Marc Faber : We are moving into a Speculative phase where everything you buy today, you can buy cheaper within the next 2-3 years

David McAlvany : We have talked about liquidity. We have talked about the implications of rising asset prices. Yet selectively, we are seeing stocks break down. You pointed out, very presciently last October, that Apple looked very much like RCA in the 1920s and could be poised for a correction. Of course, we have had the correction, close to 40%. Today, there are a growing number of stocks that are breaking down in the same manner, 30%, 50%, even 80% down in a short period, and that’s while the major indices are moving higher. What does that tell you, as someone familiar with the markets for 20, 30, 40 years now?
Marc Faber : When you have that many stocks breaking down every day, it’s not the symptom of a market that is bottoming out, it’s the symptom of a market that is already relatively high, where the bull market is already rather mature. That is what it tells me.
And by the way, I would like to add one more comment about what you said about liquidity. I’ve been in this business for a number of years, to be precise, 40 years. In the 1970s people went around the Middle East and said, “Oh, the Arabs, they have so much liquidity.” And at that time, I used to travel frequently to Kuwait, and they had a stock market, and at the peak of the Kuwaiti stock market in 1979-1980, the Kuwaiti stock market had a larger capitalization than the German stock market, and everybody always said that there was so much liquidity, it will never go down.
Fast forward: Japan in the late 1980s. Everybody told me there is so much liquidity, stocks in Japan will never go down. And then again, in the late 1990s, there is so much liquidity, NASDAQ will never go down. And for real estate the same, and so forth, and now I hear the same story. At the peak of the market, you always have lots of people who tell you how much liquidity there is around, but liquidity comes and goes, and you don’t know exactly what will happen. And I really don’t know whether the Dow Jones will peak out today, or in three months, or six months, or even a year. But we are moving into a speculative phase where my sentiment is that everything you buy today, you can buy cheaper within the next 2-3 years.
- in a recent interview with McAlvany
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