Marc Faber Remains Adamant: Stocks Will Drop As Much As 30 Percent
Monday, 28 Jul 2014 09:43 PM
By Dan Weil
For months Marc Faber, publisher of the Gloom, Boom & Doom Report, has predicted that U.S. stocks would plunge, and for months they have repeatedly hit record highs.
The S&P 500 closed Monday at 1,978.91, within 1 percent of its record high.
But Faber is unbowed.
"I was looking for a correction, but now I really think that we'll make peak sometime within the next 30 to 60 days. And then go down meaningfully," he tells CNBC.
He thinks a 20 to 30 percent drop is coming by October. "Don't forget many stocks are already down 10 percent," Faber notes.
"The homebuilders are down roughly 15 percent. Airlines have just dropped around 10 percent. So, we're not exactly in a uniformly strong market." He notes that the Russell 2000 index of small stocks has slipped 2 percent so far this year.
The Federal Reserve's massive easing program has boosted stocks, Faber explains. Meanwhile, companies, flush with cash aren't increasing their capital expenditures.
"What they do is to buy other companies, because their currency, their shares, are a good way to buy other companies." That, rather than individual investors, has pushed stocks higher, he argues.
"There has been very little individual buying."
So where should investors put their money?
"I would buy Hong Kong shares because I think that the Chinese stock market is breaking out on the upside, and that will lift also Hong Kong shares. So that is a trade I would do at the present time," Faber adds.
Esteemed investor Mark Cook, who was featured in Jack Schwager’s book "Stock Market Wizards," also is bearish on stocks. He sees a 20 percent drop or more within a year, according to MarketWatch.
Cook uses a proprietary measure called the "Cook Cumulative Tick" to predict market moves. His index combines the NYSE Tick, which represents the number of NYSE stocks ticking upward minus the number ticking downward, with stock prices.
Now stock prices are rising, and the NYSE Tick is falling.
"There have been only two instances when the NYSE Tick and stock prices diverged radically, and that was in the first quarter of 2000 and the third quarter of 2007. The third time was April of 2014," Cook explains. Stocks eventually crashed after the first two instances.
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Poster Comment:
Get ready to pull up your bootstraps. It may be a tough ride. ;)