Thursday, December 29, 2011

Marc Faber says the whole derivatives market will one day cease to exist, 'will become zero'

Via a reader.
From Business Intelligence Middle East:
Marc Faber the Swiss fund manager and Gloom Boom & Doom editor recently discussed his 2012 predictions. In a nutshell, he expects politicians in the US and the EU to keep on addressing symptoms rather than dealing with the fundamental problems of the crisis.

He can smell more money printing and sees less prosperity - to the point that within 5 years many investments could lose 50% of their value.

"You can increase debt but it doesn't increase prosperity or economic growth," he says. He predicts the collapse of the derivatives market - down to zero - and favors equities and gold.

QE3 and equities
Speaking in an interview with Jeanne Yurman of Reuters on the sidelines of the IndexUniverse’s 4th Annual “Inside Commodities” conference held on December 8 at the New York Stock Exchange, Faber said: "There is no doubt that QE3 will come in one form or the other, and in Europe also".
"They will monetize," he stressed.

Because of impending additional quantitative easing, Faber, who predicted the stock market crash in 1987 and turned bearish shortly before the 2007-2009 bear market, is less bearish on equities now.
If the S&P drops 10%-15% here [the US] and in Europe, "they are going to print money," he predicted.

Addressing symptoms: The limit of Keynesian policies
Faber sees more can-kicking and more avoidance of real solutions through additional fiscal deficits and money printing in 2012.

"When the EU [and the eurozone] were formed, in the Maastricht treaty it was stated that no country should have a fiscal deficit of more than 3% and the debt to GDP ratio should not exceed 60%, but nobody kept that promise, Faber reminded his host.

The first one to violate [the rules] was Germany, he added.

When you look at what happened subsequently where countries had huge expansions in debt/GDP, you have to ask yourself what did these bureaucrats do all day? asked Faber....MORE
A fair question.