Dr Doom predicts gloom

Dr Doom predicts gloom. Legendary investor Marc Faber expects stock prices all over the world to fall by nearly 20% this year. His reason for this pessimism is the state of the global economy. Countries all over the world are battling with bad fiscal positions. Unfortunately most of the countries appear to be at the losing end of this battle. At the same time, economies continue to be depressed. Higher tax rates and depressed conditions would end up harming the corporate earnings. If earnings suffer, stock prices will follow suit.

Another reason for the gloomy picture is the political tensions and social unrests. Many countries are facing this threat. With so much tension and depression gripping the world, Faber feels that the recent stock rally is unlikely to sustain itself. His logic and reasoning appears to be on the right track. Political leaders around the world need to understand the side effects of their short term, myopic policies. They all seem to be looking at ways to postpone the crisis. Rather than tackling the underlying reason for the crisis. Till such time as the cause is understood and cured, the long term outlook is not going to get any better. No wonder that even investors like Faber are drawing out insurance policies by picking up safe haven assets like gold.