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Equities in USA and Europe to do better in 2011.

Tuesday, February 8, 2011

Dr. Marc Faber shares his latest views on global equities in this interview with CNBC Asia last month.



I think what we should realise is that equities in USA and Europe could outperform equities in emerging markets by simply having relatively smaller corrections. It does not necessarily mean that they would outperform on the upside, they could just be less dramatic on the downside. Now, that is sobering.

However, Dr. Marc Faber's advice is still to stay in equities and commodities as these are expected to do much better than bonds and cash in the next decade.

"I am very negative about the world, because I think that what caused the crisis in 2008 was excessive credit growth, excessive leverage in the system, and now the private sector is de-leveraging, but governments are printing money, and through huge fiscal deficits are creating even more debt growth. So in other words, what killed the economy is now being applied to revive the economy, and I think this will lead to a disaster. But if you think it through and you believe in the disaster scenario I'm envisioning, then you will be better off in equities and in commodities than in government bonds and cash."

4 comments:

SGDividends said...

Hey AK71,

wah i dont understand what Marc is saying......if he says there is a disaster scenario, then wouldnt it be better off to stay in cash?

Equities will die if got disaster scenario right??

Maybe he means disaster as in hyperinflation....

Would like to exchange lnks with you....

Sgdividends

AK71 said...

Hi SGDividends,

I have been following Marc Faber for a few years now and he usually makes a lot of sense.

He thinks that in the worst case scenario, countries could go to war. War is always good for industry. Demand for lots of things would go up to fuel the war efforts. I guess, we should qualify by saying that selected equities could do well. ;)

In the extreme, if there should be real global conflicts, having a hoard of physical gold is better than being in cash. The older generation who went through World War II would tell us that.

As for hyperinflation, this possibility is rather real, especially in countries with very loose monetary policies. Of course, for countries with huge debt, inflation is actually a good thing as well as they could inflate their way out of their debts. Sneaky but it would work.

Whatever the case, I think if we stay invested in real assets, we should do fine as inflation is bound to kick in. Real assets which generate cash flow would be even better.

I would be happy to do a link exchange with you. Check out my blogroll "Investors & Traders". :)

SGDividends said...

Hey AK71,

Added your links.

AK71 said...

Hi SGDividends,

Cheers! :)

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