See long-term negative cues for fin sector: Marc Faber

Marc Faber, Editor & Publisher, The Gloom, Boom & Doom Report said, “We had expanding credit growth in the period 2001-2007. We had this credit bubble built up after 1982.” So in other words, for 25 years now credit growth is slowing down and the fundamentals of the financial sector have worsened and thay will stay unfavourable for a very long time, he added.

The peak earnings of finance companies ain't going to come back. “I don't think that Citigroup, or UBS or any other finance stock will go back to their peak level thay had reached in 2007.”

Faber feels that the problem of Fannie Mae & Freddie Mac is that they were able to borrow at more favourable terms than the private sector, since they came into existence, because their debt was perceived to be government guaranteed. He feels that they built up their balance sheet to an extent that led to a huge leverage and in a housing downturn, they of course incurred losses. The shareholders and the bondholders of both the entities should be punished for that, and not the taxpayer, he added.