It's interesting, given the recent market turmoil and aggressive action by the US Federal Reserve, to revisit predictions from one of the gloomier market watchers, Marc Faber, from 2006.
MARC FABER: Well, I basically think that Mr Bernanke is a money printer and it's interesting to see that since he was appointed Fed chairman, the price of gold has risen by 42 per cent so the market is not very happy with his bias towards money printing....
All I am saying is if the Dow Jones here goes up three times because of money printing by Mr Bernanke and we have examples in financial history where a central bank printed money and everything went up, but in this instance I think that gold would significantly outperform the Dow Jones. So if someone says to me the Dow will go to 33,000, I say yes, it's possible but it will decline against the price of gold which will go up to $US5,000, $US6,000 an ounce. ... The US dollar is a doomed currency.Dr Faber likes to be colourfully apocalyptic, but part of his point here is that the US stock market will go up in nominal terms if the currency is devalued. Indeed, that's what we've seen over the period since the interview, though only once we take into account the recent market correction. The Dow Jones has gone up around 12%, and the USD/EUR rate has declined around 12%. (Gold has also jumped.) From the perspective of an Australian or European investor, it's gone nowhere. The recent cut from the Federal Reserve - the recent bout of money printing - makes hard assets more valuable than cash by stoking inflation, but not that impressive in real terms. The cost is also more to the poorer parts of society, who don't have many assets and whose cash savings and income are then worth much less. Faber's website is here, which in the usual style of market analysts is mostly full of expensive reports, and just in case you miss the theme, the "Dance of Death" paintings by Reformation era painter Kaspar Meglinger.
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