Dr. Doom Sounds More Dr. Out of His Mind

      David Faber is out today with more alarmism about how there's about to be a "massive wealth destruction"

      "Runaway government debts have triggered uncontrolled money printing that in turn will lead to inflation that will decimate portfolios, according to the latest forecast from "Dr. Doom" Marc Faber."

        http://www.cnbc.com/id/46923999

      Of course, Faber is famous for thinking the sky is falling at any particular, given moment, If he actually saw some reason for optimism, that would be news. Then we might believe we're living in a parallel universe.

       Part of the trouble is that not only does he see doom, but the unlikely reasons. It's only rich guy investors who worry about "runaway government debts" and "uncontrolled money printing" that will lead to inflation that will decimate portfolios. Of course if that did happen, if bondholders saw their portfolios hit by inflation that would actually be good news for the rest of us borrowers. However, the fact is that we are far from  inflation or "stagflation" or the 70s in general.

     It's amazing how so many of these inflation phobes never forget the 70s, even though this time has been more like the Depression. And we keep hearing how "massive government debt" is about to make borrowing costs skyrocket, while the world has been paying us to borrow from them. You want to see government debt rise during a balance sheet recession. What got us here was not government debt but private debt.

   " Investors, particularly those in the "well-to-do" category, could lose about half their total wealth in the next few years as the consequences pile up from global government debt problems, Faber, the author of the Gloom Boom & Doom Report, said on CNBC."

     "Efforts to stem the debt problems have seen the Federal Reserve expand its balance sheet to nearly $3 trillion and other central banks implement aggressive liquidity programs as well, which Faber sees producing devastating inflation as well as other consequences."

      Yes, "devastating inflation" is right around the corner. It always is,, just never seems to get here. Still, Faber shows why inflation is such a fear for guys like him-inflation is a rich man's worry, especially for those in the creditor class.

     "I think that people should own some gold and I think that people should own some equities, because before the collapse will happen, with Mr. Bernanke at the Fed, they're going to print money and print and print and print," he said. "So what you can get is a bad economy with rising equity prices."

      I actually do think his investment picks may be right though-equities I think will continue to do well, gold may well too, though not because as Faber thinks,, it's the end of the world. Gold does well, partly because gold always does well or has done for the last 10 years, we're in a secular bull market for gold. It has nothing to do with what gold bugs like Faber think it does, ironically, however. Gold has been trading up with all the other commodities, like oil. What you see is that gold rises with the rest of the market and commodities,it's pro-cyclical these days.

    As for Treasuries there have been some signs that the bull market might be slowing down finally. This would be good news for the overall market though, as higher interest rates, as Sumner is always saying are signs of loose money-and a bull market and economy. It would be interesting if, as some have suggested, the 30 year bull run in bonds is over, though it's too early of course to know for sure yet.