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Marc Faber 2010 Outlook: Go For Gold, Oil & Agriculture, But Watch Out For PIIGS & U.S. Equities

 January 20, 2010 06:52 PM
 


Here is the summary and my thoughts on a trio of Dr. Marc Faber's latest interview where he discussed his 2010 outlook on China bubble, sovereign default risk, stocks and commodities.

Faber is most famous for advising his clients to get out of the stock market one week before the October 1987 crash.   News just broke that Faber, a famed contrarian investor often known as Dr. Doom, has joined Sprott Inc. SII-T as director and member of the money management firm's audit committee.

Euro Death By PIIGS
Faber believes the countries most likely to blow up are the "PIIGS": Portugal, Ireland, Italy, Greece, and Spain. One or more of them will likely default in the next couple of years, which could mean the death of Euro
Debt Interest Costs to Triple
According to Faber, the U.S. annual interest costs, currently around 12% of the government's tax revenue, will soar to 35% of tax revenue within five years.  This will force the government to cut spending (an unlikely scenario), and/or frantically print more money
U.S. & Japan - Default in 5 to 10 Years
Excessive money printing and debasing of the Dollar would most likely result in the United States defaulting on its debt within 5 -10 years  Japan could face the same fate as well.  (See more U.S. debt crisis charts from Faber here.) 
Note:  Jim Rogers sees U.K as in danger of an implosion as well. 

U.S. Stocks - Correction Coming
After noting in his January 2010 newsletter that he was bullish on U.S. stocks, Faber changed his mind after participating in Barron's round-table discussion. Faber says the overly bullish consensus worries him. 
He now believes a correction in U.S. stocks could come much sooner than most expect as momentum players could "pull the trigger relatively quickly." Faber is now looking at a 5%-10% rate of return for global investors.
Bonds
Bonds could be in for a rebound near term, but longer term, investors should look for exit opportunities in Treasuries.
Note: Jim Rogers also sees the U.S. government bond is overpriced and "in a bubble".

Asia
Asia is likely to have longer term favorable growth.

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