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Marc Faber: Treasurys Are A "Suicidal Investment"
Marc Faber, who just like Nassim Taleb has never hidden his disdain for investments in US-backed paper, is back to bashing Treasurys, although with logic diametrically opposite to that espoused by those such as Morgan Stanley who see rising rates as a sign of economic growth. "This is a suicidal investment,” Faber told Bloomberg in a
telephone interview from St. Moritz, Switzerland. “Over time,
interest rates on U.S. Treasuries will go up. Investors will
gradually understand that the Federal Reserve wants to have
negative real interest rates. The worst investment is in U.S.
long-term bonds.” As for equities, Faber increasingly sees a Zimbabwe outcome: “If you print money, the currency goes down and the S&P 500 goes up. By the end of 2011, people will look at 2012 and think 2012 could be a very bad year because the policies applied are not sustainable and create a lot of instability. Investors may look at 2012 and 2013 with horror.” Not Wall Street thought. By the end of 2011, bankers will most likely be looking at the second consecutive record bonuses year, and by then will have enough gold safely stashed away in non-extradition countries to where the host organism may finally be allowed to die in peace.
Treasury 10-year note yields will rise to 5 percent from yesterday’s level of 3.349 percent, Faber said, without specifying a time frame. As bonds fall over the next decade, he said investors should buy precious metals, real estate or equities. U.S. debt has returned 5.7 percent in 2010, more than erasing last year’s 3.7 percent loss, according to a Bank of America Merrill Lynch index.
Treasuries fell today as reports showed initial jobless claims dropped more than forecast, U.S. businesses expanded at the fastest pace in two decades and pending home resales beat expectations. The yield on the benchmark 10-year note advanced 0.04 percentage point to 3.39 percent at 1:54 p.m. in New York, according to BGCantor Market Data.
Faber correctly predicted in May 2005 that stocks would make little headway that year. The S&P 500 gained 3 percent. He was less prescient in March 2007, when he said the S&P 500 was more likely to fall than rise because the threats of faster inflation and slower growth persisted. The S&P 500 then climbed 10 percent to its record of 1,565.15 seven months later, and ended the year up 3.5 percent.
Below is the most recent video appearance, presented previously on Zero Hedge, of the ever entertaining Doom Boom and Gloomer:
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(d)
I think you all are forgetting that the Dollar won't be the WRC for much longer, and the effect that is going to have.
I like Marc Faber, but he is not an opportunistic trader. He "knows what he knows", and doesn't mind saying it, over and over.
As Robo said above, you can't have it both ways. There is absolutely no possible chance, none, nada, that the Fed will allow rates to rise to a level that would do it harm. It doesn't matter that this sucks and we hate it--the Fed is still far too powerful.
An enormous amount of money can be made playing options on the long bond. Take it coming, take it going. When/if it hits 5%, my god, will be like buying gold at $400/oz
Fabor ought to watch the Kyle Bass interview on CNBC from last August or Gundlach's latest webcast.
Anything from 5-30yr rates are going much higher, and stocks are going to get a reality check. Is buying Treasuries bad? Yes, right now it is, and that is why we see the FED and the PD's taking down every auction for the past 2 years. Imagine, buying a simple 1yr note at the paltry rates being paid right now. Who is going to put $10k into a 1yr note to get a $50 return for the whole term, and when prices collapse they lose half their investment? It's not gonna happen. They only ones doing it right now is the FED and the bankers they have been protecting. Even Bill Gross has stepped away from long term treasuries, for a REASON!
There is going to be a time to buy and hold treasuries again, but it isn't now. But soon!! The 10yr with inflation is going to 7% easy. When? Who knows. With Congress passing any stimulus legislation that comes in front of them, it won't be long. The faster our deficits and debt loads spiral out of control, the time will come much quicker. Let's just assume for a minute that Benny pulls this magic trick off and the economy recovers. Then rates will be 7% or higher on the 10yr easily. Either way, the Treasury pays for lying with the dog at the FED.
Late last year I stopped buying any T-notes or bills, other than flipping 28-day bills month to month. My money is not tied up for a long period and I can pounce on a long note when the time comes. Look at the 28-day rates before the crisis and look at them now, and tell me that every major Treasury player isn't doing the same thing. The only ones buying anything over 3 months right now are Benny's banker boys and whomever else he has cut a backroom deal with, because they are getting free money to keep the rates as low as they can. It's not gonna last much longer. The bankers are starting to feel the squeeze again, so will housing, and so will retail. Rates should have long started higher, yet no one expected that Benny would throw everything he had (and keeps on trying to renew his throwing) trying to keep rates down. His wad is about spent. Congress is not going to allow him to continue this charade much longer, with so many people out of work, and on food stamps/unemployment, and those people already off the unemployment(used up) growing each month by leaps and bounds.
Sorry Faberites...long bonds will rally in 2011...curve will flatten as short rates rise.
(d)
IIRC, Argentina’s status vis-à-vis extradition treaties didn’t affect Israel’s ability to “reach out and touch” Eichmann, et al.
The banksters may get a few good years abroad, but they’ll be found. The especially unlucky ones will see their families butchered immediately before they're forced to ask, "What now?"
http://www.youtube.com/watch?v=23EOVuhIhdg
Payback’s a bitch, and we bat last.
Nah--who's going to do the hunting? Fugitives with unlimited bank accounts can keep the game going indefinitely, then wait for a friendly prez to come in with a pardon!
Ooh--did I say that?
I wouldn't buy bonds either.
At such low rates, the slightest hint of any rate increase absolute disaster to face value. The Fed has painted themselves into a corner.
"Never trust a banker who is also wearing socks" R. Paul
I could easily see a 8.75%+ yield on the 30 year by the end of next year. They have to let something go or openly admit the whores that they are.
Forgive my ignorance here, as I am not in the Finance field, but how will Uncle Ben not bankrupt the Fed holding all this toxic paper (the mortgages) and US debt at such low interest rates? If rates rise, his US T-bills crash... What do the "owners" of the Fed do then? Seriously - I mean mechanically what do they do? Do they just print and loan as rates go up, in ever increasing quantities in order to cover the debasement of the debt they bought at low rates?
Hold the bonds until maturity...which is what they're doing already with mortgage bonds (in runoff).
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You can eat gold. It won't digest.
Which means you can't destroy it and you can get it back again. Try that with fiat, a stock or bond.
I love listening to honest Pattaya boy Faber *lol
He's the only one seeing the big custody risk involved with securities for the future. Imagine a big bank such as JPM or BAC is going bust. It will take years to complete the bankruptcy proceeding and to get back your securities. When you're now investing in shares you have think well with whom and where your securites are custodied and this is preferably small and secure counterparty in a stable country with low political risk.