Faber : In a Free Market Economy, you will always have price fluctuations

TD: Marc, your fellow board member at Sprott Inc., Rick Rule, commonly notes that bull markets are the authors of bear markets and bear markets are the authors of bull markets. When you look at the general equities market here today, how does it strike you?

Marc Faber : In a free market economy, you will always have price fluctuations. The Federal Reserve today artificially manipulates asset prices up. It’s a huge mistake but that’s what they do. To answer your question specifically, we had a bear market that ended March 6th, 2009, at S&P 666. We are now over 1800, up almost three times. Over the last two years, most equity markets around the world, emerging market stock markets have been down or moving sideways, they’re no longer following on the upside. In the U.S., an increasing number of shares are breaking down.

We had extremely optimistic sentiment just before Christmas. We had very heavy insider selling and we have high valuations and extremely high corporate profits by historical standards if you look at margins and so forth.

So my view is in a month’s time, the bull market will be five years old. This is the second longest bull market in the last 100 years. I wouldn’t buy shares here. I’m not interested.

Now can the market go up another 20 percent? I wasn’t interested to buy the NASDAQ in late 1999, but between January 2000 to March 2000, the NASDAQ went up another 30%. Afterwards people were crying when they realized their losses.

So I think yeah, the markets go up and down. I think that the upside potential now is very limited and there is considerable downside risk, considerable. Probably more downside risk than investors realize. - in bullmarketthinking Click here to watch the full interview


Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.Dr. Doom also trades currencies and commodity futures like Gold and Oil.