Tuesday, August 9, 2011

Marc Faber Now Expects a Bounce, While Still Intermediate Term Bearish

Say what you will but Marc Faber's call last week for a 'bear market' looks pretty darn good now.  That came on Tuesday, when the S&P 500 had closed essentially at its primary support of 1250.  To be fair he made the call earlier in the day... the S&P 500 had opened around 1280s.  With two traumatic selloffs since then, we'll call it roughly 11% lower on the S&P 500 since his call.   Small caps via the Russell 2000 have been hit even harder in that time, over 15%!

He appears to be a pretty tacticle trader, so in the very short term he now appears to be constructive - although still calling for a low of 1100 by October.  Heck we're 20 points away from that as of yesterday's close.

  • Marc Faber, who predicted just last week that a bear market was on its way back, says the current selloff in equities is overdone and he expects a short-term rebound.  "I think that near-term stock markets around the world are very, very oversold and most oversold since February, March 2009 and 1987," Faber said. "(It) doesn't mean that they can't go lower, but I think they will rebound."
  • Faber, the editor and publisher of The Gloom Boom & Doom Report hasn't, however, changed his bearish view. He still expects the S&P 500  to drop to 1100 by October, but he says the selloff came even earlier than he had expected.
  • "The strategists in the US, mostly brainless people, who are predicting S&P between 1400 and 1500 by year end, I think they will have to re-adjust their views and I think the markets may actually go lower," he told CNBC on Tuesday.
  • Faber says the correction has been so vicious because investors have lost faith in politicians and current economic policies.  "Nobody trusts (anyone) anymore, the Obama administration, the U.S. government, Congress, the people that voted for the debt increase and so on," he said.
  • The selloff in stocks has boosted safe-havens including Treasurys, driving 10-year yields down to 2.35 percent, despite Standard & Poor's downgrade of the U.S. credit rating. Faber, along with Jim Rogers, believes Treasurys are overvalued and that yields will have to rise.  "In my opinion, around this level, government bonds in the US are the short of the century," he added.

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