By: Paul Toscano Producer, CNBC.com
Faber's Doom Scenario
Marc Faber, Gloom Boom & Doom Report, explains why he believes the rally could end badly this year.
Growing wealth inequality means that the wealthy have nowhere to hide and that events like those in Cyprus will happen in more countries around the world, including developed nations, said Marc Faber, the contrarian investor and publisher of the Gloom, Boom & Doom Report.
"It will happen everywhere in the world, in Western democracies," Faber said "Squawk on the Street" on Tuesday. "You have more people that vote for a living than work for a living. I think you have to be prepared to lose 20 to 30 percent. I think you're lucky if you don't lose your life."
"If you look at what happened in Cyprus, basically people with money will lose part of their wealth, either through expropriation or higher taxation," he added.
"The problem is that 92 percent of financial wealth is owned by 5 percent of the population. The majority of people don't own meaningful stock positions and they don't benefit from a rise in the stock market. They are being hurt by a rising cost of living and we all know that the real incomes of median households has been going down for the last few years," he said.
Another item that Faber is worried about is with new market highs, a number of important stocks are not leading the way. He listed companies like GE, IBM, Federal Express, Yum, Intel, Merck, Oracle and home builders, which are have stock prices that are lower than in January or on par with where they were in November. "We have a narrow leadership in consumer stocks," Faber said.
"What concerns me really is that most foreign markets have performed badly. The U.S. is the only game in town," Faber said.
He added that in other periods when there was only one game in town, including the NASDAQ in 1997-2000 and the housing market and commodities in 2008—"it ended badly, and I'm very cautious about the U.S. market."
"I think we could very well rise and then have a crash from the summer onward," he said. "I am not short U.S. equities because we have this money printing, which will obviously lead to some misallocation of capital," he said.
(Read More: Stock Rally Will End Badly This Year: Marc Faber)
"Given the poor outlook in Europe and the slowdown in emerging economies, which has been confirmed by companies like Caterpillar and McDonalds, I would say that the revenues will continue to disappoint and that earnings could very well disappoint quite badly," he said.