On Oct. 19, 1987, which is known as Black Monday, stock markets across the globe crashed in just a very short period of time. The Dow Jones Industrial Average itself fell by more than 508 points. This will take place again within the next year, according to one contrarian investor who predicted the same aforementioned crash.
Marc Faber, publisher of the Gloom, Boom & Doom Report, spoke with CNBC late last week in which he said that he thinks a 1987-style crash will inflict the global stock market and perhaps be even worse than what took place on that autumn day.
How bad will things get? Faber predicted that stocks will plunge between 20 and 30 percent and it will take a long time for the markets to recover from such a steep decline. In the end, “it’s not a very good time right now to buy stocks.”
“This year, for sure—maybe from a higher diving board—the S&P will drop 20 percent,” Faber said. “I think, rather, 30 percent. Who knows. But all I’m saying is that it’s not a very good time, right now, to buy stocks.”
Internet and biotechnology stocks will be one of the vulnerable stocks to fall “because they’re in cuckoo land in terms of valuations.”
The incompetence at the Federal Reserve will be one of the culprits of the crash.
“I believe that the market is slowly waking up to the fact that the Federal Reserve is a clueless organization,” added Faber. “They have no idea what they’re doing. And so the confidence level of investors is diminishing.”
This isn’t the first time that Faber has made such calls. We have reported in the past that Faber predicted last summer that a similar crash was going to take place, but the S&P 500 is close to 10 percent higher since that prediction was made.
Other contrarian investors who might be right, such as Peter Schiff and Jim Rogers, get stung each time because they make such predictions with a date. It’s inevitable that the dollar will crash, the markets will collapse and the political system will tumble, but each of these investors should refrain from adding an exact date.
The mainstream media and the financial establishment will point to these incorrect dates as examples of how everything is sound and there is no doomsday or economic collapse happening.
Even Schiff has started to realize this as it has become quite evident that he has slowed down making dates.
He has been saying the exact same thing since 2012.
Here: http://www.zerohedge.com/news/marc-faber-sees-1987-crash-approaching
Here: http://www.arabianmoney.net/us-stocks/2013/02/13/marc-faber-thinks-1987-style-wall-street-crash-coming-this-autumn-if-markets-do-not-correct-soon/
Here: http://www.cnbc.com/id/100950234
Here: http://www.cnbc.com/id/101573688
He will be correct eventually, not sure when though.
Well, if he means literally a “1987-style crash,” then it will be an equity sale of historic proportions, and a wise investor should immediately move into the market at that point. We recovered from the 1987 crash within 6 months and then saw 15 years of unbelievable gains.
My point is that Marc Faber doesn’t really know what he wants to happen precisely except perhaps that total market value fall, say, 40% in one week. For some reason, he finds deep meaning in such an event, and he thinks the rest of us should as well.
The basic problem here is that these scenarios confuse the word “crash” with “volatility.” The latter happens throughout history, the former, strictly speaking, has NEVER happened in modern society nor will it. How can I be so confident? It’s in the U.S. government’s best interest (actually, their ONLY interest) to prop up markets. That, my friend, is a very safe long term bet: no one benefits from a crash — no one, not even Marc Faber.
Mr. Dick Turpin
Financial systems of the world were not as connected back in 1987. Dominoes falling in some part of the world have the power to affect a lot more dominoes in distant places, now.
I also want to point out something less known; computers do most of the trading nowadays. People who designed and set-up those cyber networks of trading are definitely top-notch people who “figure out” what they are doing along the way.
However, one of the most famous algorithms ever, a kind of sorting algorithm that is a no-brainer to figure out, had a little bug in it for 20 years before it was patched up.
People who wrote that algorithm were the people who created computer programming. Yet the bug slipped them by.
Imagine a computer, in control of MBAs, playing with money.
Don’t act like you are not as clueless as the FED. Most of the people reading this sentence have no idea what will happen next month.
No one can.