Faber: Stocks Headed for a 20 Percent Plunge by Year's End

Stocks will plunge by year's end and the euro is seriously oversold, says economist Marc Faber, publisher of the Gloom, Boom and Doom report.

“If (equities) make a new high, I wouldn’t rule out a correction of at least about 20 percent,” Faber says.

“Don’t forget, many shares in America and globally have already corrected 20 percent, so for them to make a new high isn’t going to be all that easy in the first place,” he recently told Bloomberg. 

In general, however, Faber says “it’s better to be in stocks than bonds over the next few years because we will get more inflation in due course.”

Faber describes the euro's high against the U.S. dollar last fall as a false breakout. “I think it can rebound to $1.40 before it goes lower,” he says.

“I don’t think there is anything good about the U.S. dollar, but I don’t think there’s much good in the euro either.”

Faber believes that when investors see that monetization is inevitable, the dollar will weaken further. “It won’t necessarily have to be weak against the euro (because) both currencies are sick, and so both could go down,” he says. “Precious metals will then be strong.”

Federal Reserve staff economists have reduced their 2010 and 2011 forecasts for inflation excluding food and energy, projections that were already below 2009 rates.

The inflation outlook, coupled with Fed officials’ concerns about unemployment and long-term joblessness, signal that chairman Ben Bernanke and his colleagues are still looking for evidence of a sustained rebound from the worst recession since the 1930s, Business Week reports.