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Marc Faber Warns of 'Stealth Bear Market' in US

Marc Faber Warns of 'Stealth Bear Market' in US
(Dollar Photo Club)

By    |   Tuesday, 18 August 2015 10:10 AM

Marc Faber, editor and publisher of the Gloom, Boom and Doom Report, warns that U.S. stocks are mired in a "stealth bear market."

"This weakness in the overall market … will strike. Eventually we will end the year substantially lower," he told CNBC.

“Indices are close to a new high, but if you look at the 12-month new highs and the 12-month new lows, even in the last two days, when the market rallied, there were far more 12-month new lows than new highs. The typical stock is already down significantly, and in my view this weakness in the overall market will spread,” he said.

He noted that Dow transports are already down 9% and predicted this weakness will spread to the Dow industrials.

"If all U.S. trading partners devalue their currency, the U.S. industrial machine is becoming less competitive," he explained.

"Exports are going to be disappointing and because multinationals have a large portion of the earnings, the diminishing values of foreign currencies will have a negative impact," he said.

As far as practical advice for your average Joe Trader on how to survive such an atmosphere, Faber kept true to his contrarian personality.

"I would recommend every investor to have some money outside the financial market and outside the financial sector," Faber said. "I think that gold is still a very desirable asset, especially at this price."

Elsewhere on CNBC, with the Federal Reserve set to release the latest minutes of the FOMC, Ben Gutteridge, Head of Fund Research at Brewin Dolphin, predicts that there will be more devaluation, and he connects it to his assessment that the Fed is “determined to go” with a rate hike, and this in turn “will put upward pressure on the dollar.”

He tells CNBC’s Karen Tso that emerging market currencies will be more vulnerable once the Fed acts, because they didn’t take necessary measures when they had the chance.

In response to a question from Geoff Cutmore on the likelihood of capital flight, Gutteridge faulted the People’s Bank of China’s policy for saying it wants to give more scope to market forces, “Yet they want to avoid a disorderly devaluation.”

He thinks investors will take this opportunity to get out of yuan. In response to a remark by Tso that we’ve seen this scenario before, Gutteridge agreed and called it “currency manipulation.”

Much as the data on which the Fed claims to rely has been challenged by critics, Brendan Brown, Head of Research at Mitsubishi UFJ Securities, predicts that inflation in the U.K. will be zero, due to falling commodity prices and a sluggish labor market, so he finds “implausible” the professed expectation by the Bank of England that inflation will reach 2% in two years.

Brown questions the justification for tightening policy in Britain and the U.S. to “stabilize financial markets,” but he thinks this is irrelevant to the UK. Thus he is implying that the Fed’s action, if it occurs, would have collateral effects that might foster instability elsewhere.

Asked by CNBC’s Nancy Hulgrave whether the BOE is worried about being “behind the curve,” Brown attributed this to an “outdated, Phillips-curve view” that overstates the effect of labor markets on inflation. He concluded that BOE’s Governor Carney will not automatically follow the Fed but rather would tighten later, “if at all.”

As to whether QE was having a disappointing effect in Europe, Brown said he doesn’t think it has had much effect anywhere, “including in the U.S.”

Finally, with retail companies reporting earnings this week, James Cakmak, Equity Analyst at Monness, Crespi, Hardt & Co., talks about a New York Times report on the treatment of workers at Amazon (AMZN), saying that if true, “it needs to be addressed immediately,” but he adds that whenever disruption takes place, it is not easy, pointing to the “cliché example” of Apple (AAPL).

To drive “sudden,” as opposed to “gradual,” change, “you do need to push the limits,” and Cakmak says it is up to employees to find their work-life balance.

Interestingly, this discussion took place in Asia, where CNBC’s Bernie Lo quoted Amazon CEO Jeff Bezos as saying he would complain, too, if he were working for a company like that.

Asked if this could threaten “the dominance that Amazon has enjoyed in the e-commerce space,” with Jet.com now undercutting Amazon by half, Cakmak is “not too worried” about Amazon’s outlook.

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Marc Faber, editor and publisher of the Gloom, Boom and Doom Report, told CNBC that U.S. stocks are mired in a stealth bear market.
marc faber, stocks, bear market, cnbc
Tuesday, 18 August 2015 10:10 AM
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