Tuesday, November 13, 2012

Marc Faber on Equities Losing 20 Percent of Value

Marc Faber reiterated his position on stocks in 2013 in an interview with CNBC on its Squawk Box show, saying he expects equities to lose 20 percent of their value next year.

He added that the so-called fiscal cliff issue isn't even part of his consideration and reason for making his assertion.

"I don't think markets are going down because of Greece, I don't think markets are going down because of the "fiscal cliff" - because there won't be a 'fiscal cliff,'" Faber said.

Instead, Faber gives this as the reason stocks will get hammered:

"The market is going down because corporate profits will begin to disappoint, the global economy will hardly grow next year or even contract, and that is the reason why stocks, from the highs of September of 1,470 on the S&P, will drop at least 20 percent, in my view."

Faber rightly notes that what America and the world has needed to do is go through a period of pain in order for the economic system to correct.

He said, "There will be pain and there will be very substantial pain. The question is do we take less pain now through austerity or risk a complete collapse of society in five to ten years' time?"

"In a democracy, they're not going to take the pain, they're going to kick down the problems and they're going to get bigger and bigger."

That's the problem of course. Selfish politician only looking to retain their jobs won't touch the cutting back of spending because it immediately sets a special interest group against them.

Of course politicians created these groups of zombies in order to buy votes. Now they're stuck with them, self-forced to wait until an economic collapse forces real spending cuts and smaller government.

As Faber says, waiting until this happens will be more devastating to people, and it would have been better for some short-term pain in order to clean the system out.

I think the whole global financial system will have to be reset and it won't be reset by central bankers but by imploding markets....

Faber is correct. There is nobody in the world that really knows how long it'll take to play out. The pieces are in motion, and with no political will to solve the problem, they will reach their inevitable end.

Our investments and lives need to be ordered accordingly.


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