Marc Faber says we haven't had big correction — yet

The ever-bearish market watcher predicts selling will expand to broader markets, and reveals where he's parking his cash.

By MSN Money staff Apr 30, 2014 12:58PM
Economist Marc Faber © Alex Hofford/EPABy Matt Clinch, CNBC

 

CNBC on MSN MoneyTechnology stocks may have suffered a sell-off in the last few weeks, but the U.S. market as a whole is still set for a dramatic correction this year, Marc Faber (pictured) told CNBC on Wednesday.

 

The editor and publisher of The Gloom, Boom and Doom Report said that he personally favors emerging market securities that are still "cheap," adding that he had even made investments in Iraq last year.

 

"We had already a big break in the market but we haven't had yet the big break in the overall market," he said.

 

In early April, the wider technology sector was hit by a selloff in momentum stocks that saw the Nasdaq Composite Index ($COMPX) fall below 4,000 points for the first time since early February. Momentum stocks are fast-rising stocks that can unexpectedly reverse when investors fear they have overshot and a bubble is brewing. The Nasdaq Composite suffered its worst weekly hit since June 2012, and recorded its longest weekly losing streak since late 2012.

 

Telecommunication, social media and biotechnology companies were all part of the move lower, but Faber believes this selling will eventually hit the wider indexes, with energy and utility companies seeing a sharp pullback. Faber reiterated his concerns that equities were facing a crash that could be worse than the financial world saw in 2008.

 

"I believe it is too late to buy the U.S. stock market," he said. Faber questioned the future returns of these U.S. stocks, highlighting that record low interest rates and high valuations mean companies will not be able to give back bumper returns to their investors.

 

"In general, I think individual investors have excessively optimistic expectations about their future returns," Faber said.

 

The notable bear also underlined his belief that emerging markets provide a more suitable option for more profitable investments. He added that he has parked cash in countries such as Vietnam, Iraq, Malaysia, Thailand and Singapore.

 

"I made some investments more than a year ago in Iraq, because it's very cheap. There's lots of problems but the market is very, very inexpensive," he said. "Russia is dirt cheap, but I don't think there is a hurry to buy Russian stocks."

 

A bull run in equities that started around five years ago has caused much debate in recent months with some investors believing that it may be running out of steam. However, some remain optimistic that extra liquidity — provided by central banks around the world — would continue to help bolster the asset class.

 

Ian Harnett, a European analyst at Absolute Strategy Research, believes global stocks will rally another 20 percent in 2014, highlighting the optimal environment that policymakers have created. In its latest monthly research note, Goldman Sachs (GS) predicted a pickup in global growth and saw an upside in stocks, most notably in Germany's DAX index.

 

Meanwhile, Ed Keon, portfolio manager at Prudential's Quantitative Management Associates, told CNBC last week that the stock market low of April 11 had a "pretty good chance" of being a low point, and said the S&P 500 could rise 10 percent this year.

 

More from CNBC

Tags: $COMPX
61Comments
Apr 30, 2014 1:25PM
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Well with growth at .1% GDP we are in deep trouble.   We should finish at sub 2% again this year.


Worse yet, 1st quarter will be revised downward.  Obamanomics is such a massive fail.

Apr 30, 2014 2:17PM
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When the correction comes, teeth marks will be left in the gold.
Apr 30, 2014 2:46PM
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These 'goofs' always seem to say the same crap every time the Fed cuts these bond purchases. These were the same 'goofs' that were screaming about the inflated markets when the Bond purchases were at 85 billion==> they're now at 45 bil.

The indices will be volatile, but no correction. Why? Because most of the publicly traded companies, especially blue chips, are either meeting or exceeding the EPS expectations. 

But here's another 'monkey wrench: It is now expected that 50 % of the premiums for Obamacare sign ups have not been paid in Georgia. If this holds true for other states, and we'll find out these numbers after June, it's going to be one hell of a hard Summer going into the 3rd quarter. Remember that your insurance companies invest your premium payments into the markets to help cover cost, payouts and the administration of its business. Without some certainty in forecasting that revenue, it will have a domino effect as publicly traded companies try to forecast their EPS, P/E's, and the stock price itself. And those 'affordable' premiums for Obamacare will be going up as well. So...... how's that 'hope' & 'change' sounding now?
Apr 30, 2014 2:57PM
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HARD TO MOVE MONEY IN A 401k PROGRAM. THERE ARE NOT TOO MANY 'SAFE" OPTIONS TO CHOOSE.
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Pretty much the collapse of the US dollar is going to happen whether soon or later remains to be seen.

My vote is for Sept 15,2015

Apr 30, 2014 3:42PM
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We can say here that the Federal reserve has created two bubbles. Pumping up the market with QE and holding interest rates at near 0, both these measures have created unnatural market conditions.

The effects of this haven't been felt yet.

Apr 30, 2014 1:55PM
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If you're in the stock market, get out now before it's too late! I took all my investments out about 4 weeks before the first big crash a few years ago and I'm doing it again now. Saved myself from huge loses.

Apr 30, 2014 3:39PM
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When the GDP is almost negative, and that's after they reformulated how it is calculated last July (which, by most accounts, adds 1% to 2% to the number), can anyone really say the economy is looking up?  The labor force participation rate is at four decade low and the real unemployment rate, the U6, is still hovering around 13%.  
Apr 30, 2014 3:16PM
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The usual wing nut political debate after a stock article. Some things never change. 

I think the upside potential of the domestic market is diminishing. I read recently that the Case Shiller P/E for the S & P 500 was about 25.  I am not feeling a crash but a correction or a long period of flat appreciation. 

Emerging Markets have been getting attractive lately.
Apr 30, 2014 1:56PM
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Any  date after 7/1/2014 is as good as any other after HR 2867 kicks off July 1.  It will destroy ALL foreign investors and most USSA investors.  
Apr 30, 2014 3:29PM
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If you've ever listened to marc faber, he's not Dr. Doom. He's really just Dr. Common Sense or Dr. Smart. He knows exactly what the central banks are up to, and he's got a good idea of the possible outcomes of it.
Apr 30, 2014 4:26PM
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Geezie....You can effectively wipe out any Forum or Blog discussion....
Apr 30, 2014 5:26PM
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You can run but you can't hide.............your money.  It has been reported many times that most all Americans who are actually in the stock market, have the majority of their investments in 401K types of accounts. 
Most of these accounts have 20 or fewer options to invest: A few large, medium and small cap stocks, a couple of target date type funds, a bond or two and perhaps an international stock or two.
Oh yes, and a money market of some type that pays less than 1%.

Anybody have any ideas about how to survive a BIG correction in these accounts ??? 

Apr 30, 2014 4:55PM
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LOL have we really had a big cut or have we just been told we're going to have a big cut.
Apr 30, 2014 2:19PM
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Add more money to the market and enjoy the returns.  The naysayers are the same people that pray for a major correction and miss out on the returns as the market continues to rise.  Go for it.....
Apr 30, 2014 3:00PM
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It's crazy right wing wacko day .....thankfully all these old haters will be worm food soon enough and we can start building a utopia ;)
Apr 30, 2014 3:26PM
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I HOPE ALL THE NAYSAYERS REALIZE THE OPPORTUNITY THEY HAVE MISSED BY NOT INVESTING IN AMERICA VIA THE STOCK MARKET.   THEY ARE STILL MOURNING THE LOSS OF BUSH I GUESS.   I RODE OUT THE BUSH TRAVERSITY AND I AM STILL RIDING THE RECOVERY THAT STARTED WITH OBAMA BEING PRESIDENT.   I COULD PULL OUT NOW AND STILL BE WAY AHEAD OF WHERE I WAS DURING THE BUSH YEARS.  SOMEONE IS DOING SOMETHING RIGHT, REGARDLESS OF WHO YOU GIVE THE CREDIT TO.

Apr 30, 2014 2:12PM
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Thanks for your money, Faber and all the moronic tea party doomsday preppers that follow you. You print your  moronic gibberish, then all the lemmings that follow you go short on the market, then I take their money when they have to cover a few days later. Works like a charm.Taking money from those who pray for America to fail is the greatest thing.
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