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fear of missing out seems to keep pushing stock markets to all-time records but are the highs giving investors a false sense of security my next guest says get ready for the party to come to an end joining us now on the line is the original Doctor Doom dr. mark Farber publisher of the gloom boom and doom report thank you so much for joining us it's like greater Thank You your latest report gives a very grim prognosis of a major market correction you know but if you look at the stock prices continuing to make new highs here it seems like the markets are telling a different story correct they also told a different story in 1987 until the party came to an end and then without two months within two months the market dropped by 40% and 21% in just one day on October 19 1987 so the fact that a market goes up does not necessarily mean that it will continue to go up and don't forget we've been going up since its entry March 6 2009 so well shortly we'll have the ninth anniversary of this bull market and the economic expansion began in June 2009 not a very strong expansion but driven by a lot of stimulus monetary and fiscal so I think if people think that everything is fine they're mistaken now can bubbles become bigger that I always say in a bubble the bubble can be inflate is much further to through additional money printing and that very very well be the case there will be some consequences if you look at commodity markets they started to be actually much better this year some commodities are up quite strongly and have actually outperformed stocks if you look at the taller you can see that other currencies have been much stronger than the taller so the dollar is down by about 12% against the euro and if you look at equity or any asset value and you measure it in bitcoins then everything has collapsed so I wouldn't necessarily take great comfort from the fact that markets have been strong another point I'd like to make is foreign markets and interestingly enough frequently more questionable markets have been much stronger than the u.s.
Italy is up 30 percent pain is up 22 percent then we have Hong Kong it's up 29% this is all in dollar terms so I'm comparing apples with apples so if someone tells me to all that great in the US then I say well in dural terms the market hasn't really gone up because the appreciation in US stocks has been affected by currency weakness you know a repeat of October 1987 and there's similar patterns here can we prepare for it well you can prepare for it some people have of course done that for a long time by buying protection either buying volatility which has been a very poor in buy soon until now or they buy puts or they die or they fell short equities with part of the money or they hatch hedge funds has performed poorly over the last eight years they've grossly underperformed the market so some people have already done that I'd like to say there is a key difference between 1987 and today and this is in 87 the US stock market has gone up by 40 percent between January and August 1987 this is not the case we're at the highest point now and we are 15 percent and in 87 in other words from the end of 85 to the peak in Oh on August 20th 87 the market was up more than a hundred percent that's not the case in the US so the market is not as overboard as it was at that time but then if I look at monetary conditions and economic conditions around the world then the level of debt is much higher the level of government debt is much higher and we have worldwide in the developed economies whether that is Britain or Japan or the u.s.
still very large budget deficits that in my opinion will rather go up and not go down so we have actually from a purely technical point of view more favorable conditions then in 87 we're less overboard 87 we were very overboard but we have more unfavorable macroeconomic conditions so there was will be a serious events then which will trigger the end to this party for you a single event did not exist but when the market started to go down its accelerated in my opinion because it wasn't for for new insurance but you understand a lot of people they were so accustomed to the full market which had begun in August 82 so they're five years into a bull market that they kept on selling short but you know if you sell short the foot you must take delivery hope to share if the stock market goes down nowadays we don't we have less food spending per se but we have selling short the VIX index and their short positions in big are at the record high and so anything can happen with the big if market starts to go down and volatility goes up a lot of people will be squeezed and we could have minor decline ending up in a major decline
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