Marc Faber 2010 Economic Forecast
Dr. Marc Faber was born in Zürich and schooled in Geneva, Switzerland where he raced for the Swiss National Ski Team. He studied Economics at the University of Zurich and, at the age of 24, obtained a Ph.D. degree in Economics magna cum laude. Faber is best known for the Gloom Boom & Doom Report newsletter.
In a recent interview Faber was asked about the future of 2010, in terms of the financial situation. I present excerpts from that interview. [ reference: “The Big Interview”].
[In terms of the recovery of the asset market what happened is “when you print money anything can go up. Stocks were oversold. Commodities were oversold. Especially stocks and commodities went ballistic after March. And, we had from the lows, in many instances 100% or more recoveries in individual stocks. Even poor companies like Citigroup, went from $1 to $4.
2009 will be remembered by two groups of people. The analysts that were right: went long on commodities; went short the U.S. dollar. Other people believed that from March, when the market began to rally, from 666 on the S&P, thought it was a bear market rally and they were under the influence of deflationists, that believe that the S&P would drop to 400. It may still happen one day, but it didn’t happen at that time. They were long U.S. government bonds and long the U.S. dollar, so they were wrong on every count, long the the dollar, bonds and out of equities. These people will remember 2009 as a disastrous year for them, because they missed the whole bull market.”
[pas performances are not an indicator of future returns]
[what 2010 holds for us] “I think if you look at major recovery moves following bear markets or following recessions, like ’73 – ’74, we had the recession, then ’74 – ’75 we had a huge recovery move. We had a huge recovery move after March 2003, as you may know. And, we had a huge recovery move after August 1982. Usually the first part of the recovery, the first say 9 – 12 months are the best. And, we had the indicies, as you know, the indicies have doubled from the March lows. I don’t think they’ll double again over the next 12 months. Can the indicies move up another 20% over the next 12 months before we have another correction or will they correct here, that we don’t know for sure. But, in general I think the gravy is out of the markets. We have had huge moves, and the people that missed them, too bad.”
“Now going forward, I had some concerns, because basically the stimulus will wane, the impact will wane over time. And, sounder footing thereafter, so i think more quantities and more stimulus packages will be necessary. And, that may boost asset prices and it may lead to high inflation rates at some points. But, it may not make much difference to the typical household in the western world, who’s standard of living is going down.”