Marc Faber: Sovereign Defaults Will Proliferate

Defaults on sovereign debt are likely to proliferate in the next crisis, Marc Faber, guest host for "Squawk Box Europe" and author of the "Gloom, Boom & Doom Report" said.

"I think that sovereign debt is priced to perfection, you assume they will pay with the exception of maybe Greece, but that is a tall assumption," Faber told CNBC.

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The US will likely try to inflate its way out of its fiscal deficits, but many other countries do not have this option as their external debts are denominated in foreign currencies, he wrote in his report.

At some point, market participants will have second thoughts about the ability of governments to pay their debt and will shun sovereign credit, which in turn will take yields higher, accentuating the problem, according to the report.

"Investors who rushed into government-guaranteed debts in 2008-2009 in the belief that AAA-rated governments would always pay the interest on their debts and repay the creditor in full upon maturity could be in for a rude awakening sometime in the next 5 to 10 years," Faber wrote.

"So, whereas it was wise to own long-term US government bonds between 2000 and 2009, for the next 10 years I expect a massive outperformance of equities compared to bonds," he wrote.

The last few years have been "brutal" for the US stock market when compared with emerging markets, many of which went up by 100 percent last year, therefore this year US shares could outperform the ones in developing economies, according to the report.

"Whereas I am not negative about emerging markets, I am nevertheless disturbed by the near unanimous consensus that emerging markets will continue to outperform the US stock market," Faber also wrote.

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