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Marc Faber: It’s Not a Good Investment to Choose Treasuries in America or in Germany

Marc Faber, publisher of the Gloom, Boom and Doom report, talks about the outlook for stocks versus bonds and his investment strategy on Bloomberg today.

Faber doesn’t think U.S. stocks are particularly attractive right now, and he is in Switzerland at the moment. “The 10 Year government bond yields is 0.7% and you can buy quality companies and they have a dividend yield of maybe 3%. Relative to government bonds, equities are attractive.” said Faber. Moreover, Faber explained: “If you really think it through and you are bearish as I am and you think the whole financial system will one day collapse. Then you are better off in equities than in government bonds because a lot of government bonds will either default or they will have to print so much money that the purchasing power of money will depreciate very rapidly.”

When Faber was asked to choose government debt from U.S., Italy, and Spain, he said that he would choose the U.S. government bond but he would not take them as a good investment. “But otherwise, if you give me the choice of assets of real estate, equities, bonds, precious metals, I would rather take precious metals than equities.”

Faber admitted that he gave an inaccurate forecast in U.S. Treasuries in December 2009, but he mention that investors should keep an eye on precious metals and on emerging economies. “People say last year was a disaster for emerging stock markets, but Malaysia, Thailand, the Philippines, and Indonesia were essentially flat. A lot of stocks actually performed well. My portfolios in Asia have done surprisingly well. I don’t feel that I missed out a lot risk adjusted by not being in 30-Year government bonds.” said Faber.

Faber would also like to add one more convince on government bonds: “We have today, in my opinion, a symptom of inflation – monetary inflation. This is corporate profits which have rebounded at record highs.” said Faber. He believes it’s not a good investment in long term if people choose a Treasury in America with on yield or in Germany with negative yield because they simply want to get money back rather than “in a bond that may not repay or in equities that drop 30%”.

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