Marc Faber gets Gloomier Still

Marc Faber, publisher and editor of the Gloom Boom Doom report, told CNBC he expects a bigger correction than he earlier predicted.

Instead of a 10% correction he once saw for the S&P, he now expects the 500-stock index could drop to 1,150, sometime from August through October, or drop more than 16% from the May 2 high of 1,370.58.

“Usually what happens in the market, we have seasonal strength in January, then weakness in February, then strength in March-April and then weakness in May-June and then again a summer rally in July until early August,” Faber told Udayan Mukherjee of CNBC TV-18.

“So, we are moving into seasonally strong period,” he continued.  “But unlike many strategists, I don’t think we are going to make a new high. I think the S&P or the overall market in the U.S. will close 2011 at about this level or lower not higher as every strategist is predicting. I think we have seen the highs for this year, let us put it this way.”

Faber, who initially said on Oct. 26 he expected a 10% correction in the S&P, reiterated his call on Jan. 25, and once again reminded investors in an interview with Newsmax in early May, now sees a deeper correction of another nearly 100 points from his original prediction.

“I think we can rally to around 1,330 on the S&P now, but not make a new high above the 1,370 highs, which we saw in May,” he said.  “And then, in my view, we would be going down to maybe 1,150 on the S&P.”

As far as timing of the low, the seasonal weak period of late August through October will most likely be when the S&P bottoms at support at 1,150, according to Faber.  Historical data reveals very low volumes of incoming funds moving into stocks during the early fall months of September and October.

“I think the second half of August, September-October will be rough months,” Faber warned.

His overall thesis for stocks can be applied to commodities, as well.  Faber suggested that slowing economies in the U.S., Europe and China will bite into assets prices which have benefited from the risk-on tide of investment capital from money and hedge funds.  That tide is turning, according to Faber.

Risk-off trading is back.  He anticipates that oil, too, will drop another 20% from the already nearly 20% drop in Brent from its $127.02 print on April 11.

“I think all commodities are weakening at the present time, which essentially reflect a significant slow down in the global economy,” he said.  “We will weaken further, in my opinion, until about the end of December. I do not think that oil will collapse. I think we may go down to around $80-$85 per barrel [Brent] or so and then have further strengthening in the years ahead.”

Marc Faber: Get your Assets out of the U.S.

In article just published by the Insider Monkey, Marc Faber emphasized that investors should hold investments outside the jurisdiction of the United States, focusing his ire upon the U.S. President as a contributing reason for his advice.

The outspoken Swiss-born editor and publisher of the Gloom Boom Doom report told the Insider Monkey during the Ira Sohn Conference that he believes U.S. President Barrack Obama “is by far the worst president in the U.S. has had,” and is “vote-buying through handing out money and through increased transfer payments.”

Faber also blames President Obama for escalating conflicts beyond the burdensome Bush-era wars in Iraq and Afghanistan to now include Lybia, which only further blows out the already horrendous federal budget deficit.

Tallied on a cash accounting basis, the U.S. budget deficit looks as bad as any of the European PIIGS, but the U.S., unlike the UK, has no meaningful plans to stop the U.S. budget hemorrhaging.  But, the fiscal picture is a lot worse than the projected $1.6 trillion deficit slated for fiscal 2012.  If expenses were reported using the GAAP accrual standard that corporations must report to Wall Street, the U.S. budget deficit would show an excess of $4 trillion per year, according to economist John Williams at Shadowstats.com.

Four trillion dollars. That calculates to nearly 28% of GDP, more than twice federal tax receipts, and nearly as large as the entire Chinese economy!

Even with that bleak fiscal situation facing America, Faber doesn’t expect any changes coming in the form of fiscal responsibility—in whichever form it may take—anytime soon because of domestic U.S. politics.  In fact, in previous interviews he has stated that the U.S. government will most likely find ways of confiscating wealth through legislation over time from the so-called rich (middle class) to cut the deficit.  But those drastic Leninist-like solution that Faber suggests may not come until after Obama is re-elected to a second term.

“I think it is quite likely that he [Obama] will be reelected,” said Faber.  “But that is the problem of the U.S. In maximum 2-4 years, he will be gone, but the big people who vote in the U.S. will still be there. And I think that in today’s presentations many observers have expressed a view that it’s very difficult to cut entitlements. In other words, social security, Medicare, and Medicaid because nobody wants to do that.”

As a result of budgetary impasses, the same old kicking the can down the road legislative maneuvers will lead to a dollar devaluation—the easy way out taken by governments throughout thousands of years of economic history—until, of course, a modern day bond market crisis ensues in U.S. Treasuries—which is a long-held prediction of Faber’s.

“Nobody wants to accept that [budget cuts] because everybody lives from that,” said Faber, “so essentially the fiscal deficit will stay very large, and it will mean that over time the U.S. dollar will lose its purchasing power, more money will have to be printed, more quantity of easy measures will have to take place, and so forth.”

In the present global economic and financial environment, Faber likes equities and real estate in promising countries as well as precious metals.

“My advice would be to diversify heavily and have money in other jurisdictions than the United States, in other assets than U.S. assets,” Faber warned. “In say Asia, Asian equities, Asian real estate. And I would have some money in custody outside the USA, in Australia or in Singapore or in Hong Kong or in Switzerland and not have all my assets here in the United States.”