Friday, May 15, 2009

Marc Faber: This was a Central Bank Printing Press Rally

Have a good weekend and the US is doomed.

Marc Faber

Below we have two videos and two stories from the original Dr. Doom (and Gloom, and Boom) Marc Faber. Of course he is hidden over at CNBC Asia because this sort of talk is too gloomy for airing during hours the normal American would be viewing. Remember, these green shoots are still fragile. This gives us two leading long term strategic minds (along with Jim Rogers) thinking along almost identical paths. [Mar 19, 2009: Both Marc Faber and Jim Rogers Predicting Civil War or Unrest] George Soros is not too far behind the same curve either.

First the videos

After GDP data showed countries within Europe contracted again in the first quarter, Marc Faber, author & publisher of 'The Gloom, Boom & Doom Report, doesn't see the global economy recovering "anytime soon." Bob Parker from Credit Suisse joins the discussion.

Asian banks don't have the same problems with toxic assets that are affecting Western markets, Marc Faber, editor & publisher of 'The Gloom, Boom & Doom report,' told CNBC


Related articles - CNBC: Money Printing Pushed Stocks Up

Major central banks' efforts to lift the world economy by printing money have boosted asset prices, so stocks are unlikely to hit their lows from November and March, Marc Faber, the author of "The Gloom, Boom & Doom Report," wrote in his latest research report.

"I have explained repeatedly in the past that if a government is really determined to try and postpone an inevitable collapse by 'printing money' in order to lift or support asset prices, it can be done," Faber wrote.

"This is not to say that the global economy is about to embark on a strong and sustainable growth phase. It also doesn't mean that a new bull market in global equities a la 1982-2000 has begun," he said.

"But I think that, at least in nominal terms (inflation-adjusted), the global printing presses being run by the world's central banks and fiscal deficits have begun to impact asset prices positively," Faber wrote.

Many investors did not take advantage of the recent rally because they thought it was a bear-market rally, so they stayed on the sidelined, hoarding cash. But stocks are not likely to collapse, as more players take courage to dip into the market, he said.

"Put yourself in the shoes of a fund manager who, in the last 18 months, has lost 50 percent of his clients' money and missed the recent rally," Faber wrote.

"What is he likely to do? I would think he would be inclined to purchase equities as they correct the sharp advance since early March, especially as the economic news in the near term becomes less negative," he said.

But very high volatility and "price fluctuations that don't appear to make any sense" will be the new dominant characteristic of the market, he warned.

The lows reached by resource and mining stocks, as well as Asian equities and most emerging markets, are likely to hold for now, according to Faber. But the US long-term government bond market "has the highest probability" of having reached a high, he said.

And - CNBC: Capitalism Could Fail Like Communism

A sustainable recovery will occur only when the corporate system will be cleaned of losses and capitalism risks collapsing if this does not happen, Marc Faber, the author of "The Gloom, Boom & Doom Report," told CNBC Friday.

The central banks will continue to print money at full speed, but long-term this strategy will lead to a fall in purchasing power and living standards, especially in developed countries, Faber said.

The years 2006 and 2007 were "the peak of prosperity" and the world economy is not likely to return soon to that level, he added.

"I think the final low in markets will occur when the system is cleaned out," Faber said.

Unless the system is cleaned out of losses, "the way communism collapsed, capitalism will collapse," according to Faber. "The best way to deal with any economic problem is to let the market work it through."

US Will Go Bust

The Federal Reserve's policy of printing money is destabilizing the markets and creating "enormous volatility" said Faber, who in his latest "Gloom, Boom & Doom Report" wrote that it was money printing that had pushed stock prices up.

"The US government for sure will go bust. That I guarantee you. Not tomorrow, but it will go bust," he added.

US government bond yields bottomed out in December 2008, he said.

"I think this is the beginning of a long-term bear market. And I think the government will have to keep interest rates artificially low because deficits will be too high," Faber said.

As for the recent rally in the stock market, most investors missed it because they focused on the economy rather than look at the technicalities.

"People said fundamentals are bad and markets are going up for no reason. But money printing is a reason," he said, explaining why quantitative easing will continue.

"The worse the statistics will be, the more money will be printed. Believe me, globally all the central banks will print money like there's no tomorrow."

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