Most Europe, US Ratings Should Be Lower: Faber
Most of the European countries should be rated triple-C and the U.S. "should not be a "triple-A-minus but a triple-B or junk bond when you really analyze the unfunded liabilities that will come due in future," investor Marc Faber told CNBC Friday.
The editor of the Gloom, Boom & Doom Report said France is not a very good credit risk, and Standard & Poor's one-notch downgrade announced by the French finance minister Friday was "insufficient." France had been rated at triple-A and now, like the U.S., is double-A-plus.
Germany, the strongest of the euro-zone members, "is ok," Faber said, "but Germany also has large, unfunded liabilities." He said he is "not interested in sovereign bonds except as a trade but longer term you’ll lose money in sovereign bonds."
He said he wouldn't buy French government bonds "and I wouldn't buy any U.S. bonds either."
He predicts the S&P downgrades in Europe will have little effect on the world's stock markets, just as S&P's one-notch downgrade of the U.S. credit rating had little effect.
"Much of any downgrades has [already] been priced in," he said of Europe.
Where they will have an effect will be on the value of the euro. "I think the euro is in a downtrend," said the man nicknamed Dr. Doom. The European corporate sector has a lot of U.S. dollar-denominated debt and a lower euro "makes it more expensive to service these debts."
What could move the stock markets "is if some country would say, 'We’ve had enough, we’ll exit the euro,'" he said. "If Greece does that it's not going to be a disaster. But if Greece, Portugal, Spain, Italy do it, then it would have a huge impact" on the derivatives market.
He said European stock markets underperformed the U.S. market, but at some point that will change. When that happens, he said, companies like Novartis , Nestleand Total are "reasonably good value" although "not compelling values." Sectors in which he would invest include commodities, real estate and precious metals.
Update: A previous version of this report contained an incorrect rating for the U.S.