Marc Faber: We're Approaching a Major Market Top & It Ends in Disaster

**Marc Faber** (0:00)
Honey, what are you listening to?

**SPEAKER_2** (0:02)
Mom!
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**Marc Faber** (0:32)
We're approaching a major top. I think it will be a disaster, quite frankly.
I think a complete disaster. The highest risk is that financial assets and other assets are grossly inflated. The economy has been financialized. And in my view, the US is heading towards a fiscal crisis.

**Maggie Lake** (1:07)
Hello and welcome to Wealthion, Maggie Lake. Joining me to discuss the outlook for the global economy is Marc Faber, editor of the Gloom, Boom & Doom Report. Hi Marc, it's lovely to see you again.

**Marc Faber** (1:18)
Well, thank you for having me on your program and good day to all your viewers and listeners.

**Maggie Lake** (1:24)
So Marc, when we spoke at the start of the year, you were last on here at Wealthion, you thought US stocks looked expensive and you sense some doom and trouble ahead.
I mean, a lot has happened between then and now. We've had US and Iran at war. We saw oil spike, market sold off, but then they rallied back up to records. We have trillion dollar IPOs. How are you feeling now? What are you seeing now?

**Marc Faber** (1:50)
Well, we're even closer to a top in the market. I'm just writing about major tops. But I want to stress one point that over the last 12, 18 months, the advance of the market has been very narrow. In other words, some stocks made new highs, and we have statistics about the new highs, the 12 months new highs. They didn't expand very much on the market going up. And if you look at the number of stocks above the 50 day moving average and above the 200 day moving average, they haven't expanded much. And so it's on the 200 days moving average, about 60% of stocks are above and 40% below. In a very strong market, 80% should be above the 200 day moving average.
And we have statistics that show the performance of the max seven stocks and in other words, the magnificent seven shares. And they have actually gone down this year. They're not up, but what has been exceptionally strong are anything to do with AI, artificial intelligence, and also space related companies and so forth. And that has driven the indices to new highs. And the AI boom is for real. I mean, there is a capital spending going on that is huge. And the question is, of course, in the past, whenever you had the sector that expanded dramatically as a percent of the economy of GDP, say railroads or the automobile companies at the beginning of the 19th of the 20th century, or in more recent years, the oil industry in 1978 to 1980, and so on, these were heavy capital investments that took place. And most of these periods ended in colossal losses for most participants. I'm not saying that there are no winners, say out of the dot-com bubble, there were winners.
But very few is like in the mining industry, when you have exploration companies, approximately 95% of the exploration companies go under, and 5% are huge winners. And that I would expect in the AI space to happen, that there are a few big winners, and maybe they won't even make much money, because if you look at the 19th century, none of the canal companies made money eventually. Even the Erie Canal went bust, and that is the most successful canal in the history of mankind.
But also the railroads by 1895, over 90% of railroads had to be restructured because they were not profitable. And the same can happen now with AIR. They can be very successful, but not profitable. Is another story. And the capital expenditures are mind boggling. I mean, this is now really a capital spending boom without the precedent in our lifetime. I mean, this is the biggest capital spending boom we've experienced as a percent of the economy.
So my view is that we're approaching a major top, or maybe we've seen it already for the typical stock. Because if I look at the major top in 1973, most of the indices had actually peaked out in 1965, some in 1968, and most stocks peaked out in 1968 But the Nifty 50, the Kodaks, the Polaroids, the Xeroxes of this world, they all peaked out in 1973 Most of them have also faded away or gone bankrupt or disappeared altogether. Which is interesting that the most popular stocks didn't do well thereafter. And also in the.com bubble, I mean, Cisco has now reached a new high, but it took a long time for the new high to manifest itself. So the question is really for investors, are we approaching a peak in some stocks that will drag down the indices because there is so much indexing going on? The money in index funds is now larger than in actively managed funds. And if these few stocks that are driving the market higher, including NVIDIA and Tesla and Apple and Microsoft and so on, if they go down, they may drag down the S&P and everything.