Marc Faber, manager of $300 million in assets as founder and managing director of Marc Faber Ltd., tells Bloomberg in a follow up interview to his Tuesday proclamation that the global stock markets are "overbought and vulnerable" now predicts that the S&P 500 could fall 10 percent to 15 percent before the summer.

"I think the markets may actually come off quite a bit more than the typical portfolio manager now expects," warns Faber. "I think that we haven’t had a 10 percent correction in the U.S. since October 2002. So we are more than four years into [the] bull market without into any real correction. And since July last year we had one of the longest stretches without a 2 percent correction until this week. So I feel that we could easily have first a correction of say 10-15 percent in the S&P.

[Editor's Note: Best ways to protect your wealth from a market crash.]

Faber also says that this correction may cause the Fed to ease monetary policy, but that any rally because of it would be short-lived.

"[On] this correction I suppose that the Federal Reserve would start to ease and cut interest rates and we could have a summer rally and a rebound, but I doubt that will make news highs, and as the economy then deteriorates towards the end of the year, that would then spark a sell off in equity markets around the world."

Story Continues Below

30-40% CORRECTION IN ASIA

In Asia, he expects markets to pull back even more, with few exceptions.

"Every sell-off is basically a buying opportunity, the question is when. The way I look at the position of the markets, they have been technically deteriorating. And I think of course it will lead to a buying opportunity, but the buying opportunity … will it occur say 5-10 percent lower or 30 percent lower?" asks Faber. "My sense is that we could go down in markets like India, China, and also some of the other markets that have become stretched including Vietnam and Singapore and so forth could drop easily 30-40 percent before the markets really become buying opportunities."

[Editor's Note: Correction In India’s Markets Makes This A Great Time To Buy!]

The one exception mentioned by Faber? Thailand.

"Thailand is now a typical case of a market which is inexpensive. I don’t think there is any catalyst for a very significant rise in the market, but at the same time you can buy perfectly sound companies in Thailand that will give you a dividend yield of say 6-7 percent with a price to earnings ratio of around 10 and where the book value is even higher than the capitalization," explains Faber. "So overall, I don’t think that you have a big risk by being in Thailand. The risk is that if other markets in the region come down that Thailand will not move against the other markets on the upside. And so time in the risk that your money is idle for a while."

GOLD: BUY ON DIPS Faber also says he remains bullish on gold as a store of value, and recommends that investors buy gold on any 5-10 percent corrections in the price of gold.

"I think that gold, in comparison to copper, nickel, tin, zinc and so forth and oil hasn’t gone up all that much. It’s gone up since 2000. It’s doubled vis a vis the Dow Jones and vis a vis the S&P 500, but from a very low level. So I think around the $670 level on the gold price per ounce, gold is not terribly overvalued. In an environment of tightening liquidity, however, I would be surprised if gold went up when everything else went down. But I would look at the buying opportunity on gold on a 5-10 percent correction," advises Faber.

[Editor's Note: Four Gold Picks Set to Skyrocket in 2007 - Get Them Now]

"I think the gold market will end when there [are] lines of people in front of gold shops buying gold because they want to move out of cash because they’ve really become afraid when paper money loses all its value," forecasts Faber. "Gold is not just an industrial commodity, nor is it just jewelry. I don’t buy gold for jewelry purposes. I buy it as cash, as a currency whose supply is very limited. Whereas, as we’ve seen in the Euro zone, the U.S., all the countries, money supply is growing very rapidly and if money supply isn’t growing very rapidly, then debt growth has been very strong."

Faber tells investors to keep their gold outside of the U.S.

"Certainly you don’t want to own gold in the United States because if you buy right and the price of gold is up as much as I think it will be, at that time, I would imaging that in the U.S. they will expropriate gold," cautions Faber.

Investors in StreetTracks Gold Trust ETF will be happy to know that the physical gold that backs their shares is held in London. The iShares Comex Gold Trust holds its gold in New York, Toronto, Montreal, and London.

[Editor's Note: Get our top 4 ETF recommendations for 2007]

As for other commodities, Faber says cotton and sugar are attractive investments.

"Cotton, which is considered as an industrial commodity, hasn’t gone up at all and the price is depressed."

"Last year [sugar] was down almost 50 percent. It’s around 10 cents per pound now. I think it’s relatively attractive, especially in an environment where everybody’s rushing to produce ethanol from corn when actually the production out of sugar in countries like Brazil is actually more productive and efficient."

© NewsMax 2007. All rights reserved.

Editor's note:
Correction In India’s Markets Makes This A Great Time To Buy!
Jim Rogers Predicts Huge Profits in Commodities -- Click Here
A 2007 global recession is in the cards. Here`s how to position yourself now for monster profits before the panic headlines begin.
Get our top 4 ETF recommendations for 2007
Best ways to protect your wealth from a market crash.
Four Gold Picks Set to Skyrocket in 2007 - Get Them Now