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Faber: Bear Market is Clawing Its Way Back

By Michelle Smith   |   Wednesday, 03 Aug 2011 08:03 AM

Concerns about growth are tugging the markets south. And for some, there are indications that suggest the slide isn't temporary. “The bear market is on its way back,” Marc Faber, economist, contrarian investor, and publisher and editor of the The Gloom Boom & Doom Report told CNBC.

"When you compare equities to bonds and cash I don't think equities are very positive," Faber said.

"The Treasury market is telling you that the economy is in recession,"  Faber told CNBC. "So if the bond market is telling you that the economies of the Western world are weakening, but at the same time the stock market is still relatively high, I think the stock market is vulnerable."

Spotlighting the problems in the United States, the Washington Post reported that purchases declined over the past month, bearing witness to the first drop in consumer spending in almost two years. Incomes reportedly grew at the slowest pace since November and the savings rate climbed.

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Marc Faber
(Newsmax photo)
Mark Bronzo, a portfolio manager at Security Global Investors, told the Washington Post, “now that we’ve moved past the debt ceiling fears, people are really focused on growth. The market is very unforgiving. We’re in this period where people don’t love the stock market. They think economic growth is slow. So, there’s a flight to safety.”

Supporting those claims are reports from the Washington Post that U.S. stocks fell, driving the Standard & Poor’s 500 Index to its longest slump since October 2008. The S&P 500 also fell, “sending the benchmark gauge down for a seventh straight day.” And if that isn't enough bad news, the Dow Jones Industrial Average lost 265.87 points, or 2.2 percent, to 11,866.62. The Dow has lost 858 points, or 6.7 percent, in the last eight trading days.

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But, according to Faber, it's not just the United States that is inciting a bear market. The eurozone is also part of the problem.

For example, CNBC noted that major European banks have posted disappointing second quarter results. And although Faber believes that the euro will ultimately survive, he believes that inept leadership is making process unnecessarily difficult.

“The politicians are all useless individuals. Nobody is reducing the problems in the U.S. or Europe, just putting on a band aid and postponing the problems endlessly," he said.

Even more concerning to Faber, however, is the threat of disappointments from China, which has become the major consumer of commodities.

"If commodity prices are falling, then commodity producers will buy fewer goods from China," Faber pointed out. This is something that the world central bankers can't deal with."

Right now there are potential triggers for a bearish market coming from around the globe. Given the outlook, CNBC says Faber believes precious metals are the place to be right now.

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Concerns about growth are tugging the markets south. And for some, there are indications that suggest the slide isn't temporary. The bear market is on its way back, Marc Faber, economist, contrarian investor, and publisher and editor of the The Gloom Boom Doom Report...
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2011-03-03
 

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