Marc Faber: Bullish on Treasuries & Gold

Posted by Marc Faber via Mike "Mish" Shedlock

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low-interest-rateTaken from a Barron’s roundtable discussion, ZeroHedge reports Marc Faber Warns “Insiders Are Selling Like Crazy… Short US Stocks, Buy Treasuries Gold”

Faber: What I recommend to clients and what I do with my own portfolio aren’t always the same. That said, my first recommendation is to short the Russell 2000. You can use the iShares Russell 2000 exchange-traded fund [IWM]. Small stocks have outperformed large stocks significantly in the past few years.

Next, I would buy 10-year Treasury notes, because I don’t believe in this magnificent U.S. economic recovery. The U.S. is going to turn down, and bond yields are going to fall. Abby just gave me a good idea. She is long the iShares MSCI Mexico Capped ETF, so I will go short.

Q: What are you doing with your own money?

Faber: I have a lot of cash, and I bought Treasury bonds. … I have no faith in paper money, period. Insider buying is also high in gold shares. Gold has massively underperformed relative to the S&P 500 and the Russell 2000. Maybe the price will go down some from here, but individual investors and my fellow panelists and Barron’s editors ought to own some gold. About 20% of my net worth is in gold. I don’t even value it in my portfolio. What goes down, I don’t value.

Curious Position

US treasuries are a curious position for someone frequently in the hyperinflation camp, which brings up this humorous conversation from Barron’s. 

Faber: I recommend the Market Vectors Junior Gold Miners ETF [GDXJ], although I don’t own it. I own physical gold because the old system will implode. Those who own paper assets are doomed. 

Zulauf: Can you put the time frame on the implosion? Faber: Let’s enjoy dinner tonight. Maybe it will happen tomorrow.

Price Inflation on Hold

If the economy implodes (or even modestly declines) US Treasuries will benefit. Even a frequent hyperinflationist and firm disbeliever in paper assets gets it!

Here’s my claim: Deflation Will Return: Europe First, Then US

Strong consumer price inflation, is on hold for a long time. US hyperinflation in this environment is next to impossible. 

Mike “Mish” Shedlock