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Marc Faber says a stock market correction may be the biggest surprise of 2012

Posted on 08 April 2012 with 2 comments from readers

Leading global financial commentator and author of the Gloom, Boom and Doom Report Dr Marc Faber says in his latest newsletter that a stock market correction could be the biggest surprise of 2012, and if it does not come this month it probably will in May.

It would be unfair to reveal more of the proprietary content of this excellent newsletter. Suffice to say that Dr Marc Faber has one of the best forecasting records in the business and was voted the world’s fifth wisest investor in a Bloomberg survey. He correctly called the Q1 rally in stocks, for example, and spotted the March 2009 bottom and predicted the subsequent rally.

In an interview on Bloomberg earlier this month he told investors to be weary of investing any more in the stock market (click here).

Sell before May?

But why should the luck of stock market bulls run out now? Is not the US economic recovery established and pulling the world out of recession? Have the central banks not assured us of ever rising stock markets by printing money? Does the US president Barack Obama not want to get re-elected?

The jobs data at the end of last week put a big question market over the strength of the US recovery with a gain of 120,000 jobs last month trailing expectations pitched above 200,000. Besides as ArabianMoney and its readers have commented many times in the past these are not true figures as the unemployed drop off the register over time and so a fraudulent data series is being created.

The sugar rush of the ECB’s $1.3 billion Christmas present to the European banks is also wearing off. Like a junkie the drug dose needs to be ever higher and higher to make an impact. And the Fed is now holding back on QE3. We have always reckoned this is being kept back for a stock market correction and perhaps this will be it.

Wall Street Crash

As for US politics well there may be Republicans in the business world who do not want to see a second term for Barack Obama. That said Wall Street will be shooting itself in the foot by letting the stock market fall now, and the tumble could be far more severe than some expect.

Why? It’s all the foreign factors that Wall Street does not understand, as well as US company accounts that are also set to disappoint with Q1 profits no higher than a year ago.

What about the prospect of higher oil prices if Israel carries out its threat to strike Iranian nuclear installations this summer? What if the Chinese economic miracle comes decisively unstuck and crashes like all other emerging market bubbles in history?

And what about the economic pain in Spain? It is an economic giant in comparison to Greece whose default upset markets so much in the fourth quarter. Spanish debts are too high and the bond markets are about to send its interest rates through the roof. Greece was the largest sovereign debt default in history but Spain would be much bigger.

Then if we look at the elevated levels of stock markets they do look overbought. They have returned to pre-crisis levels while the crisis is far from over and the recovery far from assured. Volatility in these circumstances would not look a bad prognostication. Dr Faber is usually right, that is what his reputation is built upon.

Posted on 08 April 2012 Categories: Banking & Finance, Bond Markets, Global Economics, Investment Gurus, US Dollar, US Stocks

2 Comments posted by readers:

Comment by Bill on Clearwood - 09 April 2012

RUMOR: Shell is studying construction of an enormous natural gas-to-liquids plant in Louisiana to take advantage of the cheap shale gas being found here. They are supposedly after creating diesel fuel, because oil is getting too expensive and natural gas is so abundant, and thus cheaper.
It will be interesting to see if it is more profitable to sell the gas as LNG overseas, or build plants to convert it to liquid fuels, then sell that. I’m going to guess diesel will win because shale gas can be found all over the place, but building multi-billion dollar plants in a lot of countries risks seizure right after you get it all finished. THAT won’t happen in Louisiana. Big Oil runs the State. Diesel will be in demand until fossil fuels run out, and it is easy and cheap to ship massive amounts anywhere by cheap tanker. And tankers full of diesel aren’t terrorist targets.

Comment by Alexander Malejew - 16 May 2012

I believe now is the time to load up on physical gold. A lot of hedge funds have been selling their gold positions in the lead up to and in the wake of the JP Morgan $2 Billion trading loss.
In my opinion gold will not go much lower, the Federal Reserve will have to print money, of course they will.

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