CNBC Writes: Marc Faber: Market volatility will continue, here’s why

“It would seem to me that it’s not just tapering that is putting pressure on markets,” Faber, the author of the closely watched “Gloom, Boom & Doom Report” told CNBC on Tuesday. “In emerging economies we have practically no growth, we have a slowdown in China that is more meaningful than the strategists seem to think and than the official, Chinese statistics seem to suggest.”

“That then puts pressure on the earnings of the multinationals because most of the growth in the world over the last five years has come from emerging economies,” he told CNBC Europe’s “Squawk Box.” No growth, he said, was causing “a vicious circle on the downside” with slowing emerging economies and inflated asset markets that are now deflating, in turn putting more pressure on asset prices and on the economies.

Faber’s comments come as volatility in equity markets continued this week, prompting concerns among traders and investors that markets were at the start of a sharp correction. The moves lower follow a rally last year on the back of the U.S. Federal Reserve’s monetary stimulus.

“Total credit as a percent of the global economy is now 30 percent higher than it was at the start of the economic crisis in 2007, we have had rapidly escalating household debt especially in emerging economies and resource economies like Canada and Australia and we have come to a point where household debt has become burdensome on the system—that is, where an economic slowdown follows.”

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Marc Faber needs to stop reading my reports. In all seriousness, it is nice to see someone like Faber confirm your own analysis and investment thesis in its entirety.

He is, of course, right on the money. When the entire global economy depends on massive amounts of credit and each country is trying to devalue their currency faster than the other, you know you have a big problem. Here is a good way to look at the issue.

The US Economy and its global counterpart is no different from the Philip Seymour Hoffman. One of my favorites. The guy was on top of his game in one of the most competitive industries in the world, successful, rich and with the ability to land any type of a girl. What else does a guy need in this world?

Well, for him that wasn’t good enough. So he had to find an escape in booze and heroin. The US Economy functions in exactly the same way. Neither Greenspan nor Bernanke has the testicular fortitude to let the economy go through a typical recovery, clear the slate and keep moving on.

Instead, they have infused the economy with massive amount credit (aka heroin) at the first sight of a sneeze. Distorting all financial markets to a massive degree and making the patient addicted in the process.

Now, there is no going back. Just like Philip Seymour Hoffman OD on heroin, the US and Global Economy will OD on cheap credit. Leading to massive financial trouble around the world. There is no way to avoid it now.

While I agree with Faber, I have an extra level of analysis that he does not. Timing. Again, my timing work is indicating that the bull market topped out on December 31st, 2013 and the market will now roll over to take us into the cyclical 2017 bear market bottom.

With that said, right now would be a prudent time to protect yourself.

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