— “D.C. al Fine,” our third-grade music teacher Mrs. Fray used to say. “Jump back to the beginning and end at the fine.” We never understood the Latin (“to the head, or beginning, and on to the end,” roughly translated. We were just an out of tune flute-o-phone player back then. But we thought of Mrs. Fray today when we listened to Dr. Doom (Marc Faber) in an interview on Bloomberg.com, talking about the fine, the end.
–Dr. Doom is no Johnny-one-note. Nor is he a stopped clock, bound to be right twice a day. He did accurately forecast the market crash in 1987. And today, he warns of a ‘severe correction’ in financial markets. “In the next few months, we could get a severe correction in all asset markets,” Faber said. “In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate,” he added.
The key word is liquidity. We all know what happens when it goes away. Prices fall. But there is a lot of liquidity in the world now. What will make it go away? Some suggestions below.