Marc Faber: 100% Chance of Global Recession

[Sev]

More reason to be worried. The US is already losing what little momentum it had and China is retracting. Run on Greek banks is underway. Spanish and Italian banks may be next. China is in contraction.

Now all we need is Israel to launch a major offensive on Iran to put the oil speculation market in turmoil to cinch it.

http://www.cnbc.com/id/47566735

The stock market [.SPX 1317.82 -2.86 (-0.22%) ] appears to be at a critical inflection point. That’s the takeaway from widely followed economist Marc Faber, author of the Boom, Gloom & Doom newsletter.

http://media.cnbc.com/i/CNBC/Sections/News_And_Analysis/__Story_Inserts/graphics/__PEOPLE/F/Faber_Marc2_200.jpg
Dr. Marc Faber

Faber’s bearish market calls have been followed closely since 1987 when he warned his clients to cash out before Black Monday.

And in a live interview on CNBC’s Fast Money Halftime Report, Faber again warned that economies of the world may be on the brink of a serious slowdown.

Faber indicated that while investors remain focused on Greece and Europe – other issues, bigger issues are looming. And they’re more threatening.

“As an observer of markets – whenever everyone focuses on one thing – like Greece and Europe – maybe they miss issues that are far more important – such as a meaningful slowdown in India and China.”

The latest reports from Beijing would support Faber's assertion. The HSBC Flash Purchasing Managers Index, slipped to 48.7 in May from 49.3 in April. That marks the seventh straight month that the index has been below 50, a level which indicates economic activity is contracting.

Faber also cited weakness in the high-end as another key catalyst that’s very negative.

“There are more and more stocks that are breaking down – economic sensitive stocks and companies that cater to the high-end,” he said. "That suggests to me the economy is likely to weaken and the huge asset run is likely to come to an end with significant asset deflation.”

Earlier in the week Tiffany [TIF 56.32 -1.27 (-2.21%) ] lowered forecasts citing slower sales. At that time, Fast Money trader Dan Nathan warned that results such as these were foreboding and suggested the high-end was starting to crack.

When taken in concert, Faber says all the economies of the world could take a hit from these negative developments.

“I think we could have a global recession either in Q4 or early 2013." When asked what were the odds, Faber replied, "100%."

However, in the near term Faber also sees potential for a market rally.

Faber said the bullish catalyst would be Greece exiting the EU.

“I think the market would be relieved if finally Greece exited the euro [EUR=X 1.2515 --- UNCH ]. There would be some clarity. Although it wouldn’t be good for banks and insurance (stocks) in general I think markets are oversold and with an exit – markets would rally.”

It’s worth noting that Faber is talking hypothetically; he does not think Greece exits the EU in the near future.

“What I think will happen is that Germany will show more flexibility and issue more euro bonds.”

Faber pointed to the recent decline in the euro as evidence that the currency markets share his view. “More bonds will challenge the quality of the euro. That’s why the euro has been very weak, lately."

For investors looking to navigate what could be a serious economic storm, Faber said the best thing to do is keep the portfolio in US dollars and own gold, “knowing that sentiment is negative and in the near-term it could trade down to the Dec 29 low of $1522.”

[Soflasnapper]

China is not contracting, but it's gdp growth is reducing, not quite the same thing. However, they think that without a 8% gdp average increase, they risk civil unrest and disorder, and their growth is indeed slipping down to and below that number. We could only wish for what they've slipped to, btw-- 5, 6 or 7% gdp growth.

Interesting he says to stay in the US$D as a safe haven, although with the Euro zone in turmoil, that is where a lot of smart (or scared) global capital has flowed, as can be seen in the Treasury yield rates. As he also says gold, even with the likely short term declines he mentions, that of course hedges out the possible future US$D decline.

[cushioncrawler]

Theusofa needstabe very very carefull, otherwize it too might go badly.

Re the stock market, i would load up a galley with az much stock az i kood, and row/sail away somewhere, praps a trading route. A bit like Noah with hiz ark.

Likewize i would load up another galley with az much gold az i kood, but look out for navigating what kood be a serious economic storm.

Hmmmmmmmmm. Gold duznt float. Stock duz float, for a while.
I think stock iz better in a storm.
Bulls would be good, u kood takem to that bullish market.
mac.
Be vewy vewy carefull, and everything will be allright.

[Sev]

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">China is not contracting, but it's gdp growth is reducing, not quite the same thing. However, they think that without a 8% gdp average increase, they risk civil unrest and disorder, and their growth is indeed slipping down to and below that number. We could only wish for what they've slipped to, btw-- 5, 6 or 7% gdp growth.

Interesting he says to stay in the US$D as a safe haven, although with the Euro zone in turmoil, that is where a lot of smart (or scared) global capital has flowed, as can be seen in the Treasury yield rates. As he also says gold, even with the likely short term declines he mentions, that of course hedges out the possible future US$D decline. </div></div>

Good point on the terminology.

However if China's major markets are disrupted then they will be relying on internal activity. With over 1 billion people they will be able to float for a while. However it will be a limited window of time before expansion ceases.

The market is scared. There is lots of uncertainty. If things trend to the negative there will be a several thousand point adjustment on the DOW.

[Soflasnapper]

An interesting stat claim by Fareed Zacharia this Sunday-- that China has AVERAGE 9.5% GDP growth FOR THIRTY FREAKING YEARS! (Something like that is true, according to what I've heard in many other places.)

But capitalism is the best system, we hear?

[eg8r]

LOL, maybe we should switch to communism abolish our minimum wage laws and pay people a dollar a day the way they do in China. Your snide remarks do your argument no good.

eg8r

[llotter]

Capitalism is the best, most efficient system if only we would practice it. We would bury China and the rest of the world economically if we let the markets i.e. citizens, control how and where they spend their money instead of forfeiting so much of it over to government, the most inefficient system of allocating resources.

I agree that we are headed for a recession or worse in the immediate future. Decline is a natural consequence of the Nanny State which at some point will become a police state.

[Soflasnapper]

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: llotter</div><div class="ubbcode-body">Capitalism is the best, most efficient system if only we would practice it. We would bury China and the rest of the world economically if we let the markets i.e. citizens, control how and where they spend their money instead of forfeiting so much of it over to government, the most inefficient system of allocating resources.

I agree that we are headed for a recession or worse in the immediate future. Decline is a natural consequence of the Nanny State which at some point will become a police state. </div></div>

For taking a backward country into an industrialized country, no system has done better than the command state structure of some kind. We used to absolutely fear the Soviets, who'd been average a 10% growth themselves, prior to their own empire building and arms race activities.

When the US became 'the arsenal of democracy' in the second world war, we instituted a fascist regime, top down, essentially ordering if not commandeering all large scale production to the war effort.

Prior to the Fed, this country saw many depressions then called 'panics,' and although they have more or less faded from historical memory, they were very bad indeed.

Adam Smith himself stated the biggest problem with the market is that private interests would try to capture it, corner it, and game it, through collusion and restraint of trade, and that FOR THE MARKET TO WORK ITS MAGIC, there needed to be strict regulation that can only come from a national central authority (or perhaps a state central authority, back in the day).

Markets without state regulation go south quickly, and cease to function efficiently, and instead offer rent seeking behavior a happy hunting ground for monopolists and cartelists and oligopolists.

As (at least several of) our Founding Fathers stated, our nation's future has always been at risk from private actors seeking their own enrichment, and the battle was always the national interest against narrow self interest.

[cushioncrawler]

[[.....Prior to the Fed, this country saw many depressions then called 'panics,' and although they have more or less faded from historical memory, they were very bad indeed.....]]

Me myself i kan see the lie here. It seems that in theusofa there iz a lie underlaying everything, even the truth.

The truth iz that good'ol theusofa kapitalizm haz enjoyed more years of depression and recession and bankrun than not (since say 1840, karnt remember xaktly). That iz the truth. That iz usofa kapitalizm.
mac.

Shhhhh -- be vewy vewy carefull, and evwything wiw be awwight.
I'm hunting wabbits.

[Sev]

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Soflasnapper</div><div class="ubbcode-body">An interesting stat claim by Fareed Zacharia this Sunday-- that China has AVERAGE 9.5% GDP growth FOR THIRTY FREAKING YEARS! (Something like that is true, according to what I've heard in many other places.)

But capitalism is the best system, we hear?

</div></div>

So now your advocating communism that uses capitalism to its own advantage?
I wonder what the wealth disparity is there?
Over 1 billion people. Most of whom are serfs. Hmmmmm.

[llotter]

A 'command' economy can apparently work if the command is to go out and make lots of money and that appears to be exactly what the Chinese have done.

[eg8r]

It is easy making lots of money when you are selling your hardware for a fair market value and building it with labor earning pennies/hour. This appears to be the market that sofla supports.

eg8r