Dr. Marc Faber is staking out yet another contrary position on financial markets, arguing that the era of freakishly low yields may soon be at an end. In this Bloomberg story he suggests selling debt soon rather than later, what will surely come as a surprise to bond mutual fund investors who have been so smitten with their returns over the last year or two and who, sadly, may still be unaware that you can lose lots of money in bond funds.
Global markets are heading for an “important turning point” as interest rates begin to rise within about three months and the U.S. dollar gains, according to investor Marc Faber.
Investors should buy stocks and sell cash and bonds because governments are continuing to print too much money and may create a new “credit bubble,” Faber, publisher of the Gloom, Boom & Doom report, told reporters during a forum in Seoul today.
“Instead of interest rates going down, they could start to go up, instead of the dollar being weak, it could strengthen,” Faber said. “I’m ultra-bearish on everything, but I believe you’ll be better off owning shares than government bonds.”
Faber told investors to abandon U.S. stocks a week before 1987’s so-called Black Monday crash and said in August 2007 that U.S. shares were entering a bear market. The S&P 500 peaked two months later before retreating as much as 57 percent.
Warren Buffett’s perpetually sanguine view of equity markets is also offered up as further evidence that 401k investors ought to reconsider their recent asset allocation changes, but, if there’s one thing that we’ve learned in recent decades, it is that we tend to grow our asset bubbles bigger and bigger before they burst, meaning that, we still probably have a ways to go before the “bond bubble” meets its pin.