If you "want to be hedged for complete disaster World War III you are better off in commodity-related investments", says Marc Faber in the latest issue of US financial paper Barron's.
That might seem drastic. But Faber is convinced that China's rise, and its diminishing dependence on America, means that "eventually, we will have a war, big time". In fact he thinks tensions are already building. "Maybe you don't have divisions of tanks facing each other, but it should be clear that China is an active supporter of North Korea and the Taliban. And now with the US endorsing a seat for India on the UN Security Council, the Chinese are getting closer to Pakistan."
Faber is the investment expert behind the Gloom, Boom and Doom newsletter. As that name suggests, he's known for his often bearish, contrarian views. But he also called the bottom of the stock market in March 2009, so he can't be dismissed as a stopped clock.
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What should you be doing if you share his apocalyptic view? You "should be in equities and commodities, not government bonds".
He is particularly keen on energy-related themes, especially natural gas. He is not discouraged by the current low price, and the new discoveries of shale gas. "That is precisely when you buy commodities when there is a glut and prices are depressed. Then you wait."
Faber is bullish on gold but warns against having physical holdings of the yellow metal in the US and the West in general. "You don't want to hold gold in America, where expropriation is a possibility, as happened in 1933." Faber believes that in such a scenario, the US would buy gold from holders at the going rate, before revaluing it upwards overnight. It would then put "enormous pressure on the Swiss national bank and on others to do the same". The gold would be much safer in Hong Kong as the "Chinese will tell them to get lost".
As for equities Faber believes that "some stocks in the West have become attractive". He noted that Swiss and Japanese stocks both "suffer from the same syndrome a strong currency" and have underperformed in the last decade. Solid companies in both countries would do well if their respective currencies weakened and investors could "prosper by buying what no one else wants".
James graduated from Keele University with a BA (Hons) in English literature and history, and has a NCTJ certificate in journalism.
After working as a freelance journalist in various Latin American countries, and a spell at ITV, James wrote for Television Business International and covered the European equity markets for the Forbes.com London bureau.
James has travelled extensively in emerging markets, reporting for international energy magazines such as Oil and Gas Investor, and institutional publications such as the Commonwealth Business Environment Report.
He is currently the managing editor of LatAm INVESTOR, the UK's only Latin American finance magazine.
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