Subscribe via Email:

Friday, June 21, 2013

Fed mistakes repeated every time

The government bailed out savings-and-loan depositors during the thrift crisis in the late 1980s. The U.S. Treasury and Federal Reserve bailed out Mexico in the mid-1990s. The biggest policy mistake occurred with the Fed-supervised bailout of the hedge fund Long-Term Capital Management in 1998, because it gave a green light to Wall Street to keep leveraging up. Another policy mistake was made in 2000, right after the Nasdaq collapsed. The system probably could have handled a recession then, but instead, the Fed engineered a drop in interest rates, eventually to 1%, that encouraged a huge housing bubble. After it burst in September 2008, Bernanke slashed short-term rates to near-zero, where they are still. Meanwhile, the stock market is up 150% from its 2009 lows.

Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

Asset prices are grossly inflated globally

I am suggesting that in the fourth year of an economic expansion, near-zero interest rates will lead to a further mis-allocation of capital. I thought the U.S. market would have a 20% correction last fall, but it didn't happen. I also said the market might explode to the upside before the correction occurred. We might be in the final acceleration phase now. The Standard & Poor's 500 is at 1650. It could rally to 1750 or even 2000 in the next month or two before collapsing. People with assets are all doomed, because prices are grossly inflated globally for stocks, bonds, and collectibles.

Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.

MARC FABER BLOG

Popular Posts