Are Bubble Concerns Overblown?
Marc Faber thinks “we are in a gigantic financial asset bubble.” He gave this economic diagnosis on Bloomberg‘s “Street Smart” Tuesday. Faber is an economist who publishes a monthly newsletter, ”The Gloom Boom & Doom Report.” Faber said that, “It is interesting that that despite of all the money printing, bond yields didn’t go down.” Instead, the bottom for 10-year bonds was hit in July 2012, when they reached 1.43 percent. Now, it is about 2.85 percent, Faber said.
“But we’re up substantially. Now, this hasn’t had an impact on stocks yet. In fact, it pushed money into the stock market out of the bond market. But if the 10-years goes to say 3 percent to 4 percent, then the 30-year goes to close to 5 percent , the mortgage rates go to 6 percent. That will hit the economy very hard.”
Faber predicted that it’s possible bubble could burst before then. “It could burst any day,” he said. Although “everybody’s bullish,” Faber took the contrarian position. “The global economy is slowing down, because the global economy’s largely emerging economies nowadays, and there’s no growth in exports in emerging economies, there’s no growth, in the local economies,” Faber explained. “So, I feel that the valuations are high, the corporate profits have been boosted largely because of the falling interest rates.”