Faber sees 'colossal mess' brewing in West
The Swiss investor expects expanding debt burdens and never-ending deficits in Western nations in the next 5 to 10 years. He also says the S&P 500 could see a 20% drop.
The debt burden in the U.S. and other Western countries will continue to increase, Marc Faber, author of the "Gloom, Boom and Doom" report told CNBC on Monday, leading to a "colossal mess" within the next five to 10 years.
"I think the regimes will try to keep the system alive as it is for as long as possible, which means there's no "fiscal cliff," there's a fiscal grand canyon," Faber told CNBC's "Squawk Box."
Faber argued that the political systems in place in the West would allow the debt burden to continue to expand. Under such a scenario of never-ending deficits, the Western world would rack up huge deficits.
One day, the system would break, he said.
"Eventually, you have either huge changes occurring in a peaceful fashion through reforms, or, usually, through revolutions," he said. The U.S. is getting closer to such a revolution, he said, as is Europe.
"I think the time frame would be within five to 10 years you have a colossal mess … everywhere in the Western world," Faber said. "I think the deficit here (in the U.S.) — irrespective of who is in the White House — will stay above a trillion dollars per annum for at least as far as the eye can see."
Bureaucracies in the U.S., as well as Europe, are far too big, he said, and are a burden on the economy.
"My medicine for the U.S. is: Reduce government by minimum 50 percent," he said. "The impact would be immediately an improvement in the economy."
Faber believes the Chinese and Japanese stock markets could see a rebound, while in the U.S. the S&P 500 is likely to see a 20 percent downward move.
"I think here we're going to go down 20 percent from the recent top at 1,470. The technical position of the market is poor and the corporate earnings are worsening. . . . I think there's hardly any growth," Faber said.
Four months ago, Faber turned his attention to European stock markets, attracted by the low valuations.
"Greece, Italy, Spain, France, Portugal, they were four months ago at the 2009 lows or even lower," he said.
Faber recommended buying European stocks at the time and for the first time in his life bought them himself.
"I did it simply because the valuations were low. Since then, Greece is up 65%," he said.
He would no longer buy European stocks, he said. "I expect a correction but no new lows," Faber said.
Now he is focusing on Asia.
"In Asia, Thailand from the 2009 lows is up 250%. Other markets like the Philippines, Indonesia, Malaysia, Singapore, are up by a similar amount," he said. The Chinese benchmark index on the other hand was at 6,000 in 2007, now it is at 2,000.
"I think China and Japan could have a rebound here. If Greece could rebound by 65% the greatest garbage could rebound by 65%," Faber said.
© 2012 CNBC.com
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We are in the same situation as we were in 2005.
Before the market crash I looked and said is this house worth 1 million dollars? No way. and then Boom.
Now I look at Home Depot earnings up and only three cashiers in the store, I remember the time when 12 cashiers could not handle the volume. Then I look at the paint. 19.00 for a two gallon Kills primer just 8 months ago and now it is 26.00 for the same amount.
Anyone reading this can figure out the Inflation or devalued dollar and the corporate profits seem to be manipulated because the profits reported from smaller customer base comes from the mark up of the retail price So I ask you this? Can you afford to paint that room? Or change that door or lock? I see the next boom involving the consumer confidence number when we would rather put milk on the table than throw a fresh coat of paint on the living room wall.
can you say ,,,,one world order ? its all been foretold before,,,,,you cant keep peeing on a forest fire and expect it to go out,,,,,,remember when the government kept telling every american to spend to money,,,buy more things to help support the country,,,,,,you cannot ,,,cannot keep up an economy just buy consumerism,,alone,,,you MUST make something,,,produce something,,,manufacture something,,,,,,heres the solutions,,,,,,
1)Cut the government,,,,big time,,,,,,too wasteful,,,,,cut where it makes sence,,,not the defence of the country,,,,not the poor and downtrodden,,,,cut those who can and should work,,,,,
2)JOBS JOBS JOBS,,,,,Tangible goods jobs,,,,,is it that hard to figure out,,,my god,,,,modern tech jobs combined with older school manufacturing jobs,,,,gees,,,and these so called politicialns are our brain trusts?
3)Stop climbing into bed with every country that then stabs us in the back,,,,,the governments role is to protect the United States of America,,,,,and protect those who are persecuted ruthlessly,,,,,everyone else,,,either cut them off and be done with them or hit the restart button on them,,,
4)Stop playing the citizens of this country against each other.Stop paying for things that the gov has no business paying for or mandating,,,STOP PLAYING POLITICS WITH OUR LIVES.
5)JOBS,JOBS,JOBS,,,,,,,Not government jobs either who get cushy overpay ,.,,,,,,real manufacturing jobs,,,,again,,,its not that hard people,,,,,
6)Stop caving into madmen,,,,,,if they are evil and persecute innocent citizens,,,,get rid of them,,,,no leader or country has a supreme right to rule that land if they are murdering their own under ruthless laws or are a obvious threat to their neighbors,,,,if they cannot rule justly of themselves,,,,then they should be disolved and overseen buy those who can,,,,
but then again this is just an opinion on this silly page,,,,the world wide fires have already been lit,,,,and all we can do is pee on them,,,,,it wont work,,,,,,,best thing to do is prepare as best you can,,,and know in your heart you are right and just and have the deepest faith you can,,,,,
Every payday....a bag of rice and a box of ammo.
It's Wall Street. They induce us to borrow more than we can afford, inflating the value of the collateral. When the bubble bursts, there's still plenty of debt, so they demand a bailout. The results are anything from a Great Depression to the Great Recession. But they'll fix it for us, if we just deregulate them.
To get the economy rolling again, we're induced to borrow more money than we can afford, inlfating the valued of the collateral..... It's a death spiral.
The capitalists could always claim to be better than the communists, but what of it? If someone said you were better looking, & sang better than a rhino's rump, would you really feel complimented?
The communists failed in Russia, decayed into a bizarre national socialism in most of the other communist countries, & in North Korea, actually devolved into an inherited monarchy.
It's time for capitalism's fall.
When a Democrat reads "All men are created equal", they insist, that if anyone else succeeded, the government is mandated to make that success a given .................... directly from funds stolen from those who succeeded without governmental help!
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Breaking up big banks is an untested solution to the too big to fail problem that attempts to isolate and dismantle large, troubled institutions while protecting the rest of the economy.
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