With the threat of inflation looming, investors should put their money in gold and equities, money manager Marc Faber told Bloomberg TV.
Since inflation is on the horizon, investors should stay away from cash and bonds for the long term, said Faber, the Gloom Boom & Doom Report editor.
Faber thinks that the market reached its bottom in March. He doesn’t think investors will see new lows in the market because any other major decreases will be met with additional stimulus packages. The government won’t be able to lower its deficits or avoid inflation in the near term.
He advised investors to stay away from cash and bonds during the next 12 months because interest rates will be low.
"'You don’t want to be in cash," Faber said. "On the other hand, you may not lose that much."
Investors should move their money into equities and precious metals such as gold, silver, platinum and pladium.
Gold is the "preferred asset,’’ Faber said.
The U.S. dollar and bonds could rally during the next four to six weeks, while gold will likely move sideways, he said.
For the long term, Faber predicted the dollar will remain weak, while U.S. commodities and gold will be strong. He also mentioned that Asian shares will perform better than European and U.S. stocks.
David Darst, chief investment strategist of Morgan Stanley global wealth management group, advised investors to slightly increase their gold and commodities allocations to hedge against inflation, the Chicago Tribune reported. One option is for investors who would normally have 4 percent of their portfolio in gold and commodities to increase it to 6 percent.
"You need to protect yourself, shorter term, from deflation. But that might not last more than one to 1 1/2 years. You need to protect yourself a little from inflation longer term,” Darst said.
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