'I think a correction is overdue,' says Marc Faber
Source: BI-ME , Author: BI-ME staff
Posted: Fri October 29, 2010 11:31 am

INTERNATIONAL. Marc Faber the Swiss fund manager and Gloom Boom & Doom editor says the next round of quantitative easing may disappoint investors and may trigger a market correction, ultimately pushing the Fed to launch QE3, QE4, QE5 and many more QEs.

Speaking with Margaret Brennan on Bloomberg Television's "InBusiness" on Tuesday, Faber said the next round of quantitative easing will be interesting to watch as a lot of QE2 has already been discounted and may have the unintended consequence of prompting a market correction.

"Back in July- August, investors were very bearish on the market. What then happened is that September was very strong and October was a reasonably good month... and the market has gone from a low on July 1st of 1010 on the S&P, to close to 1200," he said.

I suppose Mr. Bernanke will somehow disappoint investors with QE2 and watch the market reaction, Faber anticipated.

"If the market really sells-off, you [the fed] can then increase QE2 or launch QE3...QE4...QE5 and many more QE's", he added in a quote reminiscent of his recent  "They will print and print and print until the final crisis wipes out the entire system"

Asked what would disappoint the markets, Faber predicted " anything under US$1 trillion" because he believes the market is overstretched.

"We are in the inflation trade again," he noted, highlighting "a weak dollar, strong precious metal prices, strong equity prices especially in emerging markets and now in frontier markets, plus strong industrial commodities".

"So, I think a correction is overdue," he stressed.

Faber, who predicted the stock market crash in 1987 and turned bearish shortly before the 2007-2009 bear market, dosn't think the bear market is around the corner this time.

He sees a potential correction in the stock market and precious metals as a good buying opportunity.

"We will have a crack on booming stocks and in commodities like between the end of 99 and March 2000 when the market went up very strongly," he said.

Asked about his advice to investors, Faber told Brennan his major recommendations over the last few months were agricultural commodities. He also continues to recommend the accumulation of precious metals, because he thinks they are overdue for some kind of correction and then "we'll get the next move up next year."

Speaking to Ben McLannahan in a Financial Times interview on Monday, Faber said investors should accumulate gold but shouldn't market time the gold market "because we are going to have volatility".

"If I look at the faces of Tim Geithner, Ben Bernanke, Mr. Obama and Larry Summers, that's sure that I will never sell any gold."

"As long as these people are structuring economic policy, fiscal & monetary policy and foreign policy, no thank you, I will keep my gold, I will not buy paper money," he stressed.

Note:  Dr Marc Faber was born in Zurich, Switzerland. He went to school in Geneva and Zurich and finished high school with the Matura. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics. Between 1970 and 1978, Dr Faber worked for White Weld & Co in New York, Zurich and Hong Kong.

Since 1973, he has lived in Asia. From 1978 to February 1990, he was the Managing Director of Drexel Burnham Lambert (HK). In June 1990, he set up his own business which acts as an investment advisor and fund manager.

In 2000 Faber decided to spend more time writing his newsletters as well as growing his advisory business. He moved back to his home in Chiang Mai, Thailand, maintaining only a small administrative office in Hong Kong.

Dr Faber publishes a widely read monthly investment newsletter 'The Gloom Boom & Doom Report' report which highlights unusual investment opportunities, and is the author of several books.



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