Tuesday, November 15, 2011

Stocks Beat Bonds Over 'Next 10 Years': Marc Faber - CNBC.com

Describing himself as an optimist despite his Dr. Doom reputation, Marc Faber told CNBC Wednesday that stocks will be a better investment than safe-haven bonds for the next 10 years.

Marc FarberThe author of the Gloom, Boom & Doom newsletter, in a CNBC interview, said "money-printing" central banks such as the US Federal Reserve will keep prices elevated for risky assets like stocks.

"When you print money everything goes up at different times, different asset classes," Faber said in a live interview. "I think that stocks may still continue to go up, and I would rather own equities than government bonds for the next 10 years."

Printing money is the way global governments will evade debt crises such as the one that is gripping Europe now, he said.

European ministers are convening to devise a way for Greece to get out of its debt jam, with a likely large bailout fund on the way for nations in similar distress as well as a separate allocation toward recapitalizing banks holding the bad debt.

Policymakers are facing criticism, though, for forestalling the crisis rather than solving it.

"The end crisis will be postponed until the sovereigns go bankrupt," Faber said. "They can postpone the end-game endlessly...say another five to 10 years. Each money-printing exercise brings about unintended consequences. These unintended consequences are higher inflation rates than had no money been printed."

The Fed, for one, has expanded its balance sheet to nearly $2.9 trillion in an effort to boost the economy through buying various forms of government debt. Faber has been a frequent critic of the quantitative easing practices, which he thinks will continue.

But he said he's trying to maintain a positive outlook despite the dim view he takes of the policy approaches thus far.

"I think I'm very constructive and I'm a great optimist in life. Otherwise I would commit suicide in view of the kind of governments we have nowadays," Faber said. "For sure they will take wealth away from the well-to-do people one way or the other, and from the middle class they will take it away through inflating the economy and lowering the standard of living."

The injections of new money supply also are harming the global economy and causing bubbles, one of which is in Chinese real estate, he added.

"If the Chinese bubble bursts one day, which inevitably will happen — maybe not tomorrow, maybe in three months, maybe in three years — when it happens it will have devastating consequences for the global economy," he said.

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