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Dr Doom: No Interest Rate Hikes! QE4 Incoming!
Aspire, Thought Leaders | 12 June 2015
By: Vance Wong
Articles (74) Profile

While many economists are expecting the US Federal Reserve to raise interest rates some time in Q3 this year, Marc Faber, more popularly known as Dr Doom, thinks otherwise. He thinks that almost all the major central banks that employed Quantitative Easing (QE) policies, are too “deep in the mud” to get out.

He refers the current global economy to be something like a “Titanic”, a sinking ship. As such, he strongly believes that the QE did not help the economies much and the inevitable is just being delayed. So, what will happen to the economy and what can investors do?

Little Stocks To Support US & EU Advance

Dr Doom mentioned in an interview with CNBC that market volatility is rising and foreign exchange (Forex) has moved substantially. There is also huge backup in yields, particular in US and Europe where sovereign debts over the past six months are paid back within two weeks.

However, despite all the optimistic talk in US about the economy’s growth improving, data has been weak. Faber thinks that the main problem in US is affordability. Consumer spending has been weak particularly because prices have gone up so much. Such rising prices have not been supported by equal or higher economic and wage growth.

Another Round Of US QE?

This is also one of the reasons why Dr Doom feels that another QE is incoming instead of an interest rate hike. How would the economy withstand a hike if economic growth is weak and barely sustainable?

Nevertheless, another QE would just be delaying the inevitable, Dr Doom thinks. He fears the economy to be like “Titantic” and a crash might be iminent. Furthermore, because other major central banks like in Europe and Japan have not seen significant economic growth since their QE, the crash might be huge.

Diversify Portfolio; Be Near Safety Boat

In view of Dr Doom’s negative outlook of the economy, he thinks that the treasury bond market will start to rally. Additionally, investors can look to hold some commodity stocks and precious metals.

Nevertheless, Faber told most investors that regardless of the market’s situation and outlook, they must have portfolio diversification. 25 percent in stocks, 25 percent in real estate would be a good number to start with, Dr Doom feels.

In fact, Faber had just bought a 30-year treasury bond because he thinks that it is very “oversold”. As the “Titantic” is about to sink, Dr Doom advises everyone to be near their safety boats, or at least have easy access to one.

With a Communications background, Vance has the passion to write with a purpose - to provide content supported with substantial evidence to vested readers.

Please click here for more information about this author.

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