Marc Faber, the editor and publisher of "The Gloom, Boom & Doom Report," advises investors to scoop up gold and U.S. Treasurys before the nation plunges into yet another recession.
"The global economy is probably already in recession now. It will be more obvious in the U.S. in March or June of next year," he told ETF.com.
"At that time, the Fed will say, "Well, we didn't want to increase interest rates, but there was pressure on us to do so. So we increased them, and now we have a recession, and now we have to cut them again and flood the market with QE4," he said.
So how are investors to best prepare for the recession?
"If you said, 'Marc, here is $1 million, but you have to put everything in either gold or in the Dow Jones,' then I would say I'd take gold," he said.
"Everything is distorted, and it's a relative game. Looking at the fundamentals of the world, including the quantity of money, the magnitude of debt as a percent of GDP, the low economic potential and the mad frame of mind of central bankers and their intellectual dishonesty, I would own gold," he said.
Meanwhile, he urged investors to examine the yields of European bonds compared with U.S. bonds. "I see France yielding 0.97% on the 10-year, Germany yielding 0.63%, Italy yielding 1.68% and the U.S. 10-year yielding 2.26%. What would you rather own? A 10-year U.S. Treasury or Italian bonds?" he asked.
"Right now, the global economy is slowing down meaningfully, so they (the Fed) should not have increased interest rates. But they did so to maintain some credibility," he said. "They'll use whatever happens as an excuse to cut rates again and engage, as [ECB President] Draghi is currently doing, in unlimited purchases of assets," he said.
In a wide ranging interview, Faber said:
- Markets are volatile; anything can happen. But from a demand/supply point of view, he predicts "the equilibrium price" for oil is probably between $40 and $60.
- While he does see some value in emerging markets, investors shouldn't make a mad dash there right now. "There is value here and there. But in general, considering the slowdown I'm expecting, there's no hurry to buy these emerging markets. You can wait for another six months or so," he said. "If you said, 'Marc, here's $1 million. You have to choose, and you can only choose one thing: You can buy the U.S. stock market or you can buy emerging market stocks.' If this was an investment for the next five to 10 years, I would say to buy emerging market stocks," he said.
- Precious metals are inexpensive, though they may stay inexpensive for a bit longer because sentiment is now very negative.
- Berlin, Frankfurt, Munich and Zurich real estate look good as investments.
- The stock market in Vietnam, due to the improving economic fundamentals, has better potential than Hong Kong and China, where the fundamentals are worsening.
Vanguard founder Jack Bogle currently holds more bonds than stocks, he told MarketWatch's Chuck Jaffe
“Currently, I’m 53 percent invested in bonds, 47 percent invested in stocks, almost entirely indexed or in funds heavily correlated to the market. … I have reduced my equities a little bit this year, largely in view of the fact that I’m at a time in life when I am a little more interested in preservation than growth,” he said.
He also warned against trying to outsmart the market.
“Short-term market timing is a loser’s game. None of us know what tomorrow holds, not Bogle nor anybody else. And that’s why I have never done anything other than a 10-year reasonable-expectations perspective,” said the venerable founder of the Vanguard Group — the world’s largest mutual fund company.
© 2023 Newsmax Finance. All rights reserved.