INTERNATIONAL. Marc Faber the Swiss fund manager and Gloom Boom & Doom editor believes equities are ready to drop into October-November and then rally again towards the end of the year.
Writing in the October edition of The Gloom Boom & Doom report, Faber says the Fed will start printing money again and that would create a negative sentiment driving markets down. He doesn’t however see a threat to the March 2009 lows.
"Maybe the stock market won’t be very happy about additional stimulus, more interventions into the free market," he recently said, "though anything could happen, but let’s put it this way that I do not think that we will go and breakdown below the March 2009 level".
Faber sees a downside target of no more than 950 on the S&P on the pullback. Any break below 1,000 will rattle the Fed, he says, and rather doubts Federal Reserve Chairman Ben Bernanke will allow further market declines once 1,000 is reached.
Dollar extremely oversold
The US dollar is extremely oversold and investor sentiment is very bearish. As a contrarian, I would not be short the dollar right now, Faber says in his October report.
Gold correction possible
Faber also said there could be a significant correction in gold and other commodities as the dollar changes course. However any large decline would represent a buying opportunity, he argues.
The governments of every developed economy, including the US, the UK and Western Europe, will eventually default on their sovereign debts, so the one thing he will never do in his life is 'sell my gold,' Faber said in a typically outspoken observation earlier this year.
Explaining his bullion bullishness, the famed investor said: "Gold is not a liability of someone else, you really own it, you keep it in a safe deposit box, its quantity can not be increased at the same rate as you can print money which will eventually again weaken the US dollar. I am not saying that the dollar will go straight down, but eventually the purchasing power of money will lose."
Treasuries may become worthless
Speaking in an interview with German newspaper Handelsblatt, Faber said: "US Treasuries may become worthless as central banks, led by the Federal Reserve, print money in an effort to boost economies.
“Over the next 10 years, we won’t see any restrictive monetary policy anymore and no real interest rates above zero,” the legendary investor told the newspaper in comments published Tuesday.
Bond yields will “rise massively,” he told Handelsblatt.