Markets were noticeably higher yesterday on expectations that the FOMC would keep interest rates low till 2013. That rally has disappeared today.
Investment guru, and author of Gloom, Boom & Doom Report, Marc Faber said in an interview with Bloomberg Television that the Fed’s non-Keynesian move yesterday was spot on but that the Fed would announce a third round of quantitative easing in the future that would do little to help the economy:
“I think they did the right thing that they didn’t allow QE3. They can watch the reaction of assets, whether they will go lower. I think the market is more likely to move still lower… in general I think we will test the July lows of last year, the S&P at 1,010. After that, probably we’ll get probably a QE3 announcement.”
…What has QE1 and QE2 done for the labour markets? Nothing at all. It’s done nothing for the housing markets. It’s lifted stocks and it created wider wealth inequality in a sense that people who own assets have done very well, and people that are the lower-income recipients groups, they are hurt by rising energy prices and food prices.”
As investors look for safe havens to pour their money into, Faber suggested turning to gold, instead of U.S. treasuries that saw their yields move lower despite the S&P downgrade of America’s credit rating:
“I personally think the Treasury market, the long-dated, are a bubble and it will be one of the worst investments for the longer term if you buy a 10-year, a 30-year U.S. Treasury so I’m a bit puzzled that Treasuries are now yielding, are essentially near record lows. I would rather sell Treasuries.”
Watch the entire interview at Bloomberg TV: