Dr Marc Faber was born in Zurich, Switzerland. He studied Economics at the University of Zurich and, at the age of 24, obtained a PhD in Economics magna cum laude. Dr Faber publishes a widely read monthly investment newsletter "The Gloom Boom & Doom Report" report which highlights unusual investment opportunities, and is the author of several books including “ TOMORROW\'S GOLD – Asia\'s Age of Discovery”.
Marc Faber, Editor and Publisher of “The Gloom, Boom & Doom Report’” talks about the outlook for the US treasuries.
You already mentioned shrinking trade deficits in the US. As for the US dollar, it has considerably strengthened and at the same time treasury yields are really low...
... and, if we understand correctly, you have been relatively positive on treasuries recently...
... at the same time you mentioned that the long term outlook for the US is very bad...
Yes. Well you know it is like you have a wife and you have girlfriends! And the wife is maybe permanent but the girlfriends come and go! Optically, long term I would say ten years treasury or thirty years US treasury is of course unattractive, that we all agree because interest rates have been trending down since 1981 so we are more than 35 years into a declining interest rate structure, so we must be close to a low in interest rates.
The only question here is, the economic recovery in the US began in June 2009, so we are six years into an economic expansion, and this is historically the third longest expansion. We have been six years, March 2009 low S&P 666, where it went over 2100 so we are over 6 years into bull market, then I say to myself, I see the global economy weakening and I see French, Italian and Spanish bond yields lower than US treasury yields so with the view that most people have that the US dollar will remain relatively strong, I say to myself everybody is bullish about stocks in the US and everybody is bearish about bonds.
I say to myself maybe treasury notes, the ten years and the thirty years as an investment for the next 3 to 6 months is maybe not so bad. Then I also advocate in my investment strategy, always diversification between real estate, equities, bonds, cash and precious metals. And if someone comes to me and says Marc you are bearish about the world, shouldn’t you be all in cash?
I say yes, maybe that is correct except if I put all my money in cash with the banking system I take a huge risk because we have seen it in the case of Greece, we have seen it in the case of Cyprus and now they have announced that basically investors if there is again a crisis they will also have to pay something so if you have say 20 million dollars with the banks, and they have a problem, maybe you will only get 50% back. So I say to myself, rather than have the money in the banks I would have it in treasuries.
Interview conducted by Johannes Maierhofer and Peter Matay
Full Interview - The Big Picture with Marc Faber