What Can the Fed Do To Help Markets? Collectively Resign, Says Marc Faber
Business Intelligence Middle East
the Swiss fund manager and Gloom Boom & Doom editor spoke Tuesday
about the Fed's decision to keep interest rates low for a prolonged
period of time and the prospects of QE3. He says the Treasury market
is a gigantic bubble and long-dated T-bonds are the short of the
century. Faber suggests that sometimes the best the Fed can do for
markets is to do nothing!
He also talks
about gold and how "every responsible adult should gradually
an interview from Chiang Mai, Thailand, with Carol Massar and Matt
Miller on Bloomberg
Television's "Street Smart", Faber said: "The Fed
did the right thing" by not announcing QE3, so they can now
watch the reaction of assets prices.
predicted the stock market crash in 1987, turned bearish shortly
before the 2007-2009 bear market and called the 2009 lows, believes
the markets will now test the July 2010 lows for the S&P 500
at 1,010 and "after that we'll get a QE3 announcement."
picture is so horrible that "I would use the rebound as a lightening
up opportunity I would reduce positions," he told Carol Massar.
warned that by selling 'in such a rapid way and with such a momentum,'
the markets are signaling that "something really wrong [would]
happen in the next 2-3 months...maybe there is geopolitical problems,
maybe the Middle East blows up, maybe the economy is horrible"
practice of short-selling will be restricted from Friday in Belgium,
France, Italy and Spain to combat "false rumors" that
have destabilized the markets, European regulators said.
sell borrowed shares with plans to buy them back later at a lower
a ban will have unintended consequences. EU policy makers
dont seem to understand the law of unintended consequences,
Jim Chanos, told Bloomberg yesterday. The vast majority of
short-selling financial shares is by other financial institutions,
hedging their counterparty risks, not speculators. The interbank
lending market froze up completely in October to December 2008
after the short-selling bans.
It is the worst
thing to do right now," says Abraham Lioui, economics professor
at France's Edhec business school. "This would signal to the
market there may be something fundamentally bad that is happening."
"The Fed is underestimating the severity of the coming economic
downturn and they have spent shot out- their bullets,"
Faber told Bloomberg.
It is very
difficult to follow with QE3 right here because gold prices are
going ballistic and the dollar is very weak and there are unintended
consequence with implementing QE3 right here,' he added.
the Fed do to support the economy?
they could do for markets would be to collectively resign,"
in the world has become a Keynesian, everybody thinks the government
should do this and that, the Fed should do this, the Treasury should
do that.....I think sometimes the best is to do...nothing!
his views on the prospects for another asset purchase program, Faber
asked: "What has QE1 and QE2 done for the labor market? Nothing
at all, and nothing for the housing market."
has lifted stocks and it created wider wealth inequality in the
sense that people who own assets have done well and people who are
in the lower income recipient groups are getting hurt from rising
energy and food prices," he added.
the rest of the article
Marc Faber [send him
mail] lives in Chiangmai, Thailand and is the author of Tomorrow's
2011 Business Intelligence Middle
Best of Marc Faber