Investor CAFÉ

How to Protect Yourself from a Stock Market Crash

“Look out! A 1987-Style Crash is Coming.” — Marc Faber

Last month, Marc Faber, publisher of the Gloom, Boom & Doom Report, predicted that a 1987 crash “will happen in the back half of 2013.” In 1987, the stock market boomed — until it collapsed on October 19, 1987, when the Dow fell more than 22%. I well remember it — I celebrated my 40th birthday, having warned investors to get out six weeks earlier.

Since then, I’ve predicted bull and bear markets, but not another 1987-like crash because of various tools the federal government has put into place to keep it from happening. Even the 2008 bear market did not see a 22% decline in one day due to Fed intervention.

One market-friendly money manager who is betting on another crash is Mark Spitznagel, director of Universa Investments in Santa Monica, Calif. He bases his pessimistic forecast on Austrian economics — the economics of Ludwig von Mises and Friedrich Hayek, and the Austrian theory of the business cycle.

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