, Marc Faber Blog: Why Marc Faber is calling for an ugly stock market crash

Sunday, September 18, 2016

Why Marc Faber is calling for an ugly stock market crash

Here’s the bad news: The Swiss investor, who publishes the aptly named Gloom, Boom & Doom Report, sees the large-cap benchmark SPX, -0.11% shedding more than half its value, possibly over the next year.
“When it unravels, we are going to go to 1,100 on the S&P 500,” Faber told MarketWatch.

“Maybe we go first to 2,300, then we would have a perfect topping formation. A widening-top formation is about the most bearish technical formation you can have,” he said. Faber is referring to a so-called megaphone pattern, or broadening formation, which usually is associated with a sharp reversal in an upward trend for a security.

Faber has grown increasingly pessimistic as U.S. stocks have climbed over the past several weeks.

The S&P 500 has advanced about 4% from 2,096 on June 10 when MarketWatch last spoke to Faber. And on Tuesday, the Nasdaq Composite Index COMP, -0.08% marked a record close (its second of 2016), while the Dow Jones Industrial Average DJIA, -0.07% and the S&P 500 were mostly quiescent but in positive territory.

His ursine-daubed call shouldn’t be a surprise to market participants who have followed him over the years. The 70-year-old investor has been critical of global central banks and negative on the U.S. economy, lately.

So, why should investors listen to Faber?

For one, the Swiss investor’s concerns about central bank’s propping up global economies and distorting markets echo legitimate worries expressed by smart-money investors like bond guru Bill Gross of Janus Capital.

Now, the Bank of England can be added to the list of central banks rolling out accommodative policies.

Last Thursday, the BOE revived a dormant bond-buying program and cut its interest rate to 0.25%—marking its lowest level in more than three centuries. Similar to the Federal Reserve, the BOE had been viewed as preparing to tighten monetary policy. That changed when the U.K. surprisingly voted on June 23 to exit the European Union, briefly roiling global markets.

The BOE finds itself, presently, on unsteady footing at the same time the European Central Bank and Bank of Japan are jousting with anemic growth of their own.

Faber said central banks“printing money” is a recipe for carnage that could result in “ five years of capital gains” being coughed up by the market. And if we give that back, “we’re around 1,100,” he said.

“We’re all on the Titanic.” Faber said. “When things unravel a colossal asset inflation” will burst.

Faber also gives voice to some of the persistent concerns shared by a host of investors and strategists that argue that the fundamentals of the stock market don't justify its current run-up in price.

- Source, Market Watch