Since the Fed started tapering its
monthly asset purchases by $10 billion a month in December and another
$10 billion in January, stock markets have taken a tumble. Emerging
markets fell first; this week the U.S. and Europe have also seen significant weakness.
On Monday, U.S. stocks saw their worst start to February since 1933 after a manufacturing report heightened concern about the strength of the U.S. economy.Overall factory activity hit an eight-month low in January as new order growth plunged by the most in 33 years.
Illustrating the heightened state of concern among investors, the CBOE Volatility Index rose above 20 on Monday for the first time in four months, while the yield on the 10-year Treasury note hit a three-month low. Faber said he had been advising his readers to buy 10-year U.S. Treasurys over the last few months. He expects yields to rise as investors would seek a safe haven.
"For the next three to six months probably
they are a better place to be than equities," he warned. "I don't like
[10-year Treasurys] for the long-term because the maximum you can earn
is something like 2.65 percent per annum for the next 10 years, but
Treasurys are expected to rally because of economic weakness and a stock
market decline. In the last few years at least there was a flight into
quality – that is, a flight into Treasurys." - in CNBC
Contrarian Investor Dr.Marc Faber is an international investor known for his uncanny predictions of the stock market and futures markets around the world.
