Gloom, Boom and Doom author recommends buying gold but not bitcoin

By Jules Rimmer

Marc Faber says yields will soon break out, probably higher

Marc Faber says rates will break out soon, and probably upward.

The economist once known as Dr. Doom, after forewarning the Japanese crash of the 1990s, said interest rates are likely to break higher soon, taking the stock market with it.

"This year, we'll get the big breakout of interest rates, either up or down," Marc Faber told Maggie Lake, in an interview on her "Talking Markets" show on YouTube Thursday. "And the stock market will not like it."

Bonds have essentially moved sideways since the pandemic, he notes, but if U.S. 10-year yields BX:TMUBMUSD10Y are offering roughly 4%, he believes this is no protection against real inflation that he calculates is rising by somewhere between 6% and 12% annually.

The Labor Department's official consumer price index rose 2.7% in the 12 months to November.

Gold (GC00), says the author of the "Gloom Boom Doom" report, is the store of value that nobody owns enough of, the reciprocal of the paper money that he despises and what rallies when currencies fall.

His championing of gold is no surprise to those who've been following his weekly newsletter since inception in 1990 or anyone who read his book, "Tomorrow's Gold, Age of Discovery" when it was published in 2001.

Faber likes to measure everything in gold, with the result that from this perspective, in general terms almost all assets over the last 20 to 40 years have gone down.

Considering another putative store of value - bitcoin (BTCUSD) - Faber expresses reservations. "When we have the next war, they will switch off the internet... and the mess will be complete," he says.

One of the reasons why Faber adopted such a bearish stance on the Japanese market in the 80s and 90s was because of its disproportionate representation in global indices. Japan peaked at about 50% in 1989. It's easy to guess how he views the massive 65% weighting U.S. stocks SPX now have in the global index.

Central banks, he argues, have lost control of interest rates and he remarks that while the Fed may be able to keep the short end of the yield curve subdued and Trump may succeed in his dream of getting Fed funds (FF00) to 1%, the long end of the curve is not reacting favorably. Trump is an "ignorant interventionist" and a "big money-spender," according to Faber, so he thinks the U.S. economy will sour as a consequence.

While gold, silver (SI00) and platinum (PL00) are his preferred exposure, Faber also loves cashflow and adds decent-yielding dividend stocks to his list of desirable investments. U.S. tech stocks, however, do not make the cut and owing to their expensive valuations, he predicts rotation out of the Magnificent 7 MAGS grouping of stocks or U.S. stocks in general into the rest of the world.

Faber is positive about one thing: the ability of capitalism to lift the world's populace out of poverty.

And another: he's almost 80 years old and he said he rides motorbikes around northern Thailand where he lives. That demands some optimism too.

-Jules Rimmer

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01-09-26 1012ET