Saturday, April 7, 2012

The Rich Could Lose Half Their Wealth in Downturn, Says Faber - Wall Street Journal (blog)


In an interview on CNBC and in his latest “Gloom, Boom & Doom Report,” Faber says that the diverging fortunes of the rich and the rest has become unsustainable. He says that while asset inflation and Fed stimulus of the past 30 years has benefited a lucky few ? basically “those with assets” continued money printing could lead to sudden and violent wealth destruction.


“Somewhere down the line we will have a massive wealth destruction that usually happens either through very high inflation or through social unrest or through war or a credit market collapse,” he told CNBC. “Maybe all of it will happen, but at different times.”


When asked on CNBC how much money the wealthy could lose in such a scenario, Faber didn?t hesitate: “People may lose up to 50% of their total wealth. They will still be well-do-to. Instead of having a billion dollars they will have five hundred million.”


Faber admits he doesn?t know the exact timing of all of this. And he writes that assets and inequality will likely rise before falling. Yet he says that for the wealthy, safety will likely continue to be primary goal when it comes to investing.


“Questions about which assets will decline less than others will become more important and replace the current search for asets that are likely to appreciate the most,” he writes.


He recommends farmland, entire islands, real-estate in New Zealand, Canada and Australia, foreign stocks, precious metals held in custody outside the U.S. diamonds, stamps art and defense stocks.


He says the wealthy should support policies that would reduce inequality. Yet he says that?s unlikely, since “people of privilege tend to prefer to risk their own destruction than surrender any of their advantages.”


View the original article here

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