Gloom, Boom & Doom Report publisher Marc Faber warns that the United States is on a collision course with a recession.
And there won’t be any safe place to hide as an economic downturn sweeps the globe, said Faber, also known as “Dr. Doom” for his pessimistic outlooks.
“I think there is a deceleration of economic activity everywhere,”
he told Fox Business Network.
“The U.S. has done relatively well, but also in the U.S. there are now cracks that are appearing… industrial production, new orders for durable goods… if you look at the trade balance of the U.S., imports are up and exports are basically down,” he said.
“Look at corporate announcements of United Technologies and Caterpillar Tractor, which are big companies in the industrial sector… their announcements are all essentially negative for the second half. Technology companies have all warned about the second half.”
Faber said the Chinese economy isn’t as strong as official Beijing government reports have indicated. A slowdown in China could pull the entire world into a recession. Meanwhile, oil prices have declined to a six-year low, hinting that the global economy may be near collapse.
“The Chinese economy is nowhere near growing what the government is publishing,” Faber said.
“When the weakness in China becomes so evident, it also affects all its trading partners and China is the largest trading partner of 124 different countries in the world. The new point of view is that [China’s economic growth] is nowhere near 7 percent and more likely closer to 2 percent, if any growth at all.”
Don’t be so quick to dismiss Faber’s dire warnings, because other prominent experts also are painting a bleak economic future for the US – and rest of the world.
The bond market is sending ominous signals that in the past have preceded declines in stocks, said David Rosenberg, chief investment strategist at Gluskin Sheff & Associates Inc.
High-yield or “junk” bonds have lost value this year, driving up yields and indicating investors are losing their appetite for riskier investments. Bond prices and yields move in opposite directions.
“If you think the equity market is heading for a spot of trouble here, the high-yield bond market is having a coronary,” Rosenberg said in
an August 13 report obtained by Newsmax Finance. “The average U.S. junk bond yield is now 7.3 percent, the highest since mid-December.”
The spread between junk-bond yields and safer Treasurys has widened by 100 basis points since June to 580. In the past,
that kind of rapid shift preceded a decline in the S&P 500 stock index of 9 percent, according to Rosenberg's research.
“Yet the stock market is off just over 2 percent, so either the S&P 500 has more downside from here or spreads are going to have to adjust by tightening back in,” he said. “If there is downside now, it is more in the equity market than it is in the credit market.”
While broader stock indexes have slid by 2 percent to 3 percent from recent highs, the market internals are showing signs of weakness, Rosenberg said.
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