Marc Faber says the world market is in for a "correction" in 2007, just like 1987.

Marc Faber, who predicted the U.S. stock market crash in 1987, said global assets are poised for a ``severe correction'' and it's time to sell.

``In the next few months, we could get a severe correction in all asset markets,'' Faber said in an interview with Bloomberg Television in New York. ``In a selling panic you should buy, but in the buying mania that we have now the wisest course of action is to liquidate.''

Strategists at 14 of the biggest Wall Street firms all estimate that U.S. stocks will advance this year. The last time they were in agreement was for 2001, when the S&P 500 dropped 13 percent.

Though Rich Karlgaard thinks that signs point to a good 2007.

American stocks do well. Three reasons to predict another bullish year:

1. The ten-year U.S. Treasury is yielding 4.6%. This supports a broad market P/E of 22, which is 22% higher than today's P/E of 18.

2. A rash of buybacks, mergers and LBOs have shrunk the supply of stocks by 5% a year since 2002. Heed your supply-demand knowledge!

3. As Forbes columnist Ken Fisher has pointed out, stocks do best during a President's third year. The last negative third year was 1939. The last merely single-digit-gain third year was 1987. What about the risks--Middle East turmoil, protectionism, inflation, dollar collapse? Already priced into the market.

Global stocks do better. Since 1972 the MSCI EAFE (Morgan Stanley Capital International Europe, Australasia and Far East) Index (12.8% average annual return) has run neck and neck with the U.S. S&P Index (12.7%). But over any given two- to three-year period the performance differences between the two indexes are more dramatic. Low P/E ratios in the U.K., Germany and France--all below 15 right now--and sub-2% bond yields in Japan make the MSCI EAFE a good buy.

So who is right? I don't know... but I don't generally think it's smart to try to time the market.

(HT: My wife Jessica.)



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