Wednesday, February 13, 2013

Marc Faber interview Part 1

Marc Faber interview with

Q: You sounded a bit cautious of late. Tactically, are you expecting a phase of risk-off in global markets anytime soon?

A: We had a huge rally since November and it has basically begun in March 2009 for most markets. I think that the markets are getting very frothy at present and whether this is approaching a longer term top or whether we have just a short-term peak, the correction remains to be seen. But, in general, I would be careful of buying indiscriminately in this market.

Q: Would you be expecting a 10 percent kind of correction in global equities across the board or do you think it may not be that deep?

A: Yes, we could easily see 10 percent correction. We have seen over 30 percent correction in Apple. So it is a reminder that stocks move up and they can also move down. My scenario for 2013 is either the market will make a peak relatively soon which will not be exceeded or we have a correction of a month or two and then another strong rally into August, such as we had in 1987 when the Dow Jones between January 1987 and August 1987 increased by 41 percent. However, it then lost 40 percent in two months.

I think there is a chance that in order to actually punish central bankers, markets would become extremely overheated and then crash.

Q: What do you think both outcomes are contingent on? Do you think it is the fiscal cliff issue that will be crucial in determining what happens to equity markets or something else?

A: I think that the global economy will be crucial and also what happens to China. Do not forget, if the Chinese economy does not recover or recovers for a while, for say a couple of months and then slumps again or decelerates significantly, it would have an impact on raw materials and in this case on the economies of the raw material producers or the resource producers of the world. We could have a shock for the global economy.