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posted on 30 December 2015

Faber 2016 Outlook: Recession And Falling Stocks In The U.S.

from EconMatters, EconMatters.com

Marc Faber, the publisher of the Gloom, Boom & Doom Report, said in an interview with Bloomberg on Monday morning that "I believe that we're already entering a recession in the United States." Because of his outlook for a weakening economy, and also FANG stocks (Facebook, Amazon, Netflix, Google) skewing the real market performance, he thinks U.S. stocks will fall in 2016 and sees investment opportunities in U.S Treasury, and the Emerging Market (EM).

Although EM is moving into a "buying range" (EM has been under-performing the U.S. since 2011), Faber thinks right now it is still pre-mature to commit a major position. Since he is the "Gloom-Boom-Doomer", Faber always include rural and farm properties as part of his investment strategy. With no exception this time, he likes the real estate in the country side of Portugal, Spain, Italy and the Indochina region (Vietnam, Laos, Cambodia, Myanmar, and Thailand).

The other guest on the video is Frank Berlage, CEO of a investment consulting firm, also has a pretty bearish view on commodities, China and sees the the debt burdens in advanced economies like Japan, the Euro Zone and the U.S. will put us either in a recession or a very slow growth trajectory.

In contrast to Faber's pessimism, Yellen showed a lot of confidence in the U.S. economy by raising interest rates this month for the first time in almost a decade. Many economists questioned the timing of Fed's decision because the inflation rate is stuck near zero despite an expanding GDP. U.S. economic growth registered a 2% annual growth rate in 3Q 2015, down from from 3.9% in the previous quarter.

According to Bloomberg, Faber's predictions have not always hit their mark. Last year, he made a similar prediction that U.S. stocks would plunge and favored gold as the investment choice. Since then, gold has plummeted and stocks have gained. He also warned about long-term U.S. bonds "a suicidal investment" four years ago, but Bloomberg reported that the 30-year Treasury has returned 8.7% per year for the past four years. Right now, the consensus view is that U.S. 10-year Treasuries yields will climb to 2.80% by the end of 2016 which would correspond to a decline in price around 5% from the current yield near 2.3%.

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