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In fact, some asset markets like India, Russia, the Latin American stock markets, copper, and other industrial commodities, are so over-extended that further 30% declines would not surprise me. Therefore, my advice is to sell rallies in stocks and commodities and take a holiday until next October. This would particularly apply for the Indian stock market, where speculators are mostly heavily long.
My readers will know from previous reports that I am ultra bearish about US bonds for the long term. In fact, I recommend that each reader buy just one 30-Year US government bond, frame it and put it on his wall in his living room. You can then, in future, show your grandchildren how the US dollar and bonds became worthless.
Bonds rebound
However, for the short term, I believe that the out-performance of equities compared to bonds, since 2003, has ended and that bonds will now rebound over the next three months. I may add that bond bullish sentiment reach recently extremely low levels while commercial had record long bond positions - a powerful contrary indictor, which would support my take that the US economy will shortly badly disappoint.
I believe that the US government which has been extremely adept at misinforming the media and the public about the health of the economy will find it increasingly hard to "fool all the people all the time".
Finally, for our Middle Eastern friends, I believe that for the next few weeks, their extremely over-sold stock markets could rebound around 20% to 30%. New highs are, however, out of the question.
Dr Marc Faber
