Tags: Faber | bubble | Fed | markets

Marc Faber: There's Bubble 'in Everything, Everywhere'

By    |   Friday, 19 September 2014 12:46 PM

For months, Marc Faber, publisher of the Gloom, Boom & Doom Report, has argued that asset markets are way overvalued.

And he's not changing his tune now, even as major U.S. stock indexes ascended to record highs once again Friday.

"We have a bubble in everything, everywhere," Faber tells CNBC.

Editor’s Note: Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now

"Eventually there will be a problem when these asset markets begin to perform poorly."

The Federal Reserve's massive easing program has inflated the bubbles, he explains. The Fed has kept its federal funds rate target at a record low of zero to 0.25 percent since December 2008. And its balance sheet has ballooned to $4.5 trillion through quantitative easing.

"I think they [the Fed] will keep interest rates at zero on the fed funds rate for a very long time."

So what can burst the bubble? "A rise in interest rates, not engineered by the Fed," he notes, meaning an increase in bond yields. The 10-year Treasury yield stood at 2.57 percent Monday morning.

Another possibility is a global recession, Faber argues. "The big surprise will be that the global economy slows down and goes into recession. And that will shock markets."

Meanwhile, Mohamed El-Erian, former CEO of Pimco, expresses more mild concern about financial markets.

Investors are ignoring geopolitical and economic problems across the globe, as they bid asset prices to ever-higher levels, he writes in an article for Project Syndicate.

And that blithe attitude could well come back to bite them, he says.

"In the next few months, the buoyant optimism pervading financial markets may prove to be justified," El-Erian writes. "Unfortunately, it is more likely that investors' outlook is excessively rosy."

Editor’s Note: Dow Predicted Will Hit 60,000 — Buy These 4 Stocks Now

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For months, Marc Faber, publisher of the Gloom, Boom & Doom Report, has argued that asset markets are way overvalued.
Faber, bubble, Fed, markets
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2014-46-19
Friday, 19 September 2014 12:46 PM
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