Wednesday, October 1, 2008 5:11 PM
Rescuing the U.S. financial system won't stave off a recession, and if equity prices rebound after Congress passes a rescue package, investors should sell.
So says Marc Faber, a Swiss fund manager and publisher of the Gloom Boom & Doom Report.
"A bailout will not buy the U.S. a way out," Faber told Business Intelligence. "The government is less powerful than markets in fixing this mess.”
Faber says a post-bill rebound will not lead to “new highs” for stock markets.
"We live in very uncertain times and nobody knows the extent of the damage from the slowdown of credit growth," Faber says. "It will be good to diversify."
"Most of the investment community are focusing on the financial crisis,” Faber observes. "But what they should be focusing on is that earnings will continue to disappoint for a long time, and that global growth is going to go down substantially. Most economies already today are in recession."
Faber believes that the U.S. dollar will continue to find support as investors continue to depart equity markets. He considers gold to be “a relatively good investment under any kind of scenario until the U.S. government stops its citizens from buying and owning it.
Investors should make sure to buy the precious metal in physical form, Faber says, not through gold funds.
Brinker Capital CEO Charles Widger says that while a bailout would help restore faith in the U.S. financial system, it won’t boost markets much beyond the short term.
"You've got to believe that after this major disruption in the financing of the economy -- the absence of cash for working capital -- that it's going to slow economic activity and that therefore we're going to be in a recessionary environment," Widger told the Associated Press.