Tags: Faber | stocks | plunge | McDonalds

Faber: McDonald's Woes Confirm Stocks Are Primed for a Fall

By    |   Thursday, 11 September 2014 06:45 PM

Marc Faber, publisher of the Gloom, Boom & Doom Report, has been saying for months that the stock market is headed for a 20-30 percent fall.

Tuesday's news of a 3.7 percent drop in McDonald's global same-store sales in August reinforced his view.

"McDonald's is a very good indicator of the global economy," Faber told CNBC. "If McDonald's doesn't increase its sales, it tells you that the monetary policies have largely failed in the sense that prices are going up more than disposable income, and so people have less purchasing power."

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The Federal Reserve's massive easing program hasn't done much to help "ordinary people," Faber said. "It's boosted asset markets, real estate and stocks."

While prices are rising, personal income really isn't, Faber said. Consumer prices gained 2 percent in the 12 months through August.

As for stocks, the S&P 500 hasn't slid more than 10 percent since October 2011, Faber noted. "Now we're probably not going to get a correction, but more likely, a bear market that will be 20 to 30 percent at some point."

Meanwhile, BlackRock chief investment strategist Russ Koesterich has turned cautious toward stocks rather than outright bearish.

Thanks to the economy's sluggish growth over the last five years, strong cost controls allowed smaller revenue gains to have a bigger impact on earnings, he told Forbes.

"Companies have been ridiculously profitable, margins have been ridiculously high,” Koesterich said. But valuations have soared too.

So the S&P 500 doesn't have a green light over the next five years to match the 199 percent gain of the last five, he said. "I’d say we’re flashing yellow."

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Marc Faber, publisher of the Gloom, Boom & Doom Report, says Tuesday's news of a 3.7 percent drop in McDonald's global same-store sales in August supports his view that the stock market is headed for a 20-30 percent fall.
Faber, stocks, plunge, McDonalds
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2014-45-11
Thursday, 11 September 2014 06:45 PM
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