Thursday, January 17, 2013

US Treasuries are Junk Bonds already Marc Faber warns

Marc Faber : ....growing debt in the US had simply allowed a "one-time shot" of consumption to "crowd out" the capital formation that can lead to sustainable growth.
Similarly, aggressive monetary loosening is problematic because new money flows unevenly and unpredictably into markets, he argued, citing the rate cut of 2007 and the subsequent doubling of the price of oil, which acted as an effective tax on consumers.
"Continual interventions by governments have led to much higher financial market volatility," he said. "The Fed doesn't know what we will do with the money, and that is the problem associated with monetary policy."
"At least in an inflationary scenario the Treasury would be able to pay the coupons," he said. "If and when a depression does happen, it would be risky to assume you would want to be in government bonds.""US Treasuries are junk bonds already," he added, revealing that his personal portfolio is 50% allocated to equities and corporate bonds, with the rest mostly allocated to real estate and gold.
"I would always want to go through this bearish scenario with equities," he said
"Nobody knows exactly how the endgame will be played, but the money simply isn't there to pay the liabilities.""Defaulting on its obligations to bondholders would result in Armageddon – they wouldn't dare to do that," he said."If there's going to be a black swan this year or next year, it's probably going to be in Japan," he said. - via Investment and Pensions Europe


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