Dr. Marc Faber Update: Nigtmare and Global Bust?

Here are some scary opinions.

Nightmare on Bourke Street

• Answering questions at the end, Faber relaxed and said what he really thinks: “I think the whole world will totally collapse. This is a completely unprecedented situation. Financial institutions have no idea what they own any more.
  
  “The Nasdaq is still 50 per cent below its 2000 peak, and I don’t think financial stocks will go back to their 2007 peaks.
  
  “My advice (to the chartered financial analysts at the dinner) is to buy a farm and learn how to drive a tractor.”
  
  These days Marc Faber lives Chiang Mai in northern Thailand, although he travels a lot making presentations and promoting his newsletter.
  
  His key point is that a synchronised global boom is now leading to a synchronised global bust.
  
  Of the United States, he says that its entire monetary and fiscal policies have been aimed at consumption rather than capital formation, as a result of which its competitiveness has declined.
  
  He says the secular uptrend in commodity prices remains intact, but that sharp corrections can be expected along the way.
  
  Central banks have fallen hostage to inflated asset markets, so that his recommended cure for the world’s ills – tight money – is impossible to implement.
  
  And as with all of his presentations, he spent a lot of time talking about the prospect of increasing geopolitical tensions and wars as a result of resource nationalism and shortage, focusing on central Asia. ( click here for rest of article )

On Bloomberg news: Freddie, Fannie Should Split, Not Get Aid, Faber Says

• ``They should close down Fannie Mae and Freddie Mac or what they should do is split them into 10 different companies and let them run as private companies,'' said Faber, who forecast the so-called Black Monday crash in 1987, in an interview with Bloomberg Television from Chicago. ``What Freddie Mac and Fannie Mae should right away do is not obtain any federal aid, but issue additional shares'' to avoid using taxpayers' money in a rescue plan, he said.
  
  Fannie Mae and Freddie Mac, which own or guarantee about half of the $12 trillion of U.S. mortgages, have fallen 31 percent and 41 percent respectively this month, on concern the companies have insufficient capital to cover writedowns and losses amid the mortgage-market collapse.
  
  U.S. lawmakers reached agreement on a rescue plan for Fannie Mae and Freddie Mac that the House may vote on today, Representative Barney Frank said. Under a modified version of proposals made by the Bush administration, the Treasury Department would gain authority to inject capital into the two largest U.S. mortgage finance companies, through loans and equity investments.
  
  Fannie Mae gained $1.84 to $15.25 at 7:45 a.m. New York time, before the official open of U.S. exchanges. Freddie Mac added $1.80 to $11.50.
  
  `Colossal Bust'
  
  Faber said the ``world may already be in recession,'' and reiterated a prediction for a ``bust'' in global markets.
  
  Markets may enter ``a vicious cycle on the downside'' whose worst scenario is a ``colossal bust with inflation,'' as central banks are unable to manage the economic slowdown and faster growth in prices.
  
  Still, Faber forecast the Standard & Poor's 500 Index may climb about 5.7 percent from current levels, to 1,350. Oil may drop $30 a barrel to ``about'' $100 in the near term, he said, although the ``long-term'' prospect for oil prices is to remain ``tight.''