a Bon Jovi revival?

Thu, 05/10/2012 - 14:00 | 2413945 Dr. Richard Head
Dr. Richard Head's picture

Calling Mr. Banzai - Ben Bernanke doing a version of Living on Prayer.

"Take my hand, we'll make it I swear."

Thu, 05/10/2012 - 14:10 | 2413976 DaveyJones
DaveyJones's picture

I like this comment on an OilDrum article on Norwegian production drop:

Thanks for a great article Rune. Figure 5 says it all. That is, these new discoveries will slow the decline down for a couple of years but there is no real game change in them. I have used the EIA's Crude + Condensate numbers below to show Norway's decline rate since their peak in 2001. The decline starts off slow at first then speeds up as more and more fields go into decline. The average decline rate for the last seven years, 2005 thru 2011, is 7.77 percent. That is the total decline of all fields meaning that any new fields coming on line during that period would subtract from the total decline, bringing the average decline down to 7.77%.

Norway C+C production in kb/d according to the EIA.

Year C+C Prod. Decline from previous year 2001 3,226 0.15% 2002 3,131 -3.06% 2003 3,042 -2.91% 2004 2,954 -2.97% 2005 2,698 -9.51% 2006 2,491 -8.33% 2007 2,270 -9.71% 2008 2,182 -4.05% 2009 2,067 -5.54% 2010 1,869 -10.60% 2011 1,752 -6.68%

From examining the decline rate of fields all over the world it is obvious that the new discoveries, due to their small size and great depth and pressure, have a much higher decline rate than the much older giant fields. I have noticed that some of the fields in the Gulf of Mexico have a decline rate of 15% or greater.

Thu, 05/10/2012 - 21:25 | 2415809 Seer
Seer's picture

Jevons Paradox in full display.

Greater the efficiency the greater the draw-down.  "Strength through exhaustion!"

Thu, 05/10/2012 - 23:51 | 2416182 DaveyJones
DaveyJones's picture

yup

Fri, 05/11/2012 - 01:09 | 2416279 All Risk No Reward
All Risk No Reward's picture

Or they can maximize the amount of cash they indebt the public with, bust the public and take all their chit.

You are demon spawn squid, what do you do?

1. Rob society, bust them, take all their chit and enslave them.

2. Bail out debtors and zero out your trillions in debt and cash holdings?

QE has never been about fixing the economy - it was engineered to be a societal asset stripping Ponzi Scheme.

Debt Money Tyranny

http://www.keepandshare.com/doc/3325954/debt-dollar-tyranny-2-54k?tr=77

Weapons of Mass Debt

http://www.keepandshare.com/doc/3324744/wmdebt-graph-3-79k?tr=77

Keep and Share is a PDF hosting link - nothing nefarious about it.

The Fed hasn't lied about its mandate and broken its true mandate for 25 years to bail out debtors and wipe out the Owners of the companies that put their employees on the Fed's Board of Directors.

No way.

QE represents the inner party using tax payer issued debt to prop up markets so the inner party can "quantitatively ease" the amount of money they could lose in the markets.  Period.

They can't tell you that, so you they LIE to you.  All you who think the Fed has a dual mandate, look at the Section 2A of the Federal Reserve Act and read it.  The mandate is singular (and listed in the Weapons of Mass Debt PDF link above).

Thu, 05/10/2012 - 12:34 | 2413601 Aziz
Aziz's picture

I respect Marc Faber more than I respect myself, but I see an A.D. 476-like crash coming.

Thu, 05/10/2012 - 13:24 | 2413785 Oh regional Indian
Oh regional Indian's picture

Really Aziz? More than yourself? I'd suggest you get rid of all your mirrors, it works to build that self respect back up. ;-)

But really Aziz? AD 476? New Dark Ages set to begin? That sounds like the only darker sentiment for the future than my own eschatology that I have heard.

I'll take a clean slate over a dark age any day. Tsunamis, Volcanoes, Liquidity (Ahhh) Injections (ouch)....

ori

Thu, 05/10/2012 - 13:42 | 2413861 Aziz
Aziz's picture

476 wasn't the end of the world, Ori. Greater things came out of humanity after the fall of the Classical world (eventually). But sometimes I think Mother Nature likes to clean out all the debris...

Thu, 05/10/2012 - 14:19 | 2414017 Oh regional Indian
Oh regional Indian's picture

But then those greater things got subsumed in greater darkness Aziz. it's all cyclical anyways, you know that all too well. Question is, is it Super wave time of just a wee ripple in the fabric.

ori

Interesting, looks like 6 ZHer's do not understand the word eschatology and lack a sense of humor to boot.

Thu, 05/10/2012 - 21:27 | 2415821 Seer
Seer's picture

Super Dave...  I really liked that guy!

It'll be super, that you can count on.

Thu, 05/10/2012 - 15:03 | 2414219 xela2200
xela2200's picture

Classical "world" or a portion of Europe? Other parts of the world were doing just fine at the time. Rome was not the whole world. As a matter of fact Rome was not even Rome by then. Constantinople did very well for a few centuries afterwards. If the US was to crash now in huge magnitude, it would take the whole world down with it. We would see wars and famine like nothing ever seen before in History. We still have the means to produce. What we have is too much debt and a default, as painful as it will be, would clear that out just like Iceland and many countries before.

Sorry I just don't see 476 as a good example.

I can see ORI just still can't seem to make any friends in this forum.

Thu, 05/10/2012 - 15:35 | 2414344 Oh regional Indian
Oh regional Indian's picture

Xela, making friends is easy, you just nod with the group. What a waste.

ori

Thu, 05/10/2012 - 12:37 | 2413612 jus_lite_reading
jus_lite_reading's picture

...bu... bu... but ROMNEY SAYS HE WOULD CREATE 500k jobs PER MONTH if he is elected!! He is a genius!! How can you NOT believe him? Why didn't we vote for him to begin with?? I mean any man with a net worth of $300 MILLION is certainly in touch with reality and Main Street USA!! HE KNOWS!!

 

...

 

 

...

 

 

SARC OFF

 

 

GAME OVER!!

Thu, 05/10/2012 - 12:41 | 2413624 XitSam
XitSam's picture

You mean Romney is promissing the same thing Biden promissed two years ago? Then it must be true...bipartisan cooperation.

http://www.jammiewf.com/2012/flashback-biden-predicts-500000-jobs-each-m...

/sarc

Game over, dude.

Thu, 05/10/2012 - 12:57 | 2413641 The Big Ching-aso
The Big Ching-aso's picture

 

 

The 1987 crash pales vs 1929 crash which pales vs the next bigger crash.  I think I'm feeling pale.

Thu, 05/10/2012 - 13:36 | 2413829 jus_lite_reading
jus_lite_reading's picture

Idiots who thumbed down my post have no sense of humor or insight... read it again and you'll see, it doesn't matter if you vote for Obumbo or Romney because they are both the same puppets...

Thu, 05/10/2012 - 16:48 | 2414579 cbxer55
cbxer55's picture

I gave you a thumbs up. I understand sarcasm and facetious commentary all too well. ;-)

Thu, 05/10/2012 - 12:49 | 2413656 sabra1
sabra1's picture

my models show oBLAHma and cohorts going to hell, where they shall all suck shit thru a straw!

Thu, 05/10/2012 - 13:28 | 2413794 Kayman
Kayman's picture

Those odds are too favorable.

Thu, 05/10/2012 - 13:28 | 2413804 Clayton Bigsby
Clayton Bigsby's picture

Seriously betty liu is a fucking retard - can we please get somebody smart to ask these people some questions or is there no one left?

Thu, 05/10/2012 - 13:41 | 2413847 wisefool
wisefool's picture

Bloomberg is cutting lots of staff. Too bad, as they are the only financial network that is a) free b) not completely owned by G.E./Turner/FoxCorp.

Thu, 05/10/2012 - 14:14 | 2413977 SMG
SMG's picture

Won't crash for sure before the Facebook robbery IPO next Friday.

Thu, 05/10/2012 - 19:44 | 2415451 Buck Johnson
Buck Johnson's picture

Farber is correct, but I don't think all US corporations will be doing bad.  But what scares me the most is the fact that the past few weeks there has been an increase in reporting that much of China's financial and economic data is false.  And if that is so and they have papered over a recession/depression then we may see severe cutbacks in the US corporations.

Thu, 05/10/2012 - 12:31 | 2413586 falak pema
falak pema's picture

I found my thrills on blue berry hill when I met Milken. In 1987 flash storm the index fell 10-15% but it survived.

And today?

Thu, 05/10/2012 - 12:40 | 2413618 holdbuysell
holdbuysell's picture

Did they have rehypothecation chains that extended from here to the moon at that time?

The sounds of those chains breaking would be similar to the sound coming from a popcorn popper in full tilt.

Thu, 05/10/2012 - 12:35 | 2413600 jus_lite_reading
jus_lite_reading's picture

I have had so many former clients call me up asking what to do since their assigned manager is spewing the BS recovery propaganda to them.. and I tell them like it is..

BUY GOLD AT ANY PRICE... don't concern yourself with daily fluctuations... all you need to know about the global economy is this---- the whole world is drowning in ponzi debt and the CB's of the world will print to infinity... there will be NO recovery so long as they continue to print, which they will, god forbid a major catastrophe like a M9.9 earthquake hits LA (and then then will REALLY PRINT like you have never seen) and the only store of value will be gold, guns and green beans when the shit hits the fan...

Like Tyler says, they will print, until they can't... math agrees

Thu, 05/10/2012 - 13:40 | 2413844 Free Markets
Free Markets's picture

How can a money manager spew anything but a recovery?  If his client is in cash, how does he make money?  This is an honest question.  He will not make any money on GLD or gold coins.

Thu, 05/10/2012 - 13:49 | 2413896 jus_lite_reading
jus_lite_reading's picture

>>"How can a money manager spew anything but a recovery? "<<

Correct. As I have said, they must sell the whole "the sun will come out tomorrow" BS. The majority of UHNW/HNW clients are educated and well informed. Many didn't by the BS then, they don't buy it now. Every once and a while, some rich oil tycoon from Texas would just buy anything because he didn't care to lose... he would be moved into the high risk high margin asset classes...

The rules have changed since 2008 and was the main reason I retired...

I want to be judged by my integrity and honor, not by how much wealth I amassed... 

 

Thu, 05/10/2012 - 14:12 | 2413984 Temporalist
Temporalist's picture

They don't teach integrity or honor in school any longer.

Thu, 05/10/2012 - 15:11 | 2414256 xela2200
xela2200's picture

First day of business school I was taught that the purpose of business is profit. What we need is not to teach integrity in school but critical thinking. Integrity is learned at home. Schools are for learning trades or profession not moral values. It is the over reliance in schools that cause many of these problems in the first place.

Thu, 05/10/2012 - 12:35 | 2413602 Timmay
Timmay's picture

Speaking of Predictions.....  Ron Paul is F-ing Nostradamus.

 

http://youtu.be/meFjza6BpEA

Do NOT follow this link or you will be banned from the site!