Gloom & Doom Economist Says Worst Is Yet to Come
Marc Faber, editor and publisher of The Gloom, Boom & Doom Report, thinks the worst is yet to come for the global economy.
Appearing on CNBC's "Squawk Box," the economist and managing director of Marc Faber Ltd., explained his bearish outlook -- and offered advice for how to play a glum market.
Faber perceives a "battlefield" between the Federal Reserve and other central banks, which had infused billions of dollars into the worldwide system to boost liquidity, and the counter-pressure of illiquidity brought about by market forces such as declining home prices.
But the economist fears that the Fed's "throwing money at the system" will not help improve the fundamentals of the real economy. Instead, he believes, excessive monetary growth has merely driven excessive consumption in the U.S., with consumers living beyond their means and speculators "piling one bubble, housing, on top of the Nasdaq [tech] bubble" that popped in 2001-2001.
"The easy money, the easy credit -- you can't solve your problems with what caused them in the first place," Faber declares.
He posits that a fully-realized recession at the turn of the millenium might have been for the best, restabilizing the world credit markets. "The longer you postpone the hour of truth, the worse it will be," he augurs. "We will reach 'zero hour,' when more debt doesn't help."
How should one prepare for the full-fledged global bust Faber predicts?
Precious metals. He points to the traditional safe harbor, gold -- but cautions that the precious metal is "a bit over-bought." Construction-oriented commodities in general will continue to be driven by Chinese demand, he says, making mining companies a good bet. And he the one absolute essential: Food. "We all have to eat."
Markets. As to national markets, Faber says that Japan and Thailand are "very reasonable."
Currencies. He foresees the U.S. dollar remaining low against other currencies -- but notes that "Euroland" is very expensive compared to the greenback.
Real estate. Faber's outlook for real estate goes against the grain: Manhattan is the great exception to U.S. trends, continuing to rise in price even when strong U.S. regions show signs of decline. But Faber says that in the bigger perspective, New York property is as vulnerable to a credit bust as any major metropolitan areas, such as "Hong Kong, Zurich and Frankfurt."
His real-estate advice: "Buy a farm and learn to drive a tractor."