For example, investors might typically have 4 percent of their portfolio in gold and commodities, but if they were worried about inflation they might lift that to 6 percent. Likewise, for growth, add a few percent to small caps, techs and emerging markets.
Beware inflation
MARC FABER
Publisher, the Gloom, Boom & Doom Report
After the surge in stocks and a sharp rise in commodity prices, Faber said, "The entry point is not ideal." At the same time, he said, "It is unattractive to invest in bonds."
He thinks a downturn of perhaps 20 percent in stocks is possible, but he sees little risk of the market returning to its March lows because the Federal Reserve will take extraordinary steps to prop up the system.
The Fed printing money is a concern over the long term, and underscores his warning about bonds: "Government is exploding. I'm not sure deficits will decline." If the Fed were to let rates go up to reduce the deficit, that would slow GDP. Because the economy remains weak, he doesn't think the government will do what's necessary to address the deficit.
"The economic recovery is unlikely to be powerful" over the next few years. "In the long run, the dollar will weaken." Yet, because of the trillions of dollars in the global system, foreign currencies "are not desirable either." He has been buying physical gold and silver for 15 years, though the price is not as attractive as it was. Given his view of inflation, he said hard assets are the most attractive asset class, but not in the form of futures, which often are the heart of exchange-traded funds.
Over the long haul, he sees tremendous development in Asia and believes in buying commodities, companies that produce commodities and Asian stocks. But he is less interested now that prices have jumped.
gmarksjarvis@tribune.com
Investors feel like they are at a crossroads.
The stock market flirted with apocalypse in March, then rallied 40 percent, and now is in a confusing pattern as investors await signs of a recovery and worry about the possibility of inflation in the long term. Even top strategists are sharply divided in their suggestions about how to invest in a period of uncertainty.
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