INTERNATIONAL. Marc Faber the Swiss fund manager and Gloom Boom & Doom editor believes global markets are heading for an "important turning point" as interest rates begin to rise within about three months and the US dollar gains
Speaking to reporters Tuesday during the World Knowledge Forum in Seoul, Faber said investors should buy stocks and sell bonds as a new round of quantitative easing may create a new 'credit bubble'.
"Instead of interest rates going down, they could start to go up, instead of the dollar being weak, it could strengthen," Bloomberg quoted Faber as saying. "I’m ultra-bearish on everything, but I believe you’ll be better off owning shares than government bonds."
Since September the dollar has lost 8% against a basket of currencies, about 10% against the euro, around 11% against the Australian dollar and about 1.3% this month after Federal Reserve Chairman Ben S. Bernanke signaled he may add money to the economy.
The famed investor has been repeating his long-held views that the Federal Reserve’s expansionist monetary policies are the causes of the financial crisis by creating a large amount of leverage in the system and creating a credit-addicted economy.
While the dollar may rebound in the short term because it's been oversold, a rally won't last because the US will be forced to print more money to pay its debt, he recently said.
Faber believes that at some stage, about 50% of tax revenues will be used just to cover the interest payments on the US government debt. He says this is unsustainable and at that point the the Fed will be really forced to print more money.
He blames previous Fed Chairman Greenspan’s decision to hold interest rates at artificially low levels for precipitating the housing bubble and sees current Fed Chief Ben Bernanke repeating the mistake in the current crisis.
"The Fed seems to ignore the fact that one of the causes of this crisis was the amount of leverage in the system. This is a credit-addicted economy," Faber was quoted as saying recently in one of his many appearances on TV business shows.
Legendary investor Jim Rogers agrees to various degrees on many issues with Faber but the one thing uniting them this week is the future direction of the US dollar. They see a correction looming in the US currency.
Both Faber and Rogers have been warning about the effects of monetary and fiscal policies on the US economy, since the initial rally has been mostly based on printed money, a kind of reverse Robin Hood policy of governments, to steal from the peasants to give to the rich.
"Right now everyone is pessimistic about the dollar, including me, so I wouldn't sell the dollar right now, Rogers told Maria Bartiromo in a CNBC interview earlier this month. In the long run though he believes the dollar will keep going down.
"I am pessimistic long-term but I found in life it's better being a contrarian than not be," Rogers said.