Marc Faber still expects Stock Market Correction

After his Jan. 26 statement, �Treasuries are the best place to be for the next 10 days,� Marc Faber, editor of the Gloom, Boom & Doom Report, reiterates his forecast for a correction for the U.S. equities market and a decline for emerging markets equities of a much larger magnitude.

A growing number of investors follow Dr. Faber because of his likewise growing reputation for not only predicting global markets with more accuracy than other market analysts but also for his colorful and crowd-pleasing drubbing and debunking the �liars� at the U.S. Fed. In short, Faber has become a iconic folk hero who speaks to power through truth, while navigating the financial waters for investors as his bread and butter trade.

Following his bold prediction of a strong rally for stocks during the nail-biting hysterics of the March 2009 equities meltdown, Faber now predicts that the nearly two-year long rally is overdue for a 10% correction for U.S. equities, while emerging markets could experience a much deeper sell off soon of as much as 30%.

Faber’s thesis is predicated on the fact that �the U.S. economy has performed so well over the past 18 months since the March 2009 lows,� while emerging stock markets of Asia have already priced in much of its economic recovery.

He also points to Asia’s accelerating inflation rate in food and energy prices as a hindrance to its population’s relatively low purchasing power parity with the U.S.

�My concern is this: We have money printing around the world�in particular, in the U.S.–and that has led to very high food inflation and inflation in energy prices,� Faber told CNBC’s Becky Quick on Jan. 19.

�And in low-income countries like China, India, Vietnam, and so forth, energy and food account for a much larger portion of personal disposable income than in the United States,� he explained.

In the past, Faber has repeatedly said that inflation is a unfair tax on the poor anywhere in the world, but can be devastating to populations in countries such as China, India and Vietnam where per capita purchasing power parity equates to $7,400, $3,400 and $3,100, respectively, compared with approximately $47,000 per American.

Faber routinely blames central bankers (headed by the U.S. Fed) for inflation of money supplies and the pass through effects of higher prices in food and energy as a predictable result of central bank �money printing.� More money spent on food and energy, he says, impacts discretionary spending in Asia more than it impacts American and European spending.

Moreover, Faber anticipates that central banks in emerging economies to tighten monetary policy to ward off threats of population uprisings in protest of the higher cost of living as already witnessed in Tunisia and Egypt. The other option available to Asian central banks is to do nothing and allow inflation to continue, he said.

�Both [alternatives] are not particular good for equities.�

�I believe that the U.S. and Europe have a better chance than the emerging markets that have become�I wouldn’t say necessarily have become expensive�but certainly not great values anymore.�

However, in the longer term, Faber likes emerging economies over developed ones in the many years to come as debtor nations struggle with overall burdensome debt levels. He suggests investors wanting exposure to China, India and Southeast Asian countries of Thailand, Malaysia, Vietnam and Indonesia could find good entry points following his forecast correction.