Marc Faber, Editor and Publisher of the Gloom, Boom & Doom Report, discusses why he thinks recent highs in the stock market mean nothing for most Americans.
Recent record highs in the stock market mean absolutely nothing to the vast majority of Americans. That's what noted contrarian investor Dr. Marc Faber, Editor and Publisher of the Gloom, Boom & Doom Report, says to Talking Numbers.
What's more, any deal coming from Washington will likely mean those who benefitted least from the markets' success will pay the most.
"The world is upside down and I think that basically any deal is not favorable from a longer-term perspective," says Faber. "It allows the US government to spend more and to increase its government debt. Someone, somewhere, at some point will have to pay for it. It will be either through more inflation [or] through more monetization. But there is always a price for whatever happens."
While the Federal Reserve Bank's policy of buying $85 billion per month in US Treasury and mortgage bonds may have helped lowered interest rates and boost the market to an all-time high, that doesn't mean all have shared in the boom.
"Just the fact that the market makes a new high doesn't change the lifestyle of 80% of Americans that basically are struggling," says Faber. "The market has gone up and it is now higher than it was in 2007. And, it's higher by 70% compared to 2011. In October 2011, at the low, we were at 1074 [on the S&P 500 index]. We are now at 1720. But, this is not the lifestyle of most Americans."
To prove his point, Faber cites the most recent Federal Reserve's "Survey of Consumer Finance". Faber finds the table "Household Net Worth", which breaks everything down by wealth percentiles, to be particularly interesting.
"For the bottom 50% of the households, their household wealth compared to 2007 is still down 44% because they don't own any shares – or very little shares," says Faber. "The stock market reflects 1% or 2% of the population. It's like if you tell me an Andy Warhol [painting] has reached a record price. It doesn't touch the lifestyle of ordinary people."
While Faber may have personally profited from the markets, he feel there's a bigger picture that needs to be addressed.
"I'm not complaining about it as an investor, because I'm also holding assets," notes Faber. "I'm complaining about it as a social observer and as an economist because a sound economy boosts the standard of living of everybody, not just the few."
So, what should investors do in this environment? Watch the video above to hear what Marc Faber believes is next for the markets and where the best values are now.
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