Monday, January 30, 2012

Bond Bubble? Marc Faber Says Time to Move Into Equities - NASDAQ

In a recent interview with Bloomberg Television, publisher of the Gloom, Boom & Doom Report Marc Faber certainly had gloom and doom to say when asked about the direction of US bonds. The good news, however, is he believes equities should benefit (at least in the short term).


When asked about whether he would choose Spanish or Italian debt over US Treasuries, he said (paraphrased):


I would take the U.S. because they can print themselves out. I would not take them as a good investment because I think you have today a yield on the 10-Year of around 1.7% and on the 30-Year around 3%. I think eventually in the next few years yields will be much higher and the purchasing power of the dollar will have depreciated significantly.


Faber is actually quite bearish about the entire financial system, as he indicates in the interview. However, even in this doomsday scenario, he believes investors are better off in stocks than debt:


Relative to government bonds, equities are attractive. If you really think it through and you are bearish as I am and you think the whole financial system will one day collapse, maybe three years or five years or 10 years, one day there’ll be a reset and everything will be essentially started anew. Then you are better off in equities than in government bonds because a lot of government bonds will either default or they will have to print so much money that the purchasing power of money will depreciate very rapidly.


View the original article here

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