Marc Faber says US bailout won’t stop recession, buy gold

Marc Faber says US bailout won’t stop recession, buy gold

Posted: 30-09-2008

INTERNATIONAL. Any proposal to rescue the US financial system will fail to avert a recession said Marc Faber, the Swiss fund manager and Gloom Boom & Doom editor and publisher, now based in Thailand.

A stock rally in the event that a package is approved will be temporary and should be used as ’an opportunity’ to sell, said Faber.

"The rejection of the package is good because it shows that some people in the US are still sane," Faber said in a phone interview with Bloomberg. "A bailout will not buy the US a way out. The government is less powerful than markets in fixing this mess."

"Most of the investment community are focusing on the financial crisis," Faber told TV newswire last night.

"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."

Noting that the US Dollar should continue to find support as investors rush to try and re-pay their debts "I think gold will be a relatively good investment under any kind of scenario until the US government bans the ownership of Gold in the United States.

"They are very good at changing the rules of the game – now banning short sales [of financial and other US equities].

"So yes – physical gold, you should own. Not derivatives with Citigroup, J.P.Morgan, UBS and investment banks, but physical and outside the US."

Any rebound in equities triggered by an eventual rescue package for the US financial system 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," he said. "It will be good to diversify."

The economy probably shrank in the third quarter. A further contraction is likely in the next two quarters, some economists predicted, making the recession the longest since 1981-82.

http://www.bi-me.com/main.php?id=25070&t=1&c=35&cg=4&mset=1011