U.S. on Verge of Economic Collapse, Says Marc Faber
Adding more emphasis on his belief that the U.S. is on the verge of an economic collapse, perma-bear investor Marc Faber advised retail investors not to put money in U.S. stocks; instead, according to Faber, investors should pour their funds into emerging market equities.
The publisher of The Gloom, Boom & Doom Report newsletter told Bloomberg that U.S. stocks are highly priced by several measures, including price-to-sales, price-to-earnings, and market cap-to-gross domestic product (GDP) ratios, whereas emerging markets have corrected significantly since 2006 and 2011.
“You can buy the Singapore Stock Market with a four-percent dividend yield,” Marc Faber told the business news and information channel on Friday. “Singapore is a relatively sound economy, diversified, and well run unlike the U.S.” (Source: “Marc Faber: Negative Rates Will Not End Well,” Yahoo! Finance, March 18, 2016.)
The iShares MSCI Singapore Index Fund ETF (NYSEArca:EWS) has retreated 13% in the past 12 months, but it’s up seven percent this year. It currently trades at $10.95 and has a 3.9% dividend yield.
The 30-member Dow Jones Industrial Average (DJIA) has rallied 48% over the past five years. The S&P 500 is up 60%, while the tech-heavy NASDAQ Composite has surged 80%.
Faber indicated that he might change his mind if Republican presidential hopeful Donald Trump, not Democrat Hillary Clinton, won the November elections.
Faber said the U.S. would not be a well-run economy like Singapore’s “unless of course the U.S. is run by Mr. Trump, then the U.S. will improve.” (Source: Ibid.)
“Given the alternatives, I would vote for Mr. Trump because he may only destroy the U.S. economy, but Hillary Clinton will destroy the whole world,” he said. (Source: “Faber: I’d Vote for Trump Because ‘Hillary Clinton Will Destroy the Whole World’,” Bloomberg, March 18, 2016.)
He cited Clinton’s policies on the Middle East region when she was secretary of state: “Look at her nation-building in the Middle East, how successful that has been,” Faber said with a laugh.
Donald Trump is leading the Republican presidential race with 678 delegates, followed by Ted Cruz with 423 delegates. They need to reach 1,237 delegates to snatch the nomination. In the Democratic race, Clinton is leading with 1,614 delegates, almost double the delegates Bernie Sanders has secured. The magic figure in their race is 2,383 delegates.
Marc Faber, who strongly believes that there would be an economic collapse sometime very soon around the globe, also blasted International Monetary Fund (IMF) Managing Director Christine Lagarde for saying the world economy would be worse off without negative interest rates.
“This is for the first time in recorded human history from the times of Babylon up to today that we have negative interest rates,” Faber said. “And it’s not gonna end well, that I can tell you.” (Source: Yahoo! Finance, op cit.)
In an interview with Bloomberg in Ho Chi Minh City on Friday, Lagarde said negative rates in Europe and Japan have helped support global growth and price gains. “If we had not had those negative rates, we would be in a much worse place today, with inflation probably lower than where it is, with growth probably lower than where we have it,” she said. “It was a good thing to actually implement those negative rates under the current circumstances.” (Source: “Lagarde: Negative Rates Have Helped Global Economy,” Bloomberg, March 20, 2016.)
Central banks in Europe and Japan have deployed negative interest rates to stimulate the economy, and Federal Reserve chair Janet Yellen said the U.S. central bank is taking a look at the tool “in the event that we needed to add accommodation.” (Source: “Yellen Re-Examining Negative Rates; Top Lawmaker Doubts Legality,” Bloomberg, February 11, 2016.)
Marc Faber said “the magicians at central banks they always come out with a new trick” to avoid a potential economic collapse, adding that he believes “it would have been better to let the crisis—already the first one in the 2000s—run its course and prevent the colossal credit bubble that was built up.” (Source: Yahoo! Finance, op cit.)
“You cannot grow an economy by just throwing money at people,” he said. (Source: Ibid.)