Tags: Faber | stocks | markets | plunge

Faber: Don’t Be Fooled by Rallies, Markets Will Plunge in Year

Monday, 02 July 2012 01:50 PM

Economist Marc Faber, publisher of The Gloom, Boom and Doom report, said that while markets may rally once again this year, they will ultimately plunge within the next 12 months.

“Don’t forget July is a month of seasonal strength and that we are coming into the election, there maybe some more money printing," Faber told moneycontrol.com.

"So the market may actually rally a bit more," he said. "But it doesn’t change the global picture, which is essentially for a global economic slowdown, for an increasing number of companies that are reporting disappointing sales for forecast, for earnings.”

Editor's Note: The Final Turning Predicted for America. See Proof.

Basically, Faber said, markets made a low in early June, then rallied and came down again without testing a new low and may rebound to 1,400 on the S&P.

Faber said markets were oversold, especially in Europe.

“When there was moderate good news, there was a lot of European short covering and a lot of stocks rebounded by 5-7 percent in just one day,” he said.

The total return of equity if you include dividends since 2007 hasn’t been a disaster, said Faber, but it also hasn’t been particularly good. Moreover, returns from bonds have been very good and reasonable for some commodities.

“So I think for investors, the situation was not all that bad,” Faber said. “But I concede that a lot of people lost a lot of money because they were badly positioned. It hasn’t been a particularly happy time for investors.”

Meanwhile, U.S. manufacturing shrank in June for the first time in nearly three years as new orders plummeted, one measure of the sector that showed the starkest sign yet of the extent of the slowdown in the economy, Reuters reported.

The Institute for Supply Management said on Monday its index of national factory activity fell to 49.7 from 53.5 the month before, missing expectations of 52.0, according to a Reuters poll of economists, and below even the lowest forecast.

It was the first time since July 2009 that the index has fallen below the 50 mark that separates expansion from contraction. That was shortly after the U.S. economy emerged from recession.

"Clearly this is the biggest sign yet that the U.S. is catching the slowdown that is well under way in Europe and China," Paul Dales, senior U.S. economist at Capital Economics in London, told Reuters.

Dales said the report is consistent with an economy that is growing at an annualized rate of a little below 1 percent after 1.9 percent growth in the first quarter.

"The implication here is a very soft second half of the year," said Jacob Oubina, senior U.S. economist at RBC Capital Markets in New York.

Editor's Note: The Final Turning Predicted for America. See Proof.

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Monday, 02 July 2012 01:50 PM
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