Breaking from Moneynews.com Investing in 10-year U.S. Treasury bonds is "mind-boggling" due to uncertainty surrounding U.S. monetary policy, says Marc Faber, author of the Gloom, Boom and Doom investor report. Fed Chairman Ben Bernanke has said the Fed cannot rule out a third round of quantitative easing, a stimulus measure in which monetary authorities basically print money and pump it into banks with the aim of kick-starting economic growth. While such policies are good for stocks, they're bad for the dollar — and Treasurys. Plus, concerns that the U.S. might default on its debts since lawmakers cannot agree on lifting the $14.3 trillion government debt ceiling doesn't bode well for Treasurys either. "I don't think the U.S. will default in terms of not paying the interest on its debt. They will though default via a falling dollar as Bernanke begins printing more money," Faber tells CNBC. With such uncertainty gripping the markets, investors should run for gold. "The risk is not to hold gold. Whilst there is the potential for 10 percent downside in the short term over the next five to ten years the gains will be big. Or put another way, the purchasing power of paper money will fall," Faber says. "Cash is very risky asset except in times of major market corrections." Talk of fresh monetary stimulus has sent stocks soaring and bonds falling. "The market wasn't thinking there would be any mention of QE3 whatsoever and here we're finding out QE3 is not being ruled out. It's a tantalizing headline," says Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi, according to Reuters. © Moneynews. All rights reserved. 
Faber: Investing in Treasurys is ‘Mind-Boggling’
Thursday, 14 July 2011
Editor's Note:
Posts
