"There is a colossal bubble in all asset prices and eventually it will burst," is the subtle recurring message from The Gloom, Boom, & Doom Report's Marc Faber, warnings that "maybe has begun to burst already." While Faber admits he has called for such a correction previously, he notes that the difference now is that "valuations are so much higher; and contrary to what the mainstream economists believe, I don't believe the global economy is strengthening; in fact I believe it is weakening." Furthermore, while "you never know what will trigger for a bull market or bear market is until after the fact," Faber offers 3 factors (aside from the Fed) that could trigger a 30% crash or more... beginning with "a) In The White House we have a very poor President - which will lead to political issues domestically in the US," which are not priced in.
Annotated Transcript:
"There is a colossal bubble in all asset prices and eventually it will burst.. and maybe has begun to burst already"
"We are not going to have a 'correction'; but we are going to have a bear market"
"You never know what will trigger a bull market or what will trigger a bear market - you only know it after the fact"
"When markets peak out, nobody can believe that it could go down and we have an environment where everybody puts their faith in central banks printing money - and therefore asset prices cannot go down"
"I look for 30% - if you can't buy something with the expectation that it could drop 30% then don't even get out of your bed in the morning because we have within markets now a lot of volatility" - no matter how obscured it is by the VIX.
While Faber admits he has called for such a correction previously, he notes that the difference now is that "valuations are so much higher; and contrary to what the mainstream economists believe, I don't believe the global economy is strengthening; in fact I believe it is weakening."
Analysts are all bullish for the next quarter's earnings but as Faber says "I have never met an analysts who predicted a downturn in earnings"
The fact is simply, he notes "earnings have been boosted by stock buybacks not by revenue growth and earnings are grossly inflated due to artificially low interest rates... don't rely on analysts expectations as of today."
Faber thinks there are other factors that could drive prices down aside from a Fed that raises rates sooner rather than later (which he doesn't expect)
a) In The White House we have a very poor President - which will lead to political issues domestically in the US (which are not priced in);
b) we have numerous geopolitical issues to consider (that are not priced in); and
c) We could have potentially a much higher oil price (which is not priced in)
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The rest of the clip offer sup a Gartman vs Schiff debate over the merits of gold... worth the price of admission (and a desparate attempt by Gartman to explain how he was so wrong about Corn)
