He told CNBC that the pain in the internet and biotechnology sectors was just getting started, and the market was beginning to realise that US Federal Reserve was a "clueless organisation".
"I think it's very likely that we're seeing, in the next 12 months, an '87-type of crash," Dr Faber told CNBC. "And I suspect it will be even worse."
US technology stocks suffered their sharpest dive in more than two years overnight. Photo: AFP
Dr Faber's prediction comes after another high profile investor, Jeremy Grantham, said last month the ''next bust will be unlike any other''.
The US technology-heavy Nasdaq plummeted by 3.1 per cent on Thursday night (US time), its biggest one-day drop since November 2011. A sharp sell-off in biotechnology and momentum names, including Gilead Sciences and TripAdvisor weighed on the market, fuelling fears among inventors of a broader pullback.
"I think there are some groups of stocks that are highly vulnerable because they're in cuckoo land in terms of valuations," Dr Faber said.
"They have no earnings. They're valued at price-to-sales. And this is not a good metric in the long run."
Dr Faber, the editor of the Gloom, Boom & Doom Report, has already called for growth stocks to decline this year.
He said ridiculous stock valuations were not the crash catalysts, saying the Federal Reserve was also to blame.
After the Fed began to taper its massive bond buying program, minutes from its last meeting in March indicated that it may not be as eager to end its easy money policy.
"I believe that the market is slowly waking up to the fact that the Federal Reserve is a clueless organisation," Dr Faber said.
"They have no idea what they're doing. And so the confidence level of investors is diminishing, in my view.
"This year, for sure - maybe from a higher diving board - the S&P will drop 20 per cent," Dr Faber said, before correcting himself.
"I think, rather, 30 per cent. Who knows? But all I'm saying is that it's not a very good time, right now, to buy stocks."
CNBC noted that Dr Faber predicted in August last year a 1987-type crash was looming.
Since then the S&P 500 has risen about 9 per cent.
Mr Grantham said the bust would be particularly painful because "the Fed and other central banks around the world have taken on all this leverage that was out there and put it on their balance sheets.
"We have never had this before."
Mr Grantham – the cofounder and chief investment strategist at the $US112 billion ($119.18 billion) Boston-based fund manager GMO – said assets were overpriced generally.
''They will become cheap again. That's how we will pay for this. It's going to be very painful for investors,'' he said.
Read more: http://www.smh.com.au/business/markets/wall-street-crash-even-worse-than-1987-is-coming-says-marc-faber-20140411-36gok.html#ixzz2yamoZMbc
No comments:
Post a Comment