1987 Type Stock Crash Predicted for 2014
The man who predicted the 1987 stock market crash and the recent global economic recession believes the worst crash in decades will take place later in the next 12 months. Dr Marc Faber, a Swiss investor and the author of the Gloom, Boom & Doom Report, said the cause of the crash would be the overvaluing of companies within the internet and biotechnology sectors.
He also said the market was also beginning to wake up to the idea that the U.S. Federal Reserve is a “clueless organization” — something he says is starting to affect confidence levels in investors. He also thinks it’s very likely that we’re seeing, in the next 12 months, an “87 Type of Crash” — and he suspects It will be even worse.
His comments came as the NASDAQ suffered its biggest drop in two-and-a-half years after another sharp sell off in biotechnology businesses – including Gilead Sciences and TripAdvisor.
Some groups of stocks that are highly vulnerable is because they’re in “Another World of Their Own” in terms of valuations. They have no earnings and they’re valued at price-to-sales — this is not a good metric in the long run. Overvaluations would not be the only cause of the ”87 Type of Crash’ he is predicting, adding that the U.S. Federal Reserve would have to shoulder just as much blame.
Investors will come to terms with the Federal Reserve’s failings and the market will experience a decline by 20% or 30% in 2014.
Dr Faber also made a prediction last August of 2013 that a stock market crash was imminent, but S&P 500 stock prices have remained around 9 per cent high since that announcement.