Marc Faber: “A huge move is coming in the dollar, in bonds and in equities” but…

Marc Faber was quoted in June as saying he expects a major move in financial markets, but is unclear which directions markets will turn.  His statements suggest to me he could be advising clients to go long volatility in anticipation of market turbulence.  This would usually be accomplished by buying options in high beta assets which one believes are underpriced. reports.

Investment Guru Marc Faber said he sees a huge breakout from the narrow trading range soon. “I think the summer is shaping up nicely. The grave is out, we had a huge rally. We now have a narrow trading range but we will get a big breakout.” He added that the S&P could hit 970-1020.

“I have turned kind of neutral recently because I think we are at that trading range. The big move, a huge move is coming in the dollar, bonds and in equities. But I am not yet sure clearly on what side it will be.”

However, today CNBC is reporting that Faber remains a long-term bear irrespective of his short-term views. An article on their site called “Ultimate Crisis Is Still Coming: Marc Faber” says:

We haven’t seen the last of the crisis despite all talk about green shoots, and the surge in markets was caused by nothing more than the excess liquidity coming from central banks, Marc Faber, author of the Gloom, Boom and Doom Report, told CNBC Friday.

"If you pump money into the system and you create large fiscal deficits, you create volatility," Faber said.

"We’ve seen an intermediate low in March, we’ll rally for a year or so or maybe 18 months… the ultimate crisis will happen much later, and the ultimate crisis would clean the system," he added.

Asked when this would be, he said he could not forecast a precise timing: "it may be 5 years time, 10 years time, but that’s not the last crisis."

Translation: Don’t underestimate the power of printing money. This combined with government intervention into the market will most definitely keep markets from crashing over the near term. In fact, markets may rise for a longer period than bears now expect. The real question is what will be the likely longer-term implications of this money printing.

In my view, it distorts price signals, causing people to lever up, reach for yield and take on more risk.  Whether those bets pay off is now largely determined by how successful government actions are in arresting deflationary forces over the short-term.  That makes this market extremely difficult to call and also extremely volatile, hence Faber’s talk about a big move in either direction.

On other fronts, I see Faber as a bit extreme. Always the small government-minded Libertarian, he goes on to suggest firing half of government employees in the world as a solution.  He says, “Why does California have these problems? It’s not that there are too many teachers in California but the education department is very bloated.”

Whether you agree or not, he is always entertaining.

The video of Marc Faber’s more bullish statement from June is below.


Mkt to break out either way, stay on sideline… –

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