Tags: Faber | Europe | US | ratings

Marc Faber: Most Europe, US Ratings Should Be Lower

Tuesday, 17 Jan 2012 08:21 AM

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Economist Marc Faber, publisher of The Gloom, Boom and Doom report, says most European economies should be rated triple-C.

Moreover, the United States should not be a "triple-A-minus but a triple-B or junk bond when you really analyze the unfunded liabilities that will come due in future," Faber told CNBC.

According to Faber, Germany, the strongest of the eurozone members, "is OK … but also has large, unfunded liabilities."
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"Much of any downgrades have [already] been priced in," Faber said of Europe, but will have an effect on the value of the euro.

"I think the euro is in a downtrend," says Faber, especially as European corporations have a lot of U.S. dollar denominated debt and a lower euro "makes it more expensive to service these debts."

However, European stock markets might move “if some country would say, “’We’ve had enough, we’ll exit the euro,'" Faber says.

"If Greece does that, it's not going to be a disaster,” says Faber. But if Greece, Portugal, Spain or Italy do so, there would be “a huge impact" on the derivatives market.

Faber says he isn't interested in sovereign bonds except as a trade, and adds that European stocks haven't performed as well as U.S. stocks, but expects that will change at some point.

When that change happens, Faber believes that companies like Novartis, Nestle and Jand will “offer reasonably good” but “not compelling values.”

For now, Faber continues to invest in commodities, real estate and precious metals.

MarketWatch reports that commodities were lower in December as macroeconomic sentiment continued to weigh on risky assets and supported a stronger U.S. dollar.

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